Top Income Tax Changes for FY 2025–26: What You Need to Know Before Filing

The Union Budget 2025 has brought some major updates to the Income Tax Act, 1961. If you’re preparing to file your Income Tax Return (ITR) for the Assessment Year 2025–26, it’s important to understand these changes to avoid errors, double filings, or unwanted scrutiny.

Let’s break it all down in simple terms.

1. Revised Income Tax Slabs

Here’s how the new tax slabs look for income earned in FY 2025–26:

2. Higher Rebate Under Section 87A

Good news if you’re opting for the New Tax Regime! The rebate under Section 87A has increased from ₹25,000 to ₹60,000. This means if your total income is up to ₹12 lakh, you won’t have any tax liability.

For those sticking with the Old Regime, the rebate remains at ₹12,500.

3. TDS Thresholds Increased

Starting April 2025, the government is raising the TDS (Tax Deducted at Source) limits across various sections to make compliance easier.

Here are some key changes:

• Interest (Senior Citizens): Limit increased from ₹50,000 to ₹1,00,000.
• Dividend & Mutual Fund Units: Threshold doubled from ₹5,000 to ₹10,000.
• Rent: Monthly threshold now ₹50,000.
• Professional Services: Raised from ₹30,000 to ₹50,000.

(Full updated TDS table available in the official tax document.)

4. TCS Rules Made Simpler

From April 2025:

• The TCS threshold for international remittances under LRS is up from ₹7 lakh to ₹10 lakh.
• No TCS on education-related remittances through loans.
• Section 206C(1H) (TCS on goods sold above ₹50 lakh) is removed completely.

5. More Time to File Updated Returns

You now get up to 4 years to file an updated ITR if you missed reporting some income earlier:

6. Boost for IFSC Units

Tax benefits for International Financial Services Centre (IFSC) units have been extended until March 31, 2030. Also, life insurance policies bought by non-residents from IFSC offices are now fully tax-exempt—no premium limit applies.

7. Removal of Complex TDS Provisions

Sections 206AB and 206CCA, which required tax deductors to check if the recipient had filed returns, will be scrapped from April 2025. This simplifies compliance and avoids delays or excessive deductions.

8. Higher Deduction for Partner Remuneration

Partnership firms and LLPs can now claim more deduction on payments to partners. Here’s how the revised limit works:

9. ULIPs Taxable If Premium Crosses Limit

ULIP policies with annual premiums over ₹2.5 lakh or 10% of the sum assured will now be taxed as capital gains:

• 20% for short-term
• 12.5% for long-term

ULIPs below this threshold remain fully exempt.

10. Easier Rules for Deemed Let-Out Property

Previously, only two self-occupied houses could have a NIL annual value, and only under specific conditions. Now, any two houses can be treated as self-occupied—without conditions—and declared with NIL income.

If you’re a taxpayer, consultant, or just planning your finances, these changes are worth noting well before filing season. Need help applying these updates to your ITR? Feel free to reach out or consult a tax advisor.