Category: Updates

New Income Tax Bill Next Week: Budget 2025 AnnouncementFinance Minister Said in Budget Speech:I also propose to introduce the new income-tax bill next weekI now come to my Direct tax proposalsIn Part A, I have briefly underlined Taxation Reforms as one of key reforms to realize our vision of Viksit Bharat. In respect of criminal law, Our Government had earlier ushered in Bharatiya Nyaya Sanhita replacing Bharatiya Danda Sanhita. I am happy to inform this August House and the country that the new income-tax bill will carry forward the same spirit of “Nyaya”. The new bill will be clear and direct in text with close to half of the present law, in terms of both chapters and words. It will be simple to understand for taxpayers and tax administration, leading to tax certainty and reduced litigation.In a significant announcement during the Union Budget 2025-26 presentation, Finance Minister Nirmala Sitharaman revealed that a new Income Tax Bill will be introduced in Parliament next week. This move aims to modernize and simplify the country’s tax structure, making it more transparent and taxpayer-friendly.Why a New Income Tax Bill?The existing Income Tax Act, 1961, has been in force for over six decades and has undergone numerous amendments. The government believes that a complete overhaul is necessary to align the tax system with the changing economic environment, evolving business landscape, and global best practices.Key Expectations from the New Tax BillThough the specific provisions of the bill will be unveiled upon its introduction, experts anticipate the following major reforms:Proposed ChangeExpected ImpactSimplification of Tax LawsReduced complexity in tax compliance and disputes.Clarity on Digital & Crypto TransactionsEstablishing clearer tax guidelines on digital assets.Alignment with Global Best PracticesMaking India’s tax system competitive globally.Rationalization of Exemptions & DeductionsPossible changes in tax benefits under 80C, 80D, and HRA.Ease of Compliance for Individuals & BusinessesAutomation and AI-driven assessments to reduce litigation.How a New Bill Becomes Law?When a new bill is introduced in Parliament, it must go through several stages before becoming law:1. Drafting of the BillThe bill is prepared by the Ministry of Finance in consultation with legal experts and stakeholders.It is reviewed by the Law Ministry to ensure legal soundness.2. Introduction in ParliamentThe bill is introduced as a Money Bill or Finance Bill in the Lok Sabha.The Finance Minister presents the key features and objectives of the bill.3. Debate and DiscussionMembers of Parliament (MPs) discuss the provisions of the bill.Amendments or suggestions may be proposed for modifications.4. Passing in Lok Sabha and Rajya SabhaThe bill must be passed by a majority vote in the Lok Sabha.It is then sent to the Rajya Sabha for further debate and approval.5. Presidential ApprovalOnce both houses approve the bill, it is sent to the President of India for assent.The President can either approve or return the bill for reconsideration.6. Notification and ImplementationAfter the President’s approval, the bill becomes an Act of Parliament.The government notifies the implementation date, and necessary rules and guidelines are issued.Removal of higher TDS/TCS for non-filers of Income tax ReturnCurrent ProvisionsSection 206AB (Higher TDS for Non-Filers)If payment is made to a specified person as mentioned above, then tax shall be deducted at source (TDS) at higher of below rates:2 times the rate given in the Income Tax Act or Finance Act or5%If the person provides the PAN but has not filed the return for the last assessment year, the due date for filing has expired, and the aggregate of TDS or TCS in his case is Rs. 50,000 or more, then the above rate shall apply. Just to save from this, if he doesn’t provide the PAN, then tax shall be deducted at 20% or a much higher rate as per section 206AA. Section 206CCA (Higher TCS for Non-Filers)The tax shall be collected at source (TCS) on higher of the following: 2 times the rate given in the Income Tax Act or Finance Act or.5%If the person provides the PAN but has not filed the return for the last assessment year and the due date for filing has been expired and the aggregate of TDS or TCS in his case is Rs. 50,000 or more then the above rate shall apply. Just to save from this, if he doesn’t provide the PAN then tax shall be collected at 20% or a much higher rate as per section 206CC.Issues FacedDifficult for deductors/collectors to verify tax return filing status of the deductee/collectee at the time of deduction/collection.Leads to unnecessary application of higher TDS/TCS rates, blocking of capital, and increased compliance burden.Proposed Amendment (Effective from April 1, 2025)ProvisionCurrent LawProposed ChangeSection 206ABHigher TDS for non-filers of ITR.To be removed.Section 206CCAHigher TCS for non-filers of ITR.To be removed.Impact of the Change✅ Simplifies tax compliance for deductors & collectors.✅ Reduces administrative burden and capital blockage.✅ Encourages smoother business transactions.This amendment aims to streamline the taxation process and ease operational challenges for taxpayers.REMOVAL OF TCS ON SALE OF GOODS FROM 1ST APRIL 2025Sub-section (1H) of section 206C of the Act, requires any person being a seller who receives consideration for sale of any goods of the value or aggregate of value exceeding Rs 50 lakhs in any previous year, to collect tax from the buyer at the rate of 0.1% of the sale consideration exceeding Rs 50 lakhs, subject to certain conditions.Section 194Q of the Act, requires any person being a buyer, to deduct tax at the rate of 0.1%, on payment made to a resident seller, for the purchase of any goods of the value or aggregate of value exceeding fifty lakh rupees in any previous year .Sub-section (1H) of section 206C mandates tax collection at source (TCS) by a seller while Section 194Q provides for tax deduction at source (TDS) by a buyer on the same transaction.Further, it is provided in sub-section (1H) of section 206C of the Act that the provision will not apply, if the buyer is liable to deduct TDS under any other provision of this Act on the goods purchased from the seller and has deducted such amount. Representations have been received that it becomes difficult for the seller to check whether the buyers have ensured the compliance of TDS deduction under 194Q of the Act. This results in both TDS and TCS being made applicable on the same transaction.Therefore, to facilitate ease of doing business and reduce compliance burden on the taxpayers, it is proposed that provisions of sub-section (1H) of section 206C of the Act will not be applicable from the 1st day of April, 2025.These amendments will take effect from the 1st day of April 2025.Proposed Amendment (Effective from April 1, 2025)ProvisionCurrent LawProposed ChangeSection 206C(1H)Seller must collect TCS @ 0.1% if buyer hasn’t deducted TDS.TCS on sale of goods will no longer be applicable.Section 194QBuyer must deduct TDS @ 0.1% on payments exceeding ₹50 lakh.No change. TDS provisions will continue.New Income tax slab rate under New Regime from F.Y. 2025-26 (A.Y. 2026-27) in Budget 2025Revised Income Tax Slabs (New Regime)Sl. No.Total Income (₹)Rate of Tax (%)1Upto ₹4,00,000Nil2₹4,00,001 to ₹8,00,0005%3₹8,00,001 to ₹12,00,00010%4₹12,00,001 to ₹16,00,00015%5₹16,00,001 to ₹20,00,00020%6₹20,00,001 to ₹24,00,00025%7Above ₹24,00,00030%Rebate under Section 87A (Applicable for Individuals under New Regime – Section 115BAC(1A)) ParticularsExisting (AY 2025-26)Proposed (AY 2026-27 onwards)Maximum Income Eligible for Rebate₹7,00,000₹12,00,000Maximum Rebate Amount₹25,000₹60,000ConditionRebate shall not exceed the tax payableRebate shall not exceed the tax payableImportant Note : as mentioned above, such rebate of income-tax is not available on tax onincomes chargeable at special rates (for e.g.: capital gains u/s 111A, 112 etc.Examples to clarify tax benefits under New SlabsAll TDS Threshold Limits changed in Budget 2025Effective changes from 1 April 2025 as per Budget 2025 TDS provisions have various thresholds of amount of payment or amount of income, beyondwhich tax is required be deducted. It is proposed to rationalize these thresholds as below –S. NoSectionCurrent ThresholdProposed Threshold1193 – Interest on securitiesNil₹10,000/-2194A – Interest other than Interest on securities(i) ₹50,000/- for senior citizens (ii) ₹40,000/- for others when payer is bank, cooperative society, and post office (iii) ₹5,000/- in other cases(i) ₹1,00,000/- for senior citizens (ii) ₹50,000/- for others when payer is bank, cooperative society, and post office (iii) ₹10,000/- in other cases3194 – Dividend for an individual shareholder₹5,000/-₹10,000/-4194K – Income in respect of units of a mutual fund or specified company or undertaking₹5,000/-₹10,000/-5194B – Winnings from lottery, crossword puzzle, etc.Aggregate of amounts exceeding ₹10,000/- during the financial year₹10,000/- in respect of a single transaction6194BB – Winnings from horse raceAggregate of amounts exceeding ₹10,000/- during the financial year₹10,000/- in respect of a single transaction7194D – Insurance commission₹15,000/-₹20,000/-8194G – Income by way of commission, prize, etc. on lottery tickets₹15,000/-₹20,000/-9194H – Commission or brokerage₹15,000/-₹20,000/-10194-I – Rent₹2,40,000/- during the financial year₹50,000/- per month or part of a month11194J – Fee for professional or technical services₹30,000/-₹50,000/-12194LA – Income by way of enhanced compensation₹2,50,000/-₹5,00,000/-Detail about all theses amendments is given below :1. Interest on Securities – Section 193Section 193 requires tax deduction on interest payments on securities to residents. Currently, no threshold limit exists for TDS deduction. The proposed amendment introduces a threshold limit of ₹10,000/- in a financial year.Current ProvisionProposed AmendmentNo threshold limit for deduction of TDS on interest on securities.TDS to be deducted only if interest exceeds ₹10,000/- in a financial year.2. Dividend Payments – Section 194Section 194 mandates TDS at 10% on dividend payments exceeding ₹5,000/- to resident shareholders.Current ProvisionProposed AmendmentNo TDS if the dividend paid to an individual does not exceed ₹5,000/- in a financial year.The threshold limit is increased to ₹10,000/- per financial year.3. Interest Other than Interest on Securities – Section 194ASection 194A governs TDS on interest payments (excluding securities). The amendment increases threshold limits for different types of payers.PayerCurrent TDS ThresholdProposed TDS ThresholdCurrent TDS Threshold (Senior Citizens)Proposed TDS Threshold (Senior Citizens)Banks₹40,000/-₹50,000/-₹50,000/-₹1,00,000/-Cooperative banks₹40,000/-₹50,000/-₹50,000/-₹1,00,000/-Post Office Deposits₹40,000/-₹50,000/-₹50,000/-₹1,00,000/-Other cases₹5,000/-₹10,000/-₹5,000/-₹10,000/-4. Winnings from Lottery, Gambling, and Horse Race – Sections 194B & 194BBCurrently, TDS is applicable if winnings exceed ₹10,000/- in aggregate during a financial year. The proposed amendment applies TDS on winnings per transaction instead of an annual aggregate.SectionCurrent ProvisionProposed Amendment194B (Lottery, crossword puzzle, gambling, betting)TDS applicable on aggregate winnings exceeding ₹10,000/- per financial year.TDS applicable on winnings exceeding ₹10,000/- per single transaction.194BB (Horse race winnings)TDS applicable on aggregate winnings exceeding ₹10,000/- per financial year.TDS applicable on winnings exceeding ₹10,000/- per single transaction.5. Commissions & Brokerage – Sections 194D, 194G, and 194HTDS threshold limits for insurance commission, lottery commission, and brokerage are increased.SectionNature of PaymentCurrent ThresholdProposed Threshold194DInsurance Commission₹15,000/-₹20,000/-194GLottery Commission₹15,000/-₹20,000/-194HBrokerage/Commission (excluding insurance)₹15,000/-₹20,000/-6. Rent Payments – Section 194-ICurrently, TDS applies if annual rent exceeds ₹2,40,000/-. The amendment changes the threshold to ₹50,000/- per month or part thereof.Current ProvisionProposed AmendmentTDS applicable if annual rent exceeds ₹2,40,000/-.TDS applicable if monthly rent exceeds ₹50,000/- per month or part thereof.7. Professional & Technical Fees – Section 194JThe amendment increases the threshold for various professional and technical service payments.Nature of PaymentCurrent ThresholdProposed ThresholdProfessional Fees₹30,000/-₹50,000/-Technical Services₹30,000/-₹50,000/-Royalty₹30,000/-₹50,000/-Non-compete fees under section 28(va)₹30,000/-₹50,000/-8. Mutual Fund & Specified Company Income – Section 194KTDS applies to mutual fund/unit income payments exceeding ₹5,000/-. The threshold is now increased to ₹10,000/-.Current ProvisionProposed AmendmentTDS applies if mutual fund/unit income exceeds ₹5,000/-.TDS applies if mutual fund/unit income exceeds ₹10,000/-.9. Compensation on Acquisition of Immovable Property – Section 194LAThe threshold for TDS on compensation due to compulsory acquisition of immovable property (excluding agricultural land) is increased.Current ProvisionProposed AmendmentTDS applicable if compensation exceeds ₹2,50,000/-.TDS applicable if compensation exceeds ₹5,00,000/-.Effective DateAll amendments will come into effect from April 1, 2025. Budget Key Features Finance Bill

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