TOP 10 INCOME TAX CHANGES IN 2025 – WHAT TAXPAYERS MUST KNOW!



A Comprehensive Guide to the New Income-tax Act, 2025 (Effective from 1 April 2026)

The Government of India has unveiled the New Income-tax Act, 2025, marking one of the most significant overhauls of the direct tax framework in decades. Designed to replace the existing Income-tax Act, 1961, the new legislation aims to simplify compliance, reduce litigation, encourage voluntary tax compliance, and make the system more transparent and technology-driven.

Although the new Act will come into force from 1 April 2026, the announcements made in 2025 provide taxpayers ample time to understand, prepare, and plan effectively. From revised tax slabs and higher rebates to the removal of punitive provisions for non-filers and a fully digital-first compliance approach, these changes will impact salaried individuals, professionals, businesses, and investors alike.

This blog explains the Top 10 Income Tax Changes in 2025 that every taxpayer must know.

1. Introduction of the New Income-tax Act, 2025

The most fundamental change is the introduction of an entirely new Income-tax Act, replacing the law that has been in force since 1961. Over the years, the old Act had become complex due to numerous amendments, explanations, provisos, and judicial interpretations.

The new Act focuses on:

  • Simplified language

  • Logical structure

  • Reduced cross-referencing

  • Clear definitions and compliance rules

The objective is to make tax law easier to understand for common taxpayers, not just tax professionals.

2. Revised Income-tax Slabs under the New Tax Regime

One of the most awaited reforms is the revision of income-tax slabs under the new tax regime. The government aims to make the new regime the default and more attractive by offering wider slabs and lower tax burden for middle-income taxpayers.

Key highlights:

  • Rationalised slab structure

  • Reduced tax burden for salaried and middle-income groups

  • Incentive for voluntary migration to the new tax regime

This move aligns with the government’s goal of simplifying tax planning and reducing dependency on multiple deductions.

3. Higher Rebate under Section 87A – More Tax-Free Income

The new Act proposes a higher rebate under Section 87A, effectively increasing the income threshold up to which no tax is payable.

Benefits include:

  • More individuals paying zero tax

  • Increased disposable income

  • Relief for lower and middle-income earners

This measure directly supports salaried employees and small taxpayers, ensuring tax relief keeps pace with inflation and rising living costs.

4. Increase in Standard Deduction for Salaried Taxpayers

Another taxpayer-friendly reform is the increase in standard deduction for salaried individuals and pensioners.

Why this matters:

  • Simplifies tax computation

  • Provides uniform relief without documentation

  • Encourages the adoption of the new tax regime

This move compensates for the gradual reduction in exemptions and deductions while maintaining fairness for salaried taxpayers.

5. Introduction of Marginal Relief to Avoid Sudden Tax Burden

The new Income-tax Act introduces marginal relief provisions to prevent situations where a small increase in income results in a disproportionately high tax liability.

This ensures:

  • Smooth transition between tax slabs

  • Fair taxation

  • Reduced anxiety around income thresholds

Marginal relief is particularly beneficial for individuals whose income marginally exceeds rebate or slab limits.

6. Removal of Higher TDS/TCS Provisions for Non-Filers

One of the most controversial provisions in recent years—higher TDS/TCS for non-filers under Sections 206AB and 206CCA—has been proposed to be removed.

Impact of this change:

  • Reduced compliance burden

  • Lower working capital blockage

  • Simplified TDS processes for businesses

While the government continues to encourage timely return filing, this change shifts the focus from punitive measures to voluntary compliance.

7. TCS under Section 206C(1H) Removed on Sale of Goods

The new Act proposes removal of TCS on sale of goods under Section 206C(1H), which had created operational challenges for businesses.

Benefits:

  • Simplified accounting

  • Reduced reconciliation issues

  • Improved cash flows for buyers and sellers

This reform is a welcome relief for traders, manufacturers, and MSMEs.

8. Higher Threshold Limits for TDS on Various Payments

To reduce unnecessary compliance and administrative burden, the government has proposed higher threshold limits for TDS on various payments such as:

  • Interest

  • Rent

  • Professional fees

  • Contract payments

This ensures:

  • Fewer small taxpayers subjected to TDS

  • Reduced refund claims

  • Simplified compliance for deductors

9. Extended Timelines for Updated Returns under Section 139(8A)

The scope and timeline for filing Updated Returns have been expanded to allow taxpayers to voluntarily correct mistakes.

Key advantages:

  • Encourages honest self-correction

  • Reduces litigation

  • Provides flexibility in compliance

This reflects a trust-based approach, allowing taxpayers to rectify errors without fear of immediate penal consequences.

10. Simplified and Digital-First Tax Compliance System

The New Income-tax Act, 2025 places strong emphasis on a digital-first, faceless, and automated tax administration system.

Key features include:

  • Faceless assessments and appeals

  • AI-based risk assessment

  • Automated return processing

  • Seamless data integration with AIS and TIS

This transformation aims to reduce human interface, enhance transparency, and build taxpayer confidence.

Impact on Different Categories of Taxpayers

Salaried Individuals

  • Lower tax burden

  • Higher rebates and standard deduction

  • Simplified filing process

Professionals and Freelancers

  • Reduced TDS complications

  • Easier compliance

  • Digital assessments

Businesses and MSMEs

  • Removal of TCS on goods

  • Higher TDS thresholds

  • Improved cash flow management

Senior Citizens

  • Simplified tax structure

  • Higher exemption benefits

  • Reduced compliance stress

What Taxpayers Should Do Now

Although the new Act applies from 1 April 2026, taxpayers should:

  • Review their tax planning strategies

  • Understand changes impacting income structure

  • Align salary and investment planning

  • Consult tax professionals early

Early preparation ensures maximum benefit and avoids last-minute confusion.

How Taxla Services Can Help You

At Taxla Services, we help individuals and businesses navigate changing tax laws with confidence. Our services include:

  • Tax planning under the new Income-tax Act

  • Return filing and advisory

  • Compliance management

  • Representation before tax authorities

Our expert team ensures you stay compliant while optimising your tax position.

Conclusion

The Top 10 Income Tax Changes in 2025 reflect the government’s commitment to creating a simpler, fairer, and technology-driven tax system. With reduced complexity, higher taxpayer relief, and digital transformation, the New Income-tax Act, 2025 is set to redefine tax compliance in India.

Staying informed today will help you plan smarter for tomorrow.

Get Expert Guidance Today

📞 Contact us today: +91 7305701454
📧 Email: auditsiva2@gmail.com
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Taxla Services – Trusted Tax Advisors for a Changing India
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