Key Income Tax Changes in Finance Act 2025

Current Context: The Finance Bill 2025, introduced in the Indian Parliament during the Budget Session on February 1, 2025, was passed by both the Lok Sabha and Rajya Sabha in March 2025.

It received Presidential assent on March 29, 2025, officially becoming the Finance Act 2025.
Notified on the same date, March 29, 2025, this Act introduces several key changes to income tax provisions, effective primarily from April 1, 2025, for the financial year 2025-26.

Key Income Tax Changes

Revised Tax Slabs under the New Tax Regime (Section 115BAC)

Effective from April 1, 2025, the new tax regime revises slab rates to increase disposable income, remaining the default option unless taxpayers opt for the old regime.

Increased Rebate under Section 87A

From April 1, 2025, the rebate rises from ₹25,000 to ₹60,000, ensuring no tax liability for incomes up to ₹12 lakh in the new regime, saving taxpayers up to ₹80,000 annually.

Elimination of Equalisation Levy on Digital Advertisements

Discontinued as of April 1, 2025, the 6% levy on digital ad payments to non-residents simplifies cross-border business transactions.

Deemed Let-Out Property Relaxation

Starting April 1, 2025, up to two house properties can be claimed as self-occupied with NIL income, easing property tax rules.

Omission of Sections 206AB and 206CCA

Effective April 1, 2025, higher TDS/TCS requirements for non-filers are removed, reducing compliance burdens.

Extended Deadline for Updated ITR (ITR-U)

From FY 2025-26, the ITR-U filing deadline extends to 48 months, allowing updates until March 31, 2030, for AY 2026-27.

Enhanced Deduction for Partners’ Remuneration

Higher deductions for partners’ remuneration in firms/LLPs apply from April 1, 2025, boosting business tax benefits.

Taxation of ULIP Proceeds

Effective April 1, 2025, ULIP proceeds exceeding premium thresholds are taxed as capital gains at 20% (STCG) or 12.5% (LTCG).

NPS Vatsalya Deduction (Section 80CCD)

From April 1, 2025, parents’ contributions to NPS Vatsalya for minors qualify for a ₹50,000 deduction.

Block Assessment Amendments

Applicable to searches from September 1, 2024, only undisclosed income is taxed at 60%, with an extended timeline option.

Presumptive Taxation for Non-Residents (Section 44BBD)

A 25% rate on gross receipts for non-resident services to Indian electronics firms begins April 1, 2025.

Question:

Q.1 As per Finance Bill 2025/ Finance Act 2025, What is the revised rebate limit under Section 87A for the new tax regime?
a) ₹25,000
b) ₹50,000
c) ₹60,000
d) ₹75,000

Answer:c) The rebate under Section 87A has been increased to ₹60,000, effectively making income up to ₹12 lakh tax-free under the new tax regime.