The Hon'ble Finance Minister Ms. Nirmala Sitharaman presented the Finance Bill, 2025 (the Finance Bill) on February 01, 2025 in the Parliament. We are enumerating key policy initiatives and changes under the specified Indirect and Direct Tax Laws.
DIRECT TAX
1. Changes in Tax Slabs:
Tax slabs for Individual, HUF, AOP, BOI, artificial juridical person under the New Tax Regime for AY 2026-2027
It is proposed that the following tax rates will be applicable under the New Tax regime for Individual, HUF, AOP, BOI, artificial juridical person, which are as under:
| Total Income | Rate of Tax |
|---|---|
| Upto Rs. 4,00,000 | Nil |
| From Rs. 4,00,000 – Rs. 8,00,000 | 5 percent |
| From Rs. 8,00,001 – Rs. 12,00,000 | 10 percent |
| From Rs. 12,00,001 – Rs. 16,00,000 | 15 percent |
| From Rs. 16,00,001 to Rs. 20,00,000 | 20 percent |
| From Rs. 20,00,001 to Rs. 24,00,000 | 25 percent |
| Above Rs. 24,00,000 | 30 percent |
Tax rates under Old Tax regime for Individual, HUF, AOP, BOI, artificial juridical person for AY 2026-2027
It is proposed that the following tax rates will be applicable under the Old Tax regime for Individual, HUF, AOP, BOI, artificial juridical person, which are as under:
| Total Income | Rate of Tax |
|---|---|
| Upto Rs. 2,50,000 | Nil |
| From Rs. 2,50,001 to Rs. 5,00,000 | 5% |
| From Rs. 5,00,001 to Rs. 10,00,000 | 20% |
| Above Rs. 10,00,000 | 30% |
Tax rates under Old Tax regime for senior citizen resident of India and age 60 years or above
| Total Income | Rate of Tax |
|---|---|
| Upto Rs. 3,00,000 | Nil |
| From Rs. 2,50,001 to Rs. 5,00,000 | 5% |
| From Rs. 5,00,001 to Rs. 10,00,000 | 20% |
| Above Rs. 10,00,000 | 30% |
Tax rates under Old tax regime for super senior citizen resident of India and age of 80 years or above
| Total Income | Rate of Tax |
|---|---|
| Upto Rs. 5,00,000 | Nil |
| From Rs.5,00,001 to Rs. 10,00,000 | 20% |
| Above Rs. 10,00,000 | 30% |
There is no change in income tax rates of co-operative societies, firms, local authorities and companies.
Rebate under Section 87A
Under the New Tax regime, the rebate has been significantly increased from Rs. 25,000 to Rs. 60,000. This means that individuals with an income of up to Rs. 12,00,000 will now be eligible for a complete tax rebate, resulting in zero tax liability.
2. Changes in TDS and TCS (w.e.f April 1, 2025)
TDS Threshold rationalization
| S.No | Section | Current threshold | Proposed threshold |
|---|---|---|---|
| 1 | 193 - Interest on securities | Nil | Rs. 10000 |
| 2 | 194A - Interest other than Interest on securities | (i) Rs. 50,000/- for senior
citizen; (ii) Rs. 40,000/- in case of others when payer is bank, cooperative society and post office (iii) Rs. 5,000/- in other cases |
(i) Rs. 1,00,000/- for senior citizen (ii) Rs. 50,000/- in case of others when payer is bank, cooperative society and post office (iii) Rs. 10,000/- in other cases |
| 3 | 194 - Dividend for an individual shareholder | Rs. 5,000/- | Rs. 10,000/- |
| 4 | 194K - Income in respect of units of a mutual fund or specified company or undertaking | Rs. 5,000/- | Rs. 10,000/- |
| 5 | 194B - Winnings from lottery, crossword
puzzle, etc 194BB – winnings from horse races |
Aggregate of amounts exceeding Rs. 10,000/- during the financial year | Rs. 10,000/- in respect of a single transaction |
| 6 | 194D – Insurance commission | Rs. 15,000/- | Rs. 20,000/- |
| 7 | 194G - Income by way of commission, prize etc. on lottery tickets | Rs. 15,000/- | Rs. 20,000/- |
| 8 | 194H - Commission or brokerage | Rs. 15,000/- | Rs. 20,000/- |
| 9 | 194-I Rent | Rs. 2,40,000/- during the financial year | Rs. 50,000/- per month or part of a month |
| 10 | 194J - Fee for professional or technical services | Rs. 30,000/- | Rs. 50,000/- |
| 11 | 194LA - Income by way of enhanced compensation | Rs. 2,50,000/- | Rs. 5,00,000/- |
TDS Rate Reduction for Section 194LBC
- It is proposed to reduce the TDS rate under Section 194LBC from 25% / 30% to 10%.
Rationalisation of definition of "Forest Produce"
- The term "forest produce" will be defined as per any State Act in force or the Indian Forest Act, 1927.
- TCS will apply only to forest produce obtained under a forest lease, excluding timber and tendu leaves.
Amended TCS Rates:
- TCS rate of 2% proposed on timber or any other forest produce (excluding tendu leaves) obtained under a forest lease
- TCS rate of 2% proposed on timber obtained by any mode other than under a forest lease
Omission of TCS on Sale of Specified Goods:
TCS provisions under section 206C(1H) will not apply on sale of specified goods if the buyer is liable to deduct TDS under section 194Q.
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