As the new financial year FY 2025-26 begins, the Indian government has implemented several key changes to the income tax laws, aiming to provide relief to taxpayers, simplify processes, and ensure equitable taxation across various sectors. Let’s delve into these important changes in detail.

1. New Income Tax Slabs Under the New Tax Regime

The government has introduced revised income tax slabs under the new tax regime. This move is aimed at providing taxpayers with more disposable income by offering lower tax rates across various income brackets. Here’s a quick comparison of the new income tax slabs for individuals opting for the new tax regime:

• Income up to ₹3 lakh – No tax

• Income from ₹3 lakh to ₹6 lakh – 5% tax

• Income from ₹6 lakh to ₹9 lakh – 10% tax

• Income from ₹9 lakh to ₹12 lakh – 15% tax

• Income from ₹12 lakh to ₹15 lakh – 20% tax

• Income above ₹15 lakh – 30% tax

Moreover, the tax exemption slab has been increased from ₹7 lakh to ₹12 lakh, thanks to a tax rebate available under Section 87A. This is a significant step to reduce the tax burden on middle-income individuals and provide greater financial relief.

2. Higher Deductions for Senior Citizens

Senior citizens will see substantial benefits under the new tax laws:

• The interest deduction limit under Section 80TTB has been increased from ₹50,000 to ₹1 lakh. This will benefit senior citizens who rely on interest income from savings accounts, fixed deposits, and other financial instruments.

• The tax deduction limit on rent has been raised from ₹2.40 lakh to ₹6 lakh per year. This provides a significant advantage to senior citizens living on rent, ensuring that they can claim higher deductions on their rental expenses.

These changes aim to support senior citizens by making their tax liabilities more manageable and improving their overall financial well-being.

3. Increased TCS Exemption Limit

For individuals involved in overseas remittances, the government has raised the TCS (Tax Collected at Source) exemption limit under the Liberalised Remittance Scheme (LRS) from ₹7 lakh to ₹10 lakh. This move aims to ease the tax burden on individuals transferring funds abroad for various purposes, including education, medical expenses, and investments.

With the increase in the exemption limit, taxpayers will no longer be subjected to higher TCS rates on remittances exceeding ₹7 lakh, which was previously the threshold for such transactions.

4. Rationalisation of TDS Rates and Thresholds

The TDS (Tax Deducted at Source) provisions have undergone significant revisions. Key changes include:

• A reduction in the TDS rate for Section 194LBC, which applies to income from securitisation trusts. The rate has been brought down from 25% to 10% for individuals and 30% for others.

• The thresholds for various TDS sections have also been increased, including Sections 193 (interest on securities), 194A (interest other than securities), and others. These changes will enable taxpayers to retain more of their income, as the tax will only be deducted once their income crosses the new, higher threshold limits.

These changes in TDS provisions will benefit individuals and businesses, making it easier for them to manage their income tax obligations.

5. End of Higher TDS/TCS for Non-Filers

Starting from April 1, 2025, the government has eliminated the provisions for higher TDS/TCS on non-filers of income tax returns. Earlier, individuals who had not filed their income tax returns (ITR) in previous years were subject to higher TDS and TCS rates. However, this provision will no longer be applicable from FY 2025-26, ensuring that taxpayers who haven’t filed their returns are no longer penalized with higher tax deductions.

This change is part of the government’s efforts to encourage more people to file their tax returns and comply with tax regulations.

6. New Deduction for NPS Vatsalya Contributions

In line with its ongoing efforts to promote retirement savings, the government has introduced a new deduction for contributions made to the NPS Vatsalya scheme under Section 80CCD. However, this deduction is only available to individuals who opt for the old tax regime. The NPS Vatsalya scheme aims to provide financial security to individuals by encouraging long-term retirement savings.

This deduction will incentivize individuals to invest in the NPS, helping them build a substantial retirement corpus.

7. Simplification of Self-Occupied Property Valuation

One of the notable changes this year is the simplification of the annual valuation of self-occupied properties for income tax purposes. Under the previous tax laws, individuals owning multiple self-occupied properties had to calculate the annual value for each of them, which could often be complex and confusing.

However, under the new provisions, the annual value of any two self-occupied houses will now be considered zero for income tax purposes. This means that taxpayers who own more than one self-occupied property will not have to pay tax on the notional rental income from these properties.

This simplification will greatly reduce the tax burden on individuals with multiple self-occupied houses.

Conclusion

These tax changes are designed to provide relief to taxpayers, particularly in the areas of income tax slabs, deductions for senior citizens, and simplification of property valuation. They also aim to reduce the tax burden on overseas remittances and rationalize TDS provisions, ensuring that taxpayers keep more of their hard-earned money.

It is important to stay updated with these changes to ensure that you are making the most of the new tax laws and optimizing your tax liabilities for the financial year 2025-26.

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