With effect from 1st 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 1st 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 1st April 2025, the deadline for commencing operations in IFSC for availing the benefits of tax holiday has been extended upto 31st 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.