Category: Income Tax

CBDT has extended the due date for filing for income tax returns from 31^st July, 2025 to 15^th September, 2025. After this extension, the excel utilities for ITR 1 and ITR 4 were released on the income tax portal. Several important changes have been introduced in the excel utilities especially for the assessees opting for the Old Tax Regime. Mandatory disclosures, proof of exemption or deduction claimed such as 80C, HRA etc. have been introduced to enhance accountability and transparency in filing for income tax. The assessees must keep in mind the following important changes while filing their ITRs for FY 2024-25  (AY 2025-26) –

Filing for Income Tax Returns – Changes in ITR 4 (Sugam)

The revised ITR 4 (Sugam) form now includes a specific field for reporting tax-exempt long-term capital gains under Section 112A, labeled as ‘Income on which no tax is payable: Long Term Capital Gains under Section 112A not chargeable to Income-tax.’ This enhancement enables individuals eligible to file ITR 1 or ITR 4, who also earn exempt LTCG—such as from the sale of listed equities or equity mutual funds—to disclose this income conveniently filing for income tax.

Validation Rules in ITR 1

In case the assessee has any TDS deducted under the certain sections, ITR 1 will not be available for filing for income tax for the assessee. He will have to filed ITR 2 or any other ITR form as the case may be. TDS under the following sections will make ITR 1 ineligible for the assessees –

• 194B and 194BB – TDS on winning from lotteries, etc.,
• 194Q – TDS on purchase of goods,
• 194R – TDS on gifts or perquisites,
• 194S – TDS on transfer of VDAs,
• 194LA – TDS on compensation for land acquisition,
• 195 – TDS for non-residents,
• 196A – TDS on income in respect of units of non-residents.

Disclosures Regarding HRA

The House Rent Allowance (HRA) exemption under Section 10(13A) of the Income Tax Act is available to salaried individuals who receive HRA and live in rented accommodation based on the lowest of the 3 amounts as mentioned in the section i.e. –

• Actual HRA received,
• Rent paid – 10% of salary,
• 50% of salary for metro cities and 40% for non-metro cities.

However, now during filing for income tax, several disclosures are required for computation of the HRA exemption allowed to the assessee such as –

• Place of Work,
• Actual HRA Received,
• Aggregate of Basic Salary and Dearness Allowance,
• 50% of salary for metro cities and 40% for non-metro cities

Due to the recent changes making these disclosures mandatory for claiming the House Rent Allowance (HRA) exemption under Section 10(13A), the calculation of the HRA exemption will become significantly more precise and accurate. This update in filing for income tax ensures that taxpayers provide detailed and verifiable information regarding their rent payments and related details when filing their income tax returns. As a result, the tax authorities will be better equipped to validate HRA claims, reducing the chances of incorrect or inflated exemptions being allowed.

This amendment will affect a large segment of taxpayers who claim HRA, emphasizing the importance of submitting accurate and complete disclosures. Proper reporting of these details is crucial to avoid any future scrutiny, notices, or queries from the tax department, thus ensuring a smoother and more transparent filing for income tax for employees and taxpayers alike.

Proof regarding 80C deduction

Earlier, assessees could claim deduction u/s 80C upto Rs. 1.50 lacs without any disclosures regarding the same however, now the following mandatory columns have been introduced in filing for income tax returns –

• Receipt number in case of PPF contribution,
• PPF Account Number,
• Policy number for insurance premium.

Proof regarding 80D deduction

Earlier, assessees could claim deduction u/s 80D for medical insurance premium without any disclosures regarding the same however, now the following mandatory columns have been introduced in filing for income tax returns –

• Name of the insurance company,
• Policy number.

Disclosures regarding 80E deduction

In case any assessee wants to claim deduction u/s 80E for the interest on education loan, the following disclosures will be mandatory in filing for income tax returns –

• Name of the lender,
• Loan account number,
• Date of sanction of loan,
• Amount of the loan sanctioned,
• Loan outstanding as on 31^st March for the financial year.

Disclosures regarding 80EE/80EEA deduction

In case any assessee wants to claim deduction u/s 80EE or 80EEA for additional deductions on home loan interest for first-time homebuyers, the following disclosures will be mandatory in filing for income tax returns –

• Name of the lender,
• Loan account number,
• Date of sanction of loan,
• Amount of the loan sanctioned,
• Loan outstanding as on 31^st March for the financial year.

Disclosures regarding 80EEB deduction

In case any assessee wants to claim deduction u/s 80EEB on purchase of electric vehicle, the following disclosures will be mandatory in filing for income tax returns –

• Name of the lender,
• Loan account number,
• Date of sanction of loan,
• Amount of the loan sanctioned,
• Loan outstanding as on 31^st March for the financial year.

Disclosure u/s 80DDB

Section 80DDB allows a deduction for expenses incurred on the medical treatment of specified serious ailments or diseases for self or a dependent family member. The assessee can claim deduction under this section in filing for income tax after mandatorily disclosing the name of the specified disease.

Impact of these disclosures introduced

With the introduction of the disclosures mentioned above, the government aims to strengthen the system and make it more robust by reducing loopholes and streamlining the application of the sections. Some benefits of these changes introduced are as detailed below –

• Enhances transparency: Taxpayers provide clear, detailed information about their deduction claims.
• Prevents misuse: Helps curb inflation or fraudulent claims of deductions.
• Improves verification: Enables tax authorities to cross-check claims with third-party data from insurers, banks, and financial institutions.
• Promotes compliance: Encourages taxpayers to report accurate and genuine details, reducing tax evasion.
• Streamlines assessment: Facilitates quicker identification of discrepancies and focused scrutiny by the tax department.
• Reduces errors: Standardizes reporting, minimizing mistakes or omissions in return filing.
• Saves time: Fewer post-filing notices or queries due to upfront complete disclosures.
• Strengthens tax system integrity: Builds trust and fairness by ensuring only eligible deductions are claimed.
• Supports better revenue collection: Limits fraudulent claims, aiding government tax collections.

FAQs

Q1. ITR 1 is for whom?

A1. ITR 1 (Sahaj) is the ITR form that is applicable to Resident Individuals having a total income less than or equal to Rs. 50 lacs. However, this form is applicable only if the total income of the resident individual is from the following sources i.e. heads of income –

• Income from salary,
• Income from ONE house property,
• Income from other sources,
• Agricultural income upto Rs. 5,000,
• A new update in this ITR form now allows taxpayers to report long-term capital gains (LTCG) of up to Rs. 1.25 lacs under ITR 1. Previously, such gains had to be declared using ITR 2.

Q2. ITR 4 is for whom?

A2. The ITR 4 (Sugam) is the form that can be filed by Resident Individuals, HUFs, or Partnership firms (except LLPs) falling under the following criteria –

• Total Income is upto Rs. 50 lacs,
• Income from Business of Profession and opting for presumptive taxation u/s 44AD, 44AE, 44ADA,
• Income from salary,
• Income from ONE house property,
• Agricultural income upto Rs. 5,000,
• Income from other sources (except winnings from racehorses, lottery, etc.)
• A new update in this ITR form now allows taxpayers to report long-term capital gains (LTCG) of up to Rs. 1.25 lacs.

ITR 2 Applicability Guide – Each year, as income tax season approaches in India, many taxpayers find themselves puzzled over which ITR form they need to file. With multiple forms available for different types of assessees—be it individuals, HUFs, companies, or others—the decision is not always straightforward. It is not just your taxpayer classification that matters; your income sources, residential status, and certain financial transactions also influence the choice. In this article, we will break down the specifics of ITR 2 for the financial year 2024-25, helping you understand who should use it and under what circumstances.

ITR 2 Applicability

In essence, all the individuals and HUFs who were ineligible to file ITR 1 can file ITR 2. Moreover, even in case of clubbing of income of spouse, minor children, the assessee can file ITR 2. Therefore, the assessees under the following categories can file ITR 2 –

• Total income exceeds Rs. 50 lacs,
• Agricultural income exceeds Rs. 5,000,
• Income from house property,
• Income from Capital Gains
• Income from foreign sources,
• Investment in unlisted equity shares,
• Director in a company,
• TDS of the assessee has been deducted u/s 194N,
• The assessee has deferred income tax on ESOP received from employer being an eligible start-up,
• The assessee has any brought forward loss or has to carry forward any loss under any head of income,
• Ownership of assets outside India,
• Signing authority in any account outside India.

Who is not eligible to file ITR 2?

Any individual or HUF having income from business or profession such as interest, salary, bonus or commission or any remuneration by any other name called from any partnership firm, cannot file ITR 2. The assessee will have to further navigate through the other ITR forms to choose the correct form.

Documents Required for filing ITR 2

The assessee must have the documents available for filing ITR 2 –

• Form 16 – Required if you have salary income; issued by your employer.
• Form 16A – Needed if TDS has been deducted on interest from FDs or savings accounts; issued by banks or other deductors.
• Form 26AS – Used to verify all TDS (on salary and other income); downloadable from the income tax e-filing portal.
• Rent Receipts – Needed for HRA claims if not submitted to the employer.
• Capital Gains – Provide a summary of gains/losses from shares or securities for the financial year.
• Interest Income – Keep bank passbooks and FD receipts handy for calculating interest earned.
• Rental Income – Maintain records of tenant details, municipal tax payments, and interest on home loans, if any.
• Current Year Loss – Keep documentation that shows any financial loss you want to claim.
• Carry Forward Loss – Provide the previous year’s ITR-V if you are claiming earlier losses.
• Tax Deductions (80C, 80D, 80G, 80GG, etc.) – Collect proof for investments, insurance premiums, donations, tuition fees, rent, etc., if not already included in Form 16.

Mandatory Columns to be filled in ITR 2

The assessee fulfilling the criteria for ITR 2 applicability must ensure that the following mandatory requirements have been fulfilled –

• Details such as PAN, permanent address, contact details, bank account details, are correct in the pre-filled data,
• Status of PAN is active,
• Pre-validate your bank account for receiving refunds without any errors,
• PAN and Aadhaar are linked.

Structure of ITR 2

The ITR 2 Form is organized into the following sections:

• Part A: Basic personal and general information.
• Part B-TI: Calculation of total income.
• Part B-TTI: Calculation of tax liability based on the total income.

Income Schedules

• Schedule S: Information on income earned from salary.
• Schedule HP: Details regarding income from house property.
• Schedule CG: Computation of capital gains.
• Schedule 112A: Income from the sale of equity shares.
• Schedule 115AD: Sale of equity shares by non-resident individuals.
• Schedule OS: Income from other sources.

Loss and Set-Off Schedules

• Schedule CYLA: Adjustment of current year’s losses against income.
• Schedule BFLA: Set-off of losses carried forward from previous years.
• Schedule CFL: Losses to be carried forward to upcoming years.

Deductions and Contributions

• Schedule VIA: Deductions claimed under Chapter VI-A.
• Schedule 80G: Donations qualifying for deduction under Section 80G.
• Schedule 80GGA: Contributions made towards rural development or scientific research.

Tax Computation and Relief

• Schedule AMT: Calculation of Alternate Minimum Tax under Section 115JC.
• Schedule AMTC: Tax calculations under Section 115JD.
• Schedule SI: Income taxed at special rates.
• Schedule SPI: Clubbing of income belonging to spouse, minor child, etc.
• Schedule EI: Declaration of tax-exempt income.
• Schedule PTI: Earnings from investment funds or business trusts.

Tax Payments and Deductions

• Schedule IT: Advance tax and self-assessment tax payments.
• Schedule TDS1: TDS deducted on salary.
• Schedule TDS2: TDS deducted on income other than salary.

Foreign Income and Assets

• Schedule FSI: Foreign income details and applicable tax relief.
• Schedule TR: Summary of tax relief for taxes paid outside India.
• Schedule FA: Foreign assets and income details.

Special Schedules

• Schedule 5A: Split of income between spouses governed by Portuguese Civil Code.
• Schedule AL: Disclosure of assets and liabilities as on year-end.
• Schedule: ESOP Tax Deferral: Details of deferred tax on Employee Stock Option Plans.

Other Components

• Part B: TI: Summary of total income.
• Part B: TTI: Summary of tax liability.
• Tax Payments Section: Details of advance tax and self-assessed tax payments.
• Declaration: Statement by the taxpayer confirming the accuracy of the return.
• Tax Return Preparer Details: Information about the individual assisting with the return filing, if any.

FAQs on ITR 2

Q1. Is there ITR 2 applicability for non-residents ?

A1. Yes, a non-resident can file his return in Form ITR 2, if they have income in India such as capital gains, rental income, or interest income. However, they must ensure correct disclosure of their residential status and global income, if applicable.

Q2. Who should file ITR 2 instead of ITR 1?

A2. ITR 2 applicability is meant for individuals and Hindu Undivided Families (HUFs) who do not have income from business or profession. It should be filed if you have income from sources like capital gains (sale of shares/property), more than one house property, foreign assets or income, or if your total income exceeds Rs. 50 lacs.

ITR 1 (Sahaj) is one of the 7 forms available for the purpose of filing income tax returns. ITR 1 is the simplest form for the return filing process and is therefore applicable only to resident individuals having income from salary or interest income etc. The ITR 1 has been released by the Income Tax Department for FY 2024-25 (AY 2025-26).

ITR 1 – Sahaj

ITR 1 (Sahaj) is the ITR form that is applicable to Resident Individuals having a total income less than or equal to Rs. 50 lacs. However, this form is applicable only if the total income of the resident individual is from the following sources i.e. heads of income –

• Income from salary,
• Income from ONE house property,
• Income from other sources,
• Agricultural income upto Rs. 5,000,
• A new update in this ITR form now allows taxpayers to report long-term capital gains (LTCG) of up to Rs. 1.25 lacs under ITR 1. Previously, such gains had to be declared using ITR 2.

Who is Not Eligible to File ITR 1?

It is pertinent to remember that ITR 1 cannot be used by every resident individual. Any resident individual whose total income includes any one of the below mentioned incomes is not eligible for filing ITR-1 –

• Total Income exceeds Rs. 50 lacs,
• Agricultural income exceeds Rs. 5,000,
• Income from more than 1 house property,
• Winnings from race horses, lottery, gambling etc.,
• Income from LTCG exceeds Rs. 1.25 lacs,
• Income from STCG,
• Income from business or profession,
• Income from virtual digital assets.

Moreover, if the resident individual fulfils any one of the following conditions, ITR 1 will not be applicable –

• Investment in unlisted equity shares,
• Director in a company,
• TDS of the assessee has been deducted u/s 194N,
• The assessee has deferred income tax on ESOP received from employer being an eligible start-up,
• The assessee has any brought forward loss or has to carry forward any loss under any head of income.

Therefore, any assessee not eligible to file this form has to navigate through the list of the other ITR forms to file his return.

Changes in ITR 1 from FY 2024-25 (AY 2025-26)

With effect from FY 2024-25, the following changes will be applicable while filing income tax return in ITR 1 –

• LTCG Reporting Simplified: Taxpayers can now report long-term capital gains (LTCG) up to Rs. 1.25 lacs directly in ITR 1. Previously, this required filing ITR 2.
• New Deduction Interface: A dropdown menu has been introduced to easily select deductions under Sections 80C to 80U.
• Foreign Retirement Accounts: A dedicated section under Section 89A has been added to report income from foreign retirement benefit accounts.
• Aadhaar Requirement Updated: Only a valid 12-digit Aadhaar number will be accepted; Aadhaar enrolment IDs will no longer be considered.
• TDS Details Enhanced: A new column has been added to specify the exact section under which Tax Deducted at Source (TDS) has been made.

Documents Required for filing ITR 1

The assessee must have the following documents available for filing the income tax return under ITR 1 –

• Form 16,
• Form 26AS,
• AIS,
• House rent receipts,
• Tax saving investments receipts,
• Premium receipts,
• TDS certificates,
• Interest certificates.
• Structure of ITR 1

The ITR 1 (Sahaj) has the following broad sections that have to be filled –

• Personal Information
• Gross Total Income
• Total Deductions
• Tax Paid
• Tax Liability.

Mandatory Columns to be filled in ITR 1

The assessee, before moving on to the income section of the ITR 1, must ensure that the following mandatory requirements have been fulfilled –

• Details such as PAN, permanent address, contact details, bank account details, are correct in the pre-filled data,
• Status of PAN is active,
• Pre-validate your bank account for receiving refunds without any errors,
• Residential status of the assessee is Resident,
• PAN and Aadhaar are linked.

Moreover, it is mandatory to define the nature of employment while filing of return from the following –

• Central Government Employee
• State Government Employee
• Employee of Public Sector Enterprise (whether Central or State Government)
• Pensioners (CG/SG/PSU/OTHER)
• Employee of Private Sector concern
• Not applicable (in case of family pension income).

Due Date for filing return

For Assessment Year 2025–26 (i.e., Financial Year 2024–25), the due date for filing ITR1 (for individuals not requiring audit) is 31st July, 2025. However, the due date has now been extended to 15th September, 2025. The consequences of non-filing or late filing of return would result in penalty upto Rs. 5,000 and interest will be levied u/s 234A/B/C. moreover, the assessee can file belated return upto 31^st December, 2025.

The last date for e-verification of the ITR is 30 days from the date of filing the ITR.

FAQs on ITR 1 filing

Q1. Do we have to attach or upload the documents alongwith the ITR 1?

A1. No, Individuals are not required to submit any documents, such as investment proofs or TDS certificates, along with their income tax return form. However, it is important to retain these records, as they may be requested by the Income Tax Department during assessments or if any clarification is needed later.

Q2. Can ITR 1 be used for filing return under the Old Tax Regime?

A2. Yes, salaried individuals can choose between regimes each year while filing ITR. If you have business/professional income, you must submit Form 10-IEA to opt out of the new regime.

Every year assessees filing Income Tax Returns in India face confusions regarding determination of the appropriate ITR forms for them. With different ITR forms designed for individuals, HUFs, companies, and other taxpayers, knowing which one applies to you is essential for hassle-free filing. But it’s not just about your taxpayer category—factors like income sources, residential status, and financial transactions also play a key role in form selection. In this guide, we will break down all 7 ITR forms for the financial year 2024-25 and help you identify which one is right for your specific situation.

Categorization of ITR Forms

The ITR forms are broadly categorized on the basis of the following –

• Type of assessee – Individuals, HUF, Companies, firms, LLPs, AOPs, BOIs, etc.
• Residential status of the assessee – Resident, Not ordinarily resident, Non-Residents,
• Quantum of total income – Upto Rs. 50 lacs, Above Rs. 50 lacs
• Heads of Income – Salary, Profession or Business, House Property, Other Sources, Capital gains.

ITR Forms – ITR 1 – Sahaj

ITR 1 (Sahaj) is the ITR form that is applicable to Resident Individuals having a total income less than or equal to Rs. 50 lacs. However, out of all these 7 ITR forms, this form is applicable only if the total income of the resident individual is from the following sources i.e. heads of income –

• Income from salary,
• Income from ONE house property,
• Income from other sources,
• Agricultural income upto Rs. 5,000,
• A new update in this ITR form now allows taxpayers to report long-term capital gains (LTCG) of up to Rs. 1.25 lacs under ITR 1. Previously, such gains had to be declared using ITR 2.

Who is Not Eligible to File ITR 1?

It is pertinent to remember that ITR 1 cannot be used by every resident individual. Any resident individual whose total income includes any one of the below mentioned incomes is not eligible for filing ITR 1 –

• Total Income exceeds Rs. 50 lacs,
• Agricultural income exceeds Rs. 5,000,
• Income from more than 1 house property,
• Winnings from race horses, lottery, gambling etc.,
• Income from LTCG exceeds Rs. 1.25 lacs,
• Income from STCG,
• Income from business or profession,
• Income from virtual digital assets.

Moreover, if the resident individual fulfils any one of the following conditions, ITR 1 will not be applicable –

• Investment in unlisted equity shares,
• Director in a company,
• TDS of the assessee has been deducted u/s 194N,
• The assessee has deferred income tax on ESOP received from employer being an eligible start-up,
• The assessee has any brought forward loss or has to carry forward any loss under any head of income.

Therefore, any assessee not eligible to file ITR 1 has to navigate through the list of the other ITR forms to file his return.

ITR 2 – Who is Eligible?

Next in the list of ITR forms, let us now understand the eligibility for filing returns via ITR 2. In essence, all the individuals and HUFs who were ineligible to file ITR 1 as per the exclusions listed above, can file ITR 2. Moreover, even in case of clubbing of income of spouse, minor children, the assessee can file ITR 2. Therefore, the assessees under the following categories can file ITR 2 –

• Total income exceeds Rs. 50 lacs,
• Agricultural income exceeds Rs. 5,000,
• Income from house property,
• Income from Capital Gains
• Income from foreign sources,
• Investment in unlisted equity shares,
• Director in a company,
• TDS of the assessee has been deducted u/s 194N,
• The assessee has deferred income tax on ESOP received from employer being an eligible start-up,
• The assessee has any brought forward loss or has to carry forward any loss under any head of income.
• Ownership of assets outside India,
• Signing authority in any account outside India.

Who is not eligible to file ITR 2?

Any individual or HUF having income from business or profession such as interest, salary, bonus or commission or any remuneration by any other name called from any partnership firm, cannot file ITR 2. The assessee will have to further navigate through the other ITR forms to choose the correct form.

ITR Forms – ITR 3

The ITR 3 is to be used by an individual or a HUF who is having income under the head Profits or Gains of Business or Profession and who is not eligible to file Form ITR‐1 (Sahaj), ITR‐2 or ITR‐4 (Sugam).  Therefore, assessees having the following incomes can file ITR 3 –

• Income from Business of Profession and not opting for presumptive taxation,
• Income from Business of Profession and maintaining books of accounts,
• Investment in unlisted equity shares,
• Income of Partners from a partnership firm,
• Other Incomes such as salary, pension, house property and other sources.

In essence, ITR 3 is the form that must be filed in case the individuals or HUFs are not falling under the specified categories of the following ITR forms – ITR 1, ITR 2 or ITR 4.

ITR 4 – Sugam

The ITR 4 (Sugam) is the form that can be filed by Resident Individuals, HUFs, or Partnership firms (except LLPs) falling under the following criteria –

• Total Income is upto Rs. 50 lacs,
• Income from Business of Profession and opting for presumptive taxation u/s 44AD, 44AE, 44ADA,
• Income from salary,
• Income from ONE house property,
• Agricultural income upto Rs. 5,000,
• Income from other sources (except winnings from racehorses, lottery, etc.)
• A new update in this ITR form now allows taxpayers to report long-term capital gains (LTCG) of up to Rs. 1.25 lacs.

Who is not eligible to file ITR 4?

The ITR 4 (Sugam) cannot be filed resident individuals, HUFs or partnership firms (except LLPs) if the fulfil any ONE of the following conditions –

• The assessee is a Resident but Not Ordinarily Resident (RNOR),  or Non-Resident Indian,
• Total Income exceeds Rs. 50 lacs,
• Agricultural Income exceeds Rs. 5,000,
• Income from more than 1 house property,
• Investment in unlisted equity shares,
• Director in a company,
• The assessee has deferred income tax on ESOP received from employer being an eligible start-up.
• Income from foreign sources,
• The assessee has any brought forward loss or has to carry forward any loss under any head of income.
• Ownership of assets outside India,
• Signing authority in any account outside India.

ITR 5 – Who is Eligible?

The ITR 5 Form is intended for use by the following entities:

• Firms
• Limited Liability Partnerships (LLPs)
• Associations of Persons (AOPs)
• Bodies of Individuals (BOIs)
• Artificial juridical persons as defined under section 2(31)(vii)
• Estates of deceased individuals
• Estates of insolvent individuals
• Business trusts and investment funds
• Cooperative societies
• Local authorities

However, this form should not be used by individuals or entities required to file income tax returns under sections 139(4A), 139(4B), 139(4C), or 139(4D).

ITR Forms – ITR 6 – For Companies

The ITR 6 form is applicable to companies that are not claiming exemption under section 11 of the Income Tax Act. This means companies that do not derive income from property held for charitable or religious purposes can use this form to file their income tax return.

Therefore, the companies claiming exemption under section 11 (i.e., those whose income is from property held for charitable or religious purposes) are not eligible to file ITR 6. The assessee will have to navigate through the other ITR forms for the same.

ITR Forms – ITR 7

The ITR 7 is meant for persons, including companies, required to file returns under the following sections of the Income Tax Act: 139(4A), 139(4B), 139(4C), and 139(4D). This typically includes trusts, political parties, research associations, news agencies, universities, colleges, and other institutions claiming exemption.

Stay tuned to understand more about each of these ITR forms.

The deductions available under the New Tax Regime are often not being considered appropriately by the individuals thereby leading to reduced tax savings. Even though the individuals are availing the benefits of the higher income slabs under new tax regime, the deduction available to the individuals are often overlooked. Let us understand the deductions that can be availed by individuals while filing their Income Tax Returns for FY 24-25 under the New Tax Regime in order to maximize the tax savings.

Common Assumptions regarding Deduction under the New tax Regime

The concept behind the higher income slabs for taxation under the New Tax Regime is to reduce the tax implications in the hands of the individuals. However, while the Old Tax Regime has lower income slabs, it is often preferred since many deductions are allowed in the computation of taxable income. It is commonly assumed that there are no deductions available under the New Tax Regime, however, this statement has some exceptions.

How to opt for New Tax Regime?

The New tax Regime has now been made the Default tax Regime. Therefore, the assessee does not have to opt for the New tax Regime. In case the assessee wishes to file his return under the Old Tax Regime, they will have to file Form 10 IEA to opt out of the default tax regime.

Standard Deduction in New Tax Regime

For salaried individuals, u/s 115BAC the standard deduction in New Tax Regime is Rs. 75,000 however, the standard deduction under the Old Tax Regime is Rs. 50,000. Therefore, the standard deduction in New Tax Regime is higher than the deduction under the Old Tax Regime.

Rebate u/s 87A

Under Section 87A of the Income Tax Act, resident individuals can claim a tax rebate that reduces their liability to zero if their total income is within a specified limit. In the old tax regime, this rebate is available for incomes up to Rs. 5 lakh, with a maximum rebate of Rs. 12,500. In the new regime (post Budget 2023), the limit has been increased to Rs. 7 lakh, offering a rebate of up to Rs. 25,000. This makes both regimes tax-free up to their respective thresholds, but the new regime provides greater relief for those with fewer deductions.

Provident Fund and NPS Deduction

For individuals filing their Income Tax Returns under the New Tax Regime, the filers must keep in mind that the following 2 deductions are available with regards to contributions to the Provident Fund and NPS –

• Employer’s contribution to NPS u/s 80CCD(2)
• Employee’s contribution to Provident Fund u/s 80 CCD(1).

Interest on Home loan

While the law prohibits the assessee from availing the deduction for interest on housing loan for self occupied property, the assessee can avail the deduction on the interest on housing loan for let out property u/s 24b of the Income Tax Act.

Deductions for Employee Benefits

The deductions such as House Rent Allowance (HRA) is not available under the New Tax Regime however, there are certain deductions related to other employee benefits that are allowed under the New Tax Regime such as –

• Perquisites for official purposes
• Daily Allowance
• Transport allowance for specially abled persons u/s 10(14)
• Exemption on leave encashment u/s 10(10AA).

Deductions pertaining to Retirement Benefits

Under the New Tax Regime, the deductions pertaining to the retirement benefits are as under –

• Exemption on Voluntary Retirement u/s 10(10C)
• Exemption on Gratuity u/s 10(10)

Moreover, even in cases of retrenchment, the retrenchment compensation u/ 10(10B) is allowed for deduction under the New tax Regime.

Deduction u/s 80JJAA

Under the new tax regime, Section 80JJAA continues to be available and offers a 30% deduction on the additional employee cost for three consecutive years, aimed at encouraging job creation. This benefit applies to businesses subject to tax audit that hire new employees who work for at least 240 days in the year (or 150 days for sectors like manufacturing and apparel) and earn wages not exceeding Rs. 25,000 per month through digital or banking channels. It remains one of the few deductions permitted even when opting for the concessional tax rates under Section 115BAC.

Other Deductions allowable under the New Tax Regime

Some other deductions that are permitted under the New Tax Regime are as under –

• Contribution to Agniveer Corpus Fund u/s 80CCH
• Contribution to the Family Pension Scheme
• Gifts upto Rs. 50,000 u/s 57(IIA)
• Income from Life Insurance Policy, including bonus, u/s 10(10D)(1).

Deductions Not Allowed under the New Tax Regime

The assessee must keep in mind the following list of deductions that will not be allowed under the New Tax Regime –

• House Rent Allowance (HRA)
• Leave Travel Allowance (LTA)
• Section 80C – Deductions for investments like LIC, PPF, ELSS, tuition fees, etc.
• Section 80D – Health insurance premium
• Section 80G – Donations to charitable institutions
• Section 80E – Interest on education loan
• Section 80TTA / 80TTB – Interest on savings for individuals and senior citizens
• Interest on housing loan (Section 24b) – for self-occupied or vacant property
• Professional tax
• Entertainment allowance and employment tax

This list is only an indicative list and not an exhaustive list.

Effective from 1st April 2025, the TDS and TCS framework under the Income Tax Act, 1961 has been significantly revised to streamline compliance and address overlapping provisions. This comprehensive update includes the introduction of new sections, removal of certain existing ones, upward revision of threshold limits, and adjustments in applicable tax rates. Let us understand the key changes in tax deducted at source and tax collected at source effective from 1^st April 2025 in detail.

Focus Areas of TDS and TCS Changes Effective from 1^st April 2025

The primary focus areas for the changes introduced in the TDS and TCS mechanism with effect from 1^st April 2025 are as under-

• Increasing the threshold limits for applicability across various sections,
• Removal of tax collected at source applicability on certain transactions,
• Introduction of new sections for TDS such as on remuneration paid to partners,
• Exemption from prosecution for delay in depositing TCS.

Revision of Threshold limits for TDS deduction

The threshold limits have been revised for deduction of TDS under various sections with effect from FY 2025-26 as elaborated in the table below –

Section	Applicable Until 31st March 2025	Applicable From 1st April 2025
193 – Interest on Securities	No threshold limit	₹10,000
194A – Interest (excluding interest on securities)	₹50,000 for senior citizens ₹40,000 for others (banks, co-ops, post offices) ₹5,000 in other cases	₹1,00,000 for senior citizens ₹50,000 for others (banks, co-ops, post offices) ₹10,000 in other cases
194 – Dividend (individual shareholders)	₹5,000	₹10,000
194K – Income from Mutual Fund Units	₹5,000	₹10,000
194B – Lottery, Crossword Puzzle Winnings	Cumulative winnings above ₹10,000 in a financial year	₹10,000 per transaction
194BB – Winnings from Horse Races	Cumulative winnings above ₹10,000 in a financial year	₹10,000 per transaction
194D – Insurance Commission	₹15,000	₹20,000
194G – Commission or Prize on Lottery Sales	₹15,000	₹20,000
194H – Commission or Brokerage	₹15,000	₹20,000
194-I – Rent	₹2,40,000 annually	₹50,000 monthly
194J – Professional/Technical Service Fees	₹30,000	₹50,000
194LA – Compensation on Compulsory Acquisition	₹2,50,000	₹5,00,000

Section 194T –Remuneration to Partners

A new section 194T has been introduced from FY 2025-26 with effect from 1^st April 2025 for deduction of tax on payments made by a partnership firm or LLP to its partners on or after 1st April 2025. This section covers to salary, remuneration, commission, bonus, interest (on capital or otherwise) payments made to the partner. However, any amount that represents a return of capital (i.e., capital withdrawals) is not covered under this section.

Tax is only required to be deducted if the total of all specified payments made to a partner exceeds Rs. 20,000 in a financial year. This will have to be deducted When the amount is credited to the partner’s account (including their capital account), or when the amount is actually paid, whichever is earlier.

Relief from prosecution due to delayed deposit of TCS in certain conditions

Earlier, as per section 276BB of the Income Tax Act, in case of failure in deposit of the tax collected at source amount, could lead to imprisonment from 3 months to 7 years alongwith a fine. However, now no such prosecution will be done if the assessee has deposited the tax collected at source before the last date for filing the quarterly TCS statements thereby reducing the burden on the assessee.

Relief from the Sections 206AB and 206CCA

Sections 206AB and 206CCA previously imposed higher TDS and TCS rates on individuals who failed to file tax returns. This created an additional challenge for deductors and collectors, who were responsible for identifying non-filers and submitting returns within the prescribed deadlines.

However, effective from April 1, 2025, both sections will be repealed. As a result, businesses will no longer need to verify whether an individual has filed their tax returns to determine the applicable tax deduction rates. This change streamlines the compliance process and alleviates the burden on businesses.

Removal of TCS applicability on certain LRS remittances

From FY 2025-26, no Tax Collected at Source will apply under the Liberalised Remittance Scheme (LRS) for amounts sent abroad for educational purposes, provided the remittance is made using funds from an education loan. The relevant provision, Section 206C(1G), which earlier imposed TCS on such remittances exceeding Rs. 7 lacs, has been removed. As a result, Tax Collected at Source will no longer be applicable in these cases, regardless of the amount remitted.

Removal of TCS on Sale of Goods transactions

Earlier, under section 206C(1H), sellers were required to collect Tax Collected at Source on the sale of goods when the total value of sales to a buyer exceeded Rs. 50 lakh in a financial year, subject to specific conditions. This overlapped with section 194Q, which obligated buyers to deduct Tax Deducted at Source on similar transactions, leading to duplication and confusion in tax compliance.

To address these concerns and simplify the process, section 206C(1H) has been withdrawn effective from April 1, 2025. As a result, sellers are no longer required to collect TCS on the sale of goods, thereby removing the dual applicability of TCS and TDS on the same transaction and easing the compliance burden for businesses.

Increased Threshold Limits for certain TCS transactions

The threshold for Tax Collected at Source on remittances made under the Liberalised Remittance Scheme (LRS) and for purchasing overseas tour packages has been revised upward from the earlier limit of Rs. 7 lakh to Rs. 10 lakh.

Reduction in Rate for Forest Produce

The Tax Collected at Source rate for timber and other forest products, excluding tendu leaves, under section 206C(1) has been reduced from 2.5% to 2%. Moreover, the definition of “forest produce” will align with the definition provided in the Indian Forest Act of 1927 or any applicable State legislation.

Conclusion

Overall, these reforms are intended to streamline the process of tax deduction and collection at source, ease the administrative burden on taxpayers and businesses, and eliminate overlapping provisions that led to confusion and double taxation. By enhancing thresholds, removing redundant sections, and aligning rates more closely with actual transactions, the changes aim to foster a more transparent, efficient, and business-friendly tax environment.

With effect from 1^st April 2025 i.e. new financial year FY 2025-26, there are several changes including changes in income tax slabs. These changes must be kept in mind by all categories of taxpayers such as salaried persons, businesses, professionals etc. Let us understand the 10 important changes effective from 1^st April 2025 for the new financial year 2025-26.

New Tax Regime – Changes in Income Tax Slabs and Tax Rates

For the FY 2025-26, the revised income tax slabs and tax rates for assessees opting for the New Tax Regime i.e. the default tax regime u/s 115BAC are as under:-

Income Tax Slabs	Rate of Tax
Upto Rs. 4 lacs	Nil
Rs. 4 lacs to Rs. 8 lacs	5%
Rs. 8 lacs to Rs. 12 lacs	10%
Rs. 12 lacs to Rs. 16 lacs	15%
Rs. 16 lacs to Rs. 20 lacs	20%
Rs. 20 lacs to Rs. 24 lacs	25%
Above Rs. 24 lacs	30%

It is pertinent to remember that for assessees opting for the Old Tax Regime, the income tax slabs and tax rates will remain unchanged.

No Tax Payable upto Rs. 12 lacs wef 1st April 2025

The Income Tax Act, 1961 allows rebate u/s 87A which was earlier capped at Rs. 25,000. However, this limit has now been increased to Rs. 60,000 thereby ensuring that there is no tax liability for incomes upto Rs. 12 lacs filed under the New Tax Regime. However, this limit has only been increased for taxpayers filing returns under the new tax regime and the earlier limit of Rs. 25,000 will be applicable under the old tax regime.

Changes in House Property Taxation wef New Financial Year

Under the head ‘Income from House Property’, earlier only one house could be treated as self-occupied, unless the taxpayer had to reside in another city for work, in which case two properties could be considered. However, the rules have now been relaxed for the new financial year — up to two properties can be treated as self-occupied, and their annual value will be considered nil, without any specific conditions wef 1st April 2025.

Deduction allowed for remuneration to partner

Section 40(b) of the Income Tax Act sets a limit on the amount of salary and interest on capital that can be paid to partners in a firm. Any payment beyond this limit cannot be claimed as a tax deduction. These limits apply to the combined salary of all partners, not individually.

For Financial Year 2024-25:

• On the first ₹3,00,000 of book profit or in case of a loss:
  Deduction allowed is ₹1,50,000 or 90% of book profit, whichever is higher.
• On the remaining book profit:
  Deduction allowed is 60% of the remaining profit.

From New Financial Year 2025-26 i.e. wef 1st April 2025 onwards:

• On the first ₹6,00,000 of book profit or in case of a loss:
  Deduction allowed is ₹3,00,000 or 90% of book profit, whichever is higher.
• On the remaining book profit:
  Deduction allowed is 60% of the remaining profit.

Exemptions for Start Ups Extended

• Current Rule: Start-ups can claim a 100% tax deduction on profits for 3 out of 10 years after incorporation.
• Eligibility:
  • Incorporated between April 1, 2016, and March 31, 2025
  • Turnover must be under ₹100 crore
  • Must be certified by the Inter-Ministerial Board
• Proposed Change:
  • Extend the eligibility period to March 31, 2030
• Effective Date:
  • The change will apply from 1st April 2025.

Extended Tax Holiday Period for IFSC

With effect from 1^st April 2025, the deadline for commencing operations in IFSC for availing the benefits of tax holiday has been extended upto 31^st March, 2030 thereby increasing the tenure of the sunset clause by 5 years. Moreover, the non-residents availing life insurance policies issued by IFSC units will be eligible for full tax exemption u/s 10(10D), regardless of the size of the premium.

Time limit for filing updated returns

The government has extended the time period for filing updated income tax returns from the existing 2 years to 4 years from the end of the relevant assessment year wef 1st April 2025. This change is intended to encourage voluntary tax compliance by giving taxpayers a longer window to review and correct any omissions or errors in their original filings. By allowing more time for individuals and businesses to file or update their returns, the revised timeline aims to reduce litigation, improve accuracy in tax reporting, and create a more transparent and taxpayer-friendly system. This move is expected to make the process of rectifying genuine mistakes in income declarations easier and promote a more efficient and cleaner tax administration.

Reporting and Disclosures regarding Cryptocurrencies

A new provision, Section 285BAA, has been introduced in the Income Tax Act to strengthen the regulatory framework around cryptocurrency and other digital asset transactions in the new financial year This section makes it compulsory for all crypto exchanges and intermediaries to report details of transactions involving virtual digital assets (VDAs) to the Income Tax Department. The move is aimed at enhancing transparency and ensuring accurate tracking of crypto-related activities.

Scope of Undisclosed Income includes VDA

The scope of undisclosed income under Section 158B has been expanded to include virtual digital assets, making it clear that unreported holdings or gains from such assets will be treated as concealed income wef new financial year i.e. 1st April 2025 onwards. These changes reflect the government’s intent to bring digital assets under stricter tax compliance and reduce the chances of tax evasion in the rapidly growing crypto space.

Changes in carry forward period in case of amalgamation

Previously, sections 72A and 72AA of the Income Tax Act allowed the successor company, in cases of amalgamation or business reorganisation, to carry forward the accumulated losses of the predecessor company for a fresh period of eight years starting from the year of amalgamation. This created a loophole where companies could bypass the standard 8-year limitation under section 72 by repeatedly restructuring, allowing them to continue setting off losses indefinitely through successive amalgamations—a practice often referred to as “evergreening” of losses.

To address this and bring consistency across the tax framework, in the new financial year wef 1st April 2025, the amended provisions under sections 72A and 72AA now restrict the carry forward of such losses to a maximum of eight years from the date they were originally determined by the predecessor entity. This change aims to prevent misuse of the provision while still supporting legitimate business restructurings.

The new age virtual digital assets like cryptocurrency, NFTs have gained popularity in the last few years worldwide and are now coming under the regulations and structural frameworks in several countries. Countries like United States of America, India and European Union countries have brought these virtual digital assets under the purview of taxation. The new Income Tax Bill 2025 introduced by the Finance Minister Nirmala Sitharaman in Parliament in February, 2025 which will be replacing the existing 6 decades old Income Tax Act, 1961 holistically covers the concept of virtual digital assets and has several clauses covering the tax implications of these assets.

Need for Inclusion of Virtual digital Assets in the bill

The spirit of the new Income Tax Bill of 2025 is to remove the redundant laws and to make the direct taxation law more contemporary. Moreover, there was a growing need for inclusion of virtual digital assets like cryptocurrency and NFTs under the pruview of taxation on account of the following reasons:-

• For generation of revenue since the volume of transaction is these virtual digital assets has been increasing rapidly,
• For prevention of tax evasion, illegal transactions and money laundering that was being facilitated by these VDAs,
• For better regulation of this sector to enhance transparency in transactions involving VDAs.

Definition of Virtual Digital Assets

In the new Income Tax Bill, 2025, the term “virtual digital assets” has been defined under Clause 2(111) as –

“(a) any information or code or number or token (not being Indian currency or foreign currency), generated through cryptographic means or otherwise, called by any name, providing a digital representation of value exchanged with or without consideration, with the promise or representation of having inherent value, or functions as a store of value or a unit of account including its use in any financial transaction or investment, but not limited to investment scheme; and can be transferred, stored or traded electronically

(b) a non-fungible token or any other token of similar nature, by whatever name called;

(c) any other digital asset, as the Central Government may, by notification, specify,

(d) any crypto-asset being a digital representation of value that relies on a cryptographically secured distributed ledger or a similar technology to validate and secure transactions, whether or not such asset is included in sub-clause (a) or (b) or (c).”

Therefore, the definition of virtual digital assets in the bill is very comprehensive and covers all kinds of cyptocurrency, crypto-assets and NFTs. The term “virtual digital assets” defined above has been used several times in the 622 pages bill as such without any changes in the term in any of these clauses.

Taxation under Income from Other Sources

Under Clause 92(5)(f) of the new Income Tax Bill, 2025, the inclusions in the term “property” have been listed as – “the following capital asset of the assesse:— (i) immovable property being land or building or both; (ii) shares and securities; (iii) jewellery; (iv) archaeological collections; (v) drawings; (vi) paintings; (vii) sculptures; (viii) any work of art; (ix) bullion; or (x) virtual digital asset.” Therefore, the taxation implications on property being covered under the head “Income from other sources” will also be applicable as it is on the virtual digital assets as well.

VDAs covered under the taxation on Unexplained Assets

Clause 104 of the Income Tax Bill, 2025, covers the aspect of assets owned by the assessee that have not been disclosed anywhere by the assessee and are later discovered by the Assessing Officer i.e. Unexplained assets. In sub-clause 2, the inclusions in the term “asset” have been listed as money, bullion, jewellery, virtual digital asset or any other valuable article. Therefore, the value of such virtual digital asset, or such excess amount, as the case may be, shall be deemed to be the income of the assessee of the tax year in which such asset has been found to be owned by, or belonging to, the assessee.

Clause 194 – Tax on transfer of Virtual Digital Assets

Clause 194 comprehensively covers the taxation on certain incomes such as royalty etc. As per this clause, where an assessee (any person) received any income from the transfer of any virtual digital asset, whether capital asset or not, will be liable to pay tax @ 30% on such income. The assessee can deduct only the cost of acquisition of such VDA for computation of income i.e. no other deduction will be allowed to the assessee for any expenditure. Moreover, the assessee will neither be allowed to set off any loss on such transaction nor to carry forward the loss to any succeeding tax years.

VDAs covered under Undisclosed Income of any other person

As per Clause 295 of the Income Tax Bill, 2025, – “Where the Assessing Officer is satisfied that any undisclosed income belongs to or pertains to or relates to any person, other than the person with respect to whom search was initiated or requisition was made, then––

(a) any money, bullion, jewellery, virtual digital asset or other valuable article or thing, or assets, or books of account, other documents, or any information contained therein, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person; and

(b) such other person referred to in clause (a) shall be assessed under section 294 and the provisions of this Chapter shall apply accordingly.”

Therefore, if in the course of any search proceedings against any assessee, the AO finds any virtual digital assets belonging to another person, the same will be handed over to the AO having jurisdiction over the other person and the other person shall now be assessed under Clause 294 i.e. Procedure for block assessment.

In this case, as per Clause 294, the block period for such assessment or reassessment shall be the same as that determined in respect of the person in whose case search was initially initiated or requisition was made and proceedings under the said section were initiated due to such search or requisition.

TDS implications on Virtual Digital Assets

In the new Income Tax Bill, 2025, Clause 393 deals with the law on the tax deducted at source (TDS). Table serial no. 8(vi) under this clause, for payments to residents, refers to the TDS implications on transfer of VDAs. In case of transfer of virtual digital assets, on any sum or consideration, TDS has to be deducted @ 1%.

Presumption as to assets, books of accounts

As per Clause 524(1), – “Where any books of account, other documents money, bullion, jewellery, virtual digital asset or other valuable article or thing, is found in the possession or control of any person in the course of a search under section 247 or survey under section 253, it may, in any proceeding under this Act, be presumed—

(a) that such books of account, other document, money, bullion, jewellery, virtual digital asset or other valuable article or thing belong or belongs to such person;

 (b) that the contents of such books of account and other document are true;

(c) that the signature and every other part of such books of account and other document, which purports to be in the handwriting of any particular person, or which may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular person, are in the handwriting of that person; and

(d) in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested article or thing belong or belongs to such person.”

Therefore, the term virtual digital assets has been included as a part of the list of assets presumed to be belonging to the assessee on whom the search or survey proceedings have been conducted.

The New Income Tax Bill 2025 was introduced by the Finance Minister Nirmala Sitharaman in the Parliament on 13^th February, 2025 to replace the six decades old Income Tax Act of 1961. The bill has now been sent to the Standing Committee for review and a report on the bill is expected to be presented by the committee on the 1^st day of the next session. Let us now understand the 10 major changes introduced in the new Income Tax Bill 2025 in comparison to the existing direct tax law contained in the Income Tax Act, 1961.

Concept of Tax Year introduced

In the existing Income Tax Act, 1961, the terms “previous year” and “assessment year” were used to denote the period for which the income tax was being computed. However, in the new Income Tax Bill 2025, the concept of “tax year” has been introduced to replace the terms “previous year” and “assessment year”. The term “tax year” has been defined in Clause 3 of the Income Tax Bill 2025 as –

“(1) For the purposes of this Act, “tax year” means the twelve months period of the financial year commencing on the 1st April.

(2) In the case of a business or profession newly set up, or a source of income newly coming into existence in any financial year, the tax year shall be the period beginning with—

(a) the date of setting up of such business or profession; or

(b) the date on which such source of income newly comes into existence, and,

ending with the said financial year.”

Change in determination of residential status

Clause 6 of the new Income Tax Bill 2025 deals with the rules for determination of residential status. An important change in the new law as compared to the existing law is stated in Clause 6 sub-clause 3 i.e.

“(3) The provisions of sub-section (2)(b) shall not apply in the case of an individual who is a citizen of India and leaves India in any tax year––

(a) as a member of the crew of an Indian ship, as defined in section 3(18) of the Merchant Shipping Act, 1958; or

(b) for employment outside India.”

Previously, individuals leaving India “for the purpose of employment” benefited from a relaxed residency requirement—they were classified as non-residents if they spent less than 182 days in India during the financial year, compared to the 60-day rule applicable to others. However, under the new bill, this phrase has been revised to “for employment outside India.” Individuals planning to move abroad may need to strategize their relocation carefully and ensure they have official employment proof before leaving India. Without this, they could unexpectedly fall under India’s tax residency laws despite spending most of their time overseas.

Certain transfers removed for capital gains

Since the existing Income Tax Act, 1961 is a six decades old law, there were certain redundant concepts in the law that have now been removed completely from the new Income Tax Bill, 2025. Two such changes are the removal of the transfer of land of an industrially sick company and the removal of transfer in course of demutualisation or corporatisation of a recognized stock exchange from the purview of transactions eligible for capital gains. This has been done to remove redundant provisions to simplify and streamline the law.

Deduction of 80C and 80CCD now covered in Schedule XV

As per the new Income Tax Bill, 2025, Schedule XV contains the deductions with respect to the following:-

• Life insurance premium
• Contribution to Provident Fund
• Subscription to certain equity shares

amongst other deductions that were primarily covered u/s 80C and 80CCD in the existing Income Tax Act, 1961.

Deduction for Entertainment allowance not allowed

As per the existing Income Tax Act, 1961, Section 16 includes deduction for entertainment allowance to be deducted from income from salary for government employees. However, as per the new Income Tax Bill, 2025, no such entertainment allowance deduction will be available for government employees.

Tax exemption in case of receipt of gifts

Under Section 56(2)(x) of the existing Income Tax Act, gifts received by an individual from their direct ancestors or descendants, including those related to their spouse, are exempt from income tax. However, the proposed Income Tax Bill, 2025, has now clarified that these lineal relatives may belong to either the maternal or paternal side of the family as per the definition of relative in Clause 92(5)(g) of the new Income Tax Bill, 2025.

Deduction of TDS/TCS at lower rates

As per Clause 395 of the new Income Tax Bill, 2025 the assessee can apply for a lower rate of deduction of TDS/TCS to the Assessing Officer and the AO can issue a certificate for such low/nil deduction of TDS/TCS. Clause 395 states that –

 “(1) Where tax is required to be deducted on any income or sum under this Chapter, then subject to the rules made under this Act,—

(a) the payee may make an application before the Assessing Officer for deduction of tax at a lower rate; and

(b) the Assessing Officer on being satisfied that the total income of the payee justifies a lower deduction, shall issue a certificate as appropriate; and

(c) when a certificate is issued under clause (b), the person responsible for paying the income or amount shall deduct the tax at the rate specified in such certificate till its validity.”

Under Section 197 of the existing Income Tax Act, 1961 a taxpayer can apply to the Assessing Officer for a certificate allowing nil or reduced TDS deduction. However, this benefit is only available for specific types of payments outlined in the section. The Income Tax Bill, 2025 extends this provision, enabling individuals to request a lower TDS certificate for all payment categories.

Definition of books of accounts – Search and Seizure cases

The new Income Tax Bill, 2025, has revised the phrase “any books of account or other documents” to now include “any books of account, other documents, or any information stored in electronic media or a computer system.” This change broadens the scope to cover digital records in addition to physical documents.

Access in case of search and seizure

Section 132 of the Income Tax Act grants an authorized officer the power to act when there is reason to believe that books of accounts or assets are stored in a building, vehicle, vessel, aircraft, or other locations. Among these powers is the authority to break open locks on doors, safes, lockers, or any secured storage if the keys are unavailable. The new Income Tax Bill,2025 expands this provision by allowing officials to bypass access codes to computer systems or virtual digital spaces when the required credentials are not accessible.

“Virtual Digital Asset” Introduced

As per Clause 2 sub-clause 111 of the new Income Tax Bill, 2025, a new term “virtual digital asset” has been introduced and defined as –

“Virtual digital asset” means—

• any information or code or number or token (not being Indian currency or foreign currency), generated through cryptographic means or otherwise, called by any name, providing a digital representation of value exchanged with or without consideration, with the promise or representation of having inherent value, or functions as a store of value or a unit of account including its use in any financial transaction or investment, but not limited to investment scheme; and can be transferred, stored or traded electronically;
• a non-fungible token or any other token of similar nature, bywhatever name called;
• any other digital asset, as the Central Government may, bynotification, specify,
• any crypto-asset being a digital representation of value thatrelies on a cryptographically secured distributed ledger or a similar technology to validate and secure transactions, whether or not such asset is included in sub-clause (a) or (b) or (c),”

Thus, Virtual Digital Assets (VDAs) include cryptocurrencies, NFTs and other digital currencies that will now be categorised as assets such as paintings, jewellery and shares for taxation purposes.

The New Income Tax Bill introduced in the Lok Sabha by the Finance Minister Nirmala Sitharaman on 13^th February, 2025 to replace the Income Tax Act, 1961. The motion to introduce the bill was passed and the Finance Minister requested the Speaker of the Lok Sabha to send the income tax bill to the Parliamentary Standing Committee for their suggestions and the report of the committee may be given on the 1^st day of the next session.

The new Income Tax Bill introduced is a 622 pages document, with 536 sections, 23 chapters and 16 schedules. Before the new income tax could be introduced, there were certain arguments made by some opposition members that were then answered by the Finance Minister in her introductory remarks.

Objections raised by Members of Parliament

Certain objections were raised in the Lok Sabha today by Manish Tiwari (INC), N. Premachandran (RSP) and Saugota Roy (TMC) primarily on the grounds that the contention of the Finance Ministry was to simplify the direct tax law however, since the number of sections has increased from 298 to 536 in the new Income Tax Bill introduced, this objective of the bill requires clarity.

FM’s arguments for 536 sections

As elaborated above, it was argued by the opposition members in the Parliament that the Income Tax Act, 1961 had only 298 sections however, the new income tax bill introduced by the Finance Minister has 536 sections. In response to this argument, the Finance Minister Nirmala Sitharaman stated that in the Income Tax Act, 1961 there were effectively 819 sections that have now been substantially reduced to 536 sections.

Accommodation of amendments

The Finance Minister Nirmala Sitharaman highlighted that in the Income Tax Act, 1961, there were over 4000 amendments that had been introduced from 1961 to 2024. In the new Income Tax Bill introduced, the focus has been on accommodating these amendments in a simple language.

Bill sent to Committee for review

The motion to introduce the bill was passed and the Finance Minister requested the Speaker of the Lok Sabha to send the income tax bill to the Parliamentary Standing Committee for their suggestions and the report of the committee may be given on the 1^st day of the next session i.e. 10^th March, 2025. The introduced new law will be called the Income Tax Act, 2025 and is expected to be implemented from 1^st April, 2026.

No change in the heads of income

There has been no change in the heads of income in the new Income Tax Bill introduced and the heads of income are – salary, income from house property, profits and gains from business or profession, capital gains and income from other sources.

Click here to read details about the Highlights of the New Income Tax Bill 2025.

Click here to view the official document of the New Income Tax Bill 2025 introduced.