Starting April 1, 2025, several significant financial and tax changes have affected taxpayers, investors, and everyday economic transactions. These updates, largely stemming from the Union Budget 2025 announced by Finance Minister Nirmala Sitharaman, aim to simplify tax structures, enhance disposable income, and adapt financial systems to modern needs. Below is a breakdown of the key changes you need to know as of April 2, 2025.
Income Tax Changes
- Revised Tax Slabs under the New Tax Regime
The new tax regime, now the default option, introduces updated income tax slabs for the financial year 2025-26 (April 1, 2025 – March 31, 2026). Key highlights include:
- Income up to ₹12 lakh is tax-free for individuals opting for the new regime, thanks to an increased rebate of ₹60,000 under Section 87A (up from ₹25,000).
- Salaried individuals can earn up to ₹12.75 lakh tax-free due to a standard deduction of ₹75,000.
- The highest tax rate of 30% applies only to income exceeding ₹24 lakh.
- The old tax regime remains optional, with unchanged slabs and deductions like Section 80C still available for those who opt in.
- Increased TDS Thresholds
Tax Deducted at Source (TDS) limits have been raised to reduce premature deductions:
- Interest income: No TDS up to ₹50,000 for non-senior citizens (previously ₹40,000) and ₹1 lakh for senior citizens (previously ₹50,000).
- Rental payments: TDS threshold increased from ₹2.4 lakh to ₹6 lakh annually.
- Dividends: TDS applies only if annual income exceeds ₹10,000 (up from ₹5,000).
- TCS Adjustments
Tax Collected at Source (TCS) rules have been tweaked:
- The threshold for TCS on overseas remittances under the Liberalized Remittance Scheme (LRS) is now ₹10 lakh (up from ₹7 lakh).
- No TCS applies to educational loans financed through financial institutions, easing the burden on students.
- Extended Deadline for Updated Returns
The timeline for filing an Updated Tax Return (ITR-U) has been extended from 12 months to 48 months (4 years) from the end of the relevant assessment year, giving taxpayers more flexibility to correct errors or disclose income. - Startup Tax Benefits
Startups incorporated before April 1, 2030, can claim a 100% profit deduction for three out of ten years under Section 80-IAC, provided conditions are met, fostering entrepreneurship.
Financial and Banking Updates
- UPI Deactivation for Dormant Numbers
The National Payments Corporation of India (NPCI) has mandated the deactivation of UPI IDs linked to mobile numbers that have been inactive for an extended period. Users with outdated numbers must update their details with banks to avoid disruptions in digital payments. - Unified Pension Scheme (UPS)
Effective April 1, 2025, central government employees under the National Pension System (NPS) can opt into the UPS. It guarantees a pension of 50% of the average basic salary over the last 12 months for those with at least 25 years of service, enhancing retirement security. - Credit Card Changes
Several banks have revised credit card benefits:
- SBI Cards: Starting July 26, 2025, complimentary insurance for air and rail accidents will end, and reward points per ₹100 spent will drop from 15% to 5%.
- Axis Bank: Vistara Credit Card benefits will be revised post-merger with Air India, removing complimentary perks from April 18, 2025.
Other Notable Changes
- Removal of Equalisation Levy
The 6% levy on digital advertisements and 2% on e-commerce transactions, applicable to non-resident providers, has been scrapped, aiming to boost foreign investment in India’s digital economy. - GST and E-Invoicing
Businesses with an annual turnover of ₹10 crore or more must now upload e-invoices to the Invoice Registration Portal within 30 days, down from the previous ₹100 crore threshold, enhancing tax compliance.
What You Should Do
- Taxpayers: Review your income and decide between the new and old tax regimes based on deductions you can claim. File ITRs to avail rebates, even if your tax liability is zero.
- UPI Users: Update your mobile number with your bank if it’s linked to an inactive UPI ID.
- Investors and Businesses: Adjust financial plans to leverage higher TDS/TCS thresholds and startup benefits.
- Credit Card Holders: Check with your bank for specific reward structure changes.
These changes reflect a push toward simplification, relief for middle-income earners, and modernization of financial systems. Stay informed and adjust your financial strategies accordingly for the 2025-26 fiscal year!
