Major Amendments proposed in Income Tax Act 1961 by Finance Bill 2025

• Change in Individual Slab Rate & Rebate Under New Regime. [Para - 1(A & B), Page- 3]
• Increase in limit of Salary for calculating Perquisites. [Para - 2(A), Page- 3]
• Annual Value of House Property. [Para - 3(A), Page- 4]
• Carry forward of Losses in case of Amalgamation. [Para - 4(B), Page-4]
• ULIPs which do not qualify for exemption u/s. 10(10D) shall be considered as Capital Asset. [Para - 5(B), Page- 5]
• Contribution To NPS Vatsalya accounts by Parent Section 80CCD [Para - 7(B), Page- 6]
• Period of registration of smaller trusts or institutions. [Para - 8(A), Page-7]
• Incomplete application for registration of trust shall not be treated as specified violation. [Para - 8(B), Page-7]
• Rationalisation of Transfer Pricing provisions. [Para - 9(A), Page-7]
• Period of Updated Returns Extended for 4 years. [Para - 10(B), Page- 9]
• Tax and interest payment in case of updated return. [Para - 10(C), Page- 9]
• Computation of Total Income of Block Period. [Para - 10(F), Page- 10]
• Amendment in TDS Threshold Limits [Para - 11(A), Page- 12]
• No Higher Rate of TDS & TCS- Section 206AB & 206CCA [Para - 11(c), Page- 13]
• TCS on Sale of Specified Goods us. 206C(1H) Abolished [Para - 11(F), Page- 13]
• Obligation to furnish information of crypto-asset [Para - 12(D), Page- 14]

1. INCOME TAX RATE

A. Amendment In Personal Tax Rates (New Tax Regime- 115BAC(1A)(iii))

Changes have been proposed in the slab rate structure under the new regime in respect of total income of the person being an individual or HUF or AOP or BOI. The new slab rate proposed are as below:

• No Changes in Standard Deduction u/s 16(ia) for Salary Income of Rs. 75,000
• This amendment would be effective from AY 2026-27 and subsequent assessment years.

B. Rebate u/s 87A

Rebate u/s. 87A has been increased upto Rs. 60,000/- if total income of such assessee does not exceed Rs. 12 Lakh. However, this rebate can be claimed on total income chargeable under section 115BAC (1A) only.

Such rebate of income tax is not available on tax on incomes chargeable at special rate (for e.g. capital gain u/s. 111A or 112 etc.)

• This amendment would be effective from AY 2026-27 and subsequent assessment years.

2. INCOME FROM SALARY

A. Increase in the limits on the income of the employees for the purpose of calculating perquisites- Section 17(2)

The provisions of section 17 are proposed to be amended to prescribe rules to increase the limit on the gross total income of the employees so that-

a) The amenities and benefits received by such employees by such amount as prescribed later on would be exempt from being treated as perquisites. (Earlier the limit was if the employee's salary does not exceed Rs. 50,000)

b) The expenditure incurred by the employer for travel outside India on the medical treatment of such employee or his family member by such amount as prescribed later on would not be treated as a perquisite. (Earlier the limit was if the employee's salary does not exceed Rs. 2,00,000)

This amendment would be effective from AY 2026-27 and subsequent assessment years.

3. INCOME FROM HOUSE PROPERTY

A. Annual Value from House Property - Section 23(2)

• Section 23(2) is proposed to be amended to allow claim of annual value of two house properties as "nil" treating it as self-occupied properties, without any conditions.
• This means the taxpayer can now claim two residential properties as self-occupied without any conditions and will not be liable to pay tax on deemed rent for these properties.
• This amendment would apply in relation to AY 2025-26 and subsequent assessment years.

4. INCOME FROM BUSINESS & PROFESSION

A. Presumptive taxation for Non-Resident providing services - Section 44BBD

• It is proposed, to insert a new section 44BBD, to introduce presumptive taxation regime for non-residents engaged in the business of providing services or technology, to a resident company which are establishing or operating electronics manufacturing facility in India, wherein, 25% of the aggregate amount received/ deemed to be receivable by, or paid/payable to the non-resident providing such services or technology, shall be deemed as profits and gains of such non-resident from this business.
• However, no set-off of unabsorbed depreciation and brought forward losses shall be allowed to such non-resident when profit is declared as per such presumptive regime.
• This amendment would apply in relation to AY 2026-27 and subsequent assessment years.

B. Carry Forward of Losses in case of Amalgamation- Section 72A & 72AA

• Section 72A and 72AA provide that accumulated loss of the amalgamating entity or predecessor entity shall be deemed to be the loss of the amalgamated entity or the successor entity for the previous year in which amalgamation or business reorganisation has been effected or brought into force. Further, section 72 of the Act provides that no loss (other than loss from speculation business) under the head "Profits and gains from business or profession" shall be carried forward for more than 8 assessment years immediately succeeding the assessment years for which the loss was first computed.
• It is proposed to amend section 72A and section 72AA of the Act to provide that in cases of amalgamation or business reorganization, any loss forming part of the accumulated loss of the predecessor entity, which is deemed to be the loss of the successor entity, shall be eligible to be carried forward for not more than eight assessment years immediately succeeding the assessment year for which such loss was first computed for original predecessor entity.
• The aforesaid amendments shall apply to any amalgamation or business re-organisation which is effected on or after 01.04.2025
• This amendment would apply in relation to AY 2026-27 and subsequent assessment years.

5. INCOME FROM CAPITAL GAINS

A. Definition of Capital Asset- Section 2(14)

• It is proposed to amend the Act to provide that any security held by investment funds referred to in Section 115UB (Alternate Investment Funds- AIF's ) which has invested in such security in accordance with the regulations made under the Securities and Exchange Board of India Act, 1992 would be treated as capital asset only so that any income arising from transfer of such security would be in the nature of capital gain.
• This amendment would apply in relation to AY 2026-27 and subsequent assessment years.

B. Capital gain on Redemption of ULIPS- Section 45(1B) & Section 112A(a)

• Unit-linked insurance policies (ULIPs) and the ULIPs which do not qualify for exemption under section 10(10D) shall be considered as Capital Asset and shall be included in the definition of an equity-oriented fund. Accordingly, the profits or gains from redemption of the said ULIPs be charged to tax as capital gains u/s 112A of the Act.
• This amendment would apply in relation to AY 2026-27 and subsequent assessment years.

6. INCOME FROM OTHER SOURCES

A. Deemed Dividend- Section 2(22)(e)(iia)

• It is proposed to amend clause (22) of section 2 to provide that any advance or loan between two group entities, where one of the group entity is a "Finance company" or a "Finance unit" in IFSC set up as a global or regional corporate treasury centre for undertaking treasury activities or treasury services and the 'parent entity' or 'principal entity' of such 'group entity' is listed on stock exchange in a country or territory outside India, other than the country or territory outside India as may be specified by the Board in this behalf, shall not be treated as 'dividend'. The conditions for a 'group entity', 'principle entity' and the 'parent entity' shall be prescribed.
• This amendment would apply in relation to AY 2026-27 and subsequent assessment years.

B. Definition of Virtual Digital Asset- Section 2(47A)

• Definition of virtual digital asset also includes any crypto-asset being a digital representation of value that relies on a cryptographically secured distributed ledger or a similar technology to validate and secure transactions, whether or not already included in the definition of virtual digital asset or not.
• This amendment would apply in relation to AY 2026-27 and subsequent assessment years.

7. CHAPTER VI-A DEDUCTIONS

A. Exemption on Withdrawals by Individuals from National Savings Scheme- 80CCA

• It is proposed to amend section 80CCA to provide exemption to the withdrawals made by individuals from the deposits made in the National Savings Scheme before 01.04.1992 (including interest accrued thereon) for which deduction has been allowed.
• This amendment would apply from 29th Day of August, 2024.

B. Contribution To NPS Vatsalya accounts by Parent or Guardian- Section 80CCD(1B)

It is proposed to extend the tax benefits available to the National Pension Scheme (NPS) under Section 80CCD of the Act to the contributions made to the NPS Vatsalya accounts, as follows:

a) A deduction to be allowed to the parent/guardian's total income, of the amount paid or deposited in the account of any minor under the NPS to a maximum of Rs 50,000/- overall as mandated under sub-section (1B) of section 80CCD;

b) The amount on which deduction has been allowed under sub-section (1B) of section 80CCD or any amount accrued thereon, will be charged to tax when such amount is withdrawn, in the case where deposit was made in the account of a minor; and

c) The amount on which deduction has been allowed and is received on closure of the account due to the death of the minor shall not be deemed to be the income of the parent/guardian;

The NPS Vatsalya Scheme also allows for partial withdrawal from the minor's account to address certain contingency situations like education, treatment of specified illnesses and disability (of more than 75%) of the minor.

Accordingly, it is also proposed to insert a clause (12BA) in section 10 of the Act, which provides that any income received on partial withdrawal made out of the minor's account, shall not be included in the total income of the parent/guardian to the extent it does not exceed 25% of the amount of contributions made by him and in accordance with the terms and conditions, specified under the Pension Fund Regulatory and Development Authority Act, 2013 (23 of 2013) and the regulations made thereunder.

This amendment would apply in relation to AY 2026-27 and subsequent assessment years.

C. Eligible Startup- Section 80-ICA

It is proposed to extend the tax benefits the benefit of Section 80-IAC of the Act to the eligible startups incorporated till 31.03.2030.

8. CHARITABLE & RELIGIOUS TRUST

A. Period of registration of smaller trusts or institutions- Section 12AB(i)

To reduce the compliance burden for the smaller trusts or institutions, it is proposed to increase the period of validity of registration of trust or institution from 5 years to 10 years, in cases where the trust or institution made an application under sub-clause (i) to (v) of the clause (ac) of sub-section (1) of section 12A, and the total income of such trust or institution, without giving effect to the provisions of sections 11 and 12, does not exceed Rs. 5 crores during each of the two previous years, preceding to the previous year in which such application is being made.

This amendment will be applicable from 01st Day April, 2025.

B. Incomplete application for registration of trust or institution shall not be treated as specified violation- Section 12AB(4)

It is, proposed to amend the Explanation to section 12AB(4) so as to provide that an incomplete application for registration of trust or institution shall not be treated as specified violation and thus, would not lead to cancellation of registration.

This amendment will be applicable from 01st Day April, 2025.

C. Definition of Specified Persons- Section 13(3)

It is proposed to amended the definition of specified persons for a trust or institution as follows:

a) Exceeds Rs. 1 lakh during the relevant previous year, or

b) Exceeds Rs. 10 lakhs in aggregate up to the end of the relevant previous year.

However, any relative of such person or any concern in which such person has a substantial interest shall not be treated as a specified person under Section 13(3).

This amendment will be applicable from 01st Day April, 2025.

9. TRANSFER PRICING

A. Rationalisation of Transfer Pricing provisions for carrying out multi-year Arm's Length Price - Section 92CA

It proposed to provide that the ALP determined in relation to an international transaction or a specified domestic transaction for any previous year shall apply to the similar transaction for the two consecutive previous years immediately following such previous year. For the same, it is proposed to make the following amendments -

Reference to Transfer Pricing Officer (TPO)

(I) The assessee shall be required to exercise an option for the above effect in the form, manner and within such time period as may be prescribed [new sub-section (3B) in section 92CA];

(II) The TPO may by an order within one month from the end of the month in which such option is exercised, declare that the option is valid subject to the prescribed conditions [new sub-section (3B) in section 92CA];

(III) If the TPO declares that the option exercised by the assessee is valid,-

a) The ALP determined in relation to an international transaction or a specified domestic transaction for any previous year shall apply to the similar international transaction or the specified domestic transaction for the two consecutive previous years immediately following such previous year [new sub-section (3B) in section 92CA];

b) The TPO shall examine and determine the ALP in relation to such similar transaction for such consecutive previous years, in the order referred to in sub-section (3) of section 92CA [new subsection (4A) in section 92CA];

c) On receipt of such order from the TPO, the AO shall recompute the total income of the assessee for such consecutive previous years as per the provisions of sub-section (21) of section 155 [new sub-section (4A) in section 92CA];

d) No reference for computation of ALP in relation to such transaction shall be made [new first proviso to sub-section (1) of section 92CA];

e) If any reference is made in such scenarios, before or after the above declaration by the TPO, the provisions of sub-section (1) of section 92CA shall have the effect as if no reference is made for such transaction [new second proviso to sub-section (1) of section 92CA];

(IV) The provisions of exercising option mentioned above and consequent proceedings, shall not apply to any proceedings under Chapter XIV-B [proviso to new sub-section (3B) in section 92CA];

(V) If any difficulty arises in giving effect to the provisions of sub-section (3B) and sub-section (4A) of section 92CA, the Board may, issue guidelines for the purpose of removing the difficulty and every guideline issued by the Board shall be laid before each House of Parliament, and shall be binding on the income-tax authorities and the assessee [new sub-section (11) in section 92CA].

Recomputation of Income- Section 155 (21)

Corresponding to above, a new sub section (21) is proposed to be inserted in section 155 of the Act to provide that the Assessing Officer shall recompute the total income for such consecutive years by amending the assessment order or intimation u/s 143(1) of the Act in conformity with the ALP determined by the TPO or as per the directions of the DRP within a period of 3 months from the end of the month in which assessment is completed for the previous year.

This amendment would apply in relation to AY 2026-27 and subsequent assessment years.

10. ASSESSMENT & APPEALS

A. Time period for retention of books of accounts and other documents seized during search proceedings- Section 132 (8)

The time limit for taking approval for retention of books of accounts shall be one month from end of the quarter in which the assessment or reassessment or recomputation order has been made.

These amendments will take effect from AY 2025-26 and subsequent assessment years.

B. Updated Returns- Section 139(8A)

Assessee can file an updated return within 48 months from the end of the relevant assessment year.

That no updated return shall be furnished by any person where any notice to show-cause under section 148A of the Act has been issued in his case after thirty-six months from the end of the relevant assessment year.

However, where subsequently an order is passed under sub-section (3) of section 148A of the Act determining that it is not a fit case to issue notice under section 148 of the Act, updated return may be filed upto 48 months from the end of the relevant assessment year.

These amendments will take effect from AY 2025-26 and subsequent assessment years.

C. Tax and interest payment in case of updated return- Section 140B(3)

Additional income tax @ 60% to be charged of total tax and interest if the updated return is filed after 24 months but before the expiry of 36 months from the end of the relevant assessment year and 70% of total tax and interest in case the updated return is filed after 36 months but before the expiry of 48 months from the end of the relevant assessment year .

The chart showing additional income tax and interest on updated return is as follows:

These amendments will take effect from AY 2025-26 and subsequent assessment years.

D. Clarification regarding commencement date and the end date of the period stayed by the Court- Section 144BA, 153, 153B, 158BE, 158BFA, 263, 264 and Rule 68B of Schedule-II of the Act

There was an ambiguity regarding the commencement date and the end date of the period stayed by an order or injunction of any court which was required to be excluded.

With a view to removing any ambiguity, it is proposed to amend the said provisions of the Act so as to exclude the period commencing on the date on which stay was granted by an order or injunction of any court and ending on the date on which certified copy of the order vacating the stay was received by the jurisdictional Principal Commissioner or Commissioner. (Approving panel in case of section 144BA of the Act).

These amendments will take effect from AY 2025-26 and subsequent assessment years.

E. Definition of Undisclosed Income- Section 158B(b)

It is proposed to add virtual digital assets in addition to the money, bullion, jewellery and other valuable article or things under the definition of undisclosed income.

This amendment will take effect from the 01st Day of February, 2025.

F. Methodology for Computation of Total Income of Block Period- Section 158BB

It is proposed to amend clause (i) of the sub-section (1) & sub-section (6) of the said section to substitute reference to 'total income disclosed' with "undisclosed income" which has been declared in return.

It is further proposed to amend clause (iii) of the sub-section (1) to specify that any income declared in the return of income filed under section 139 or in response to a notice under sub-section (1) of section 142 or section 148, prior to the date of initiation of the search or the date of requisition, shall form part of the total income of the block period for which credit would be given while charging the tax for the said period.

It is also proposed to omit the word total from 'total income' in clause (ii) and (iii) of the sub-section (1).

It is also proposed to amend clause (iv) of sub-section (1) to provide the clarity over computation of the income pertaining to the previous year which has ended but the due date for furnishing the return for such year has not expired prior to the date of initiation of the search or requisition so that income pertaining to books of account maintained in normal course for the said period is taxed under the normal provisions.

Sub-section (3) of section 158BB of the Act proposes to tax under the normal provisions any income which relates to any international transaction or specified domestic transaction, pertaining to the period beginning from the 1st day of April of the previous year in which last

of the authorisations was executed and ending with the date on which last of the authorisations was executed. This was provided as it may be difficult to assess arm's length price of part period transactions. It is proposed to amend the said sub-section to provide that the income pertaining to any international transaction or specified domestic transaction shall not be considered in the income of the block period. Therefore, in the said sub-section, it is proposed to provide the reference to such income instead of evidence as provided earlier.

G. Time Limit for Completion of Block Assessment - Section 158BE

The time-limit for completion of block assessment is proposed to be made as twelve months from end of the quarter in which the last of the authorisations for search or requisition has been executed.

This amendment will take effect from the 01st Day of February, 2025.

H. Penalty provisions in case of Search- Section 271AAB

The penalty provisions mentioned in section 271AAB are not applicable in those cases where search has been initiated under section 132 on or after the 01st of September 2024.

This amendment will take effect from the 01st Day of September, 2024.

I. Time limit to impose penalties rationalised- Section 275

It is proposed to amend section 275 of the Act to provide that any order imposing a penalty shall not be passed after the expiry of six months from the end of the quarter in which the connected proceedings are completed, or the order of appeal is received by the jurisdictional Principal Commissioner or Commissioner, or the order of revision is passed, or the notice for imposition of penalty is issued, as the case maybe.

This amendment will take effect from AY 2025-26 and subsequent assessment years.

J. Other Penalty Provisions

It is proposed that penalty under section 271C, 271CA, 271D, 271DA, 271DB, 271E will be imposed by the Assessing Officer instead of the Joint Commissioner.

Thus, Assessing Officer shall take the prior approval of Joint Commissioner for the passing of penalty order, where penalty amount exceeds the limit specified in sub-section (2) of section 274 of the Act.

This amendment will take effect from AY 2025-26 and subsequent assessment years.

11. TDS & TCS

A. Amendment in TDS Threshold

Threshold limit for deducting the TDS under various sections has been enhanced as BELOW:

This amendment will take effect from 01st April, 2025

B. TDS on Income In Respect Of Investment In Securitization Trust- Section 194LBC

The rate of TDS has been reduced from 25% and 30% to 10%.

This amendment will be applicable from 01st Day April, 2025.

C. No Higher Rate of TDS & TCS- Section 206AB & 206CCA

It is proposed to omit the Section 206AB & 206CCA of the Income-tax Act hence no higher rate of tax is required to be deducted or collected on account of non-filing of Income tax returns.

This amendment will be applicable from 01st Day April, 2025.

D. TCS on Timber or any other Forest Produce- Section 206C(1)

Under clause (iii) of section 206C(1) of the Act for the word "Timber" the words "Timber or any other forest produce (not being tendu leaves)" shall be substituted.

Further, the amended rate for collection of TCS are as under:

This amendment will be applicable from 01st April, 2025.

E. TCS on Liberalised Remittance Scheme (LRS) - Section 206C(1G)

It is proposed to increase the threshold of TCS u/s. 206C(1G) from Rs. 7,00,000 to Rs. 10,00,000. Hence no tax is required to be collected for remittance under Liberalised remittance scheme (LRS) up to remittance of Rs. 10,00,000 for foreign tour program and packages.

Further, it is proposed that no TCS will be collected on amount remitted out of loan obtained from a financial institutions for pursuing education outside India

This amendment will be applicable from 01st April, 2025.

F. No TCS on Sale of Specified Goods- Section 206C(1H)

It is proposed to omit the Section 206C(1H) hence no TCS to be collected on specified goods sold for more than Rs 50 Lakh.

This amendment will be applicable from 01st April, 2025

12. OTHER MATTERS

A. Significant Economic Presence- Section 9(1)(i)

Explanation 2A to clause (i) of sub-section (1) of section 9, inter alia, provides that the significant economic presence of a non-resident in India shall constitute "business connection" in India and "significant economic presence" for this purpose shall inter alia mean transaction in respect of any goods carried out by a non-resident with any person in India.

It is, therefore, proposed to amend the Explanation 2A of section 9 so that the transactions or activities of a non-resident in India which are confined to the purchase of goods in India for the purpose of export shall not constitute significant economic presence of such non-resident in India. This will bring it in coherence with the Explanation 1 to clause (i) of sub-section (1) of section 9 for business connection.

This amendment would apply in relation to AY 2026-27 and thereafter.

B. Extending the processing period of application seeking immunity from penalty and prosecution- Section 270AA

It is proposed to amend the sub-section (4) of section 270AA of the Act so as to extend the processing period to three months from the end of the month in which application for immunity is received by the Assessing Officer.

This amendment would apply in relation to AY 2025-26 and thereafter.

C. Exemption from prosecution for delayed payment of TCS in certain cases- Section 276BB

It is proposed to amend section 276BB of the Act to provide that the prosecution shall not be instituted against a person, if the payment of the TCS has been made to the credit of the Central Government at any time on or before the time prescribed for filing the quarterly statement under proviso to sub-section (3) of section 206C of the Act in respect of such payment.

This amendment would apply in relation to AY 2025-26 and thereafter.

D. Obligation to furnish information in respect of Crypto Asset- Section 285BA

It is now proposed to insert section 285BAA in the Act, being the Obligation to furnish information of crypto-asset, wherein -

(I) Sub-section (1) of section 285BAA of the Act states any person, being a reporting entity, as may be prescribed, in respect of crypto asset, shall furnish information in respect of a transaction in such crypto asset in a statement, for such period, within such time, in such form and manner and to such income-tax authority, as may be prescribed;

(II) Sub-section (2) of said section states that where prescribed income-tax authority considers that the statement furnished is defective, he may intimate the defect to the person who has furnished such statement and give him an opportunity of rectifying the defect within a period of thirty days from the date of such intimation or such further period as may be allowed, and if the defect is not rectified within the aforesaid period allowed, the provisions of this Act shall apply as if such person had furnished inaccurate information in the statement;

(III) Sub-section (3) of said section states that where a person who is required to furnish a statement has not furnished the same within the specified time, the prescribed income-tax authority may serve upon such person a notice requiring him to furnish such statement within a given time period and he shall furnish the statement within the time specified in the notice;

(IV) Sub-section (4) of said section states that if any person, having furnished a statement, or in pursuance of a notice issued, comes to know or discovers any inaccuracy in the information provided in the statement, he shall within a given period inform the income-tax authority, the inaccuracy in such statement and furnish the correct information in such manner as prescribed;

(V) Sub-section (5) of said section states that the Central Government may, by rules specify the persons to be registered with the prescribed income-tax authority, the nature of information and the manner in which such information shall be maintained by the persons and the due diligence to be carried out by such persons for the purpose of identification of any crypto-asset user or owner;

This amendment will be applicable from AY 2026-27 and thereafter.