As the new financial year begins, India’s direct tax system is set for a major overhaul with the implementation of the Income-tax Act, 2025 from April 1. The new law replaces the Income-tax Act, 1961 and introduces structural, procedural, and conceptual changes aimed at simplifying compliance and reducing disputes.
According to chartered accountant Suresh Surana, the updated framework is designed to make tax laws easier to understand while improving efficiency across the system.
Key changes effective from April 1:
New Income-tax Act, 2025
The new legislation introduces simplified language and removes outdated provisions. It will apply from FY27 onwards.
Introduction of “tax year”
The terms “financial year” and “assessment year” will be replaced with a single “tax year” to bring clarity and uniformity.
Revised ITR filing deadlines
- July 31: Individuals filing ITR-1 and ITR-2
- August 31: Non-audit business/professional taxpayers and partners
- October 31: Companies and audited entities
- November 30: Special category taxpayers
(Effective from Tax Year 2026–27)
Extended timeline for revised returns
Taxpayers can now file revised returns up to 12 months from the end of the tax year.
- ₹1,000 fee for income up to ₹5 lakh
- ₹5,000 fee for income above ₹5 lakh
Increase in STT rates
- Options sale: 0.10% → 0.15%
- Options exercise: 0.125% → 0.15%
- Futures sale: 0.02% → 0.05%
Rationalisation of TCS rates
- LRS (education/medical above ₹10 lakh): 5% → 2%
- Overseas tour packages: uniform 2% (replacing 5%/20%)
- Other remittances: continue at 20%
Tax on share buybacks
Buyback proceeds will now be taxed as capital gains instead of dividends.
- 30% for individual promoters
- 22% for companies
Sovereign Gold Bonds (SGBs)
Tax exemption applies only if purchased at original issue. Secondary market purchases will attract capital gains tax.
MACT compensation relief
Interest on motor accident compensation will be fully tax-free, with no TDS.
Home-to-office travel relief
Employer-provided transport or reimbursements for commuting will no longer be treated as taxable perquisites.
Simplified TDS for property purchases
Buyers can deduct TDS using PAN without requiring a TAN when purchasing from non-residents.
Armed forces pension rule
Tax exemption will apply only to disability-related pensions, not regular retirement pensions.
Draft Income Tax Rules, 2026 (proposed):
- Education allowance: up to ₹3,000/month per child
- Hostel allowance: up to ₹9,000/month per child
- PAN thresholds revised across transactions, including:
- Cash transactions: ₹10 lakh annually
- Property: ₹20 lakh
- Hotel/events: ₹1 lakh
- Motor vehicles: above ₹5 lakh (including two-wheelers)
- Insurance: expanded to all account-based relationships
- Cash transactions: ₹10 lakh annually
These changes aim to simplify taxation, improve transparency, and align India’s Income tax system with evolving economic needs.
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