Understanding Income Tax Changes for FY 2025-26: A Comprehensive Guide

Understanding the Latest Income Tax Changes for FY 2025-26

Staying informed about recent changes in income tax legislation is essential for all taxpayers. The Income Tax Department has introduced crucial amendments for the financial year 2025-26 (assessment year 2026-27), affecting tax slabs, rebates, income tax return (ITR) forms, and the digital filing process.

Key Recent Changes (Effective April 1, 2025)

1. New Income Tax Slabs for FY 2025-26 (AY 2026-27)

Income Range (₹)	Tax Rate (%)
0 – 4,00,000	0
4,00,001 – 8,00,000	5
8,00,001 – 12,00,000	10
12,00,001 – 16,00,000	15
16,00,001 – 20,00,000	20
20,00,001 – 24,00,000	25
Above 24,00,000	30

• The basic exemption limit has been raised to ₹4 lakh.

2. Increased Tax Rebate Under Section 87A

• The rebate has been raised to ₹60,000.
• No tax is payable for net taxable income up to ₹12 lakh under the new regime, significant relief for middle-income taxpayers.

3. Standard Deduction

• For salaried individuals and pensioners: ₹75,000 (remains unchanged in Budget 2025).
• For family pensioners: ₹25,000.

4. Newly Notified ITR Forms

• ITR-1 (Sahaj) and ITR-4 (Sugam): Available for incomes up to ₹50 lakh, including long-term capital gains (LTCG) up to ₹1.25 lakh from listed equities or mutual funds.

• ITR-3 and ITR-5: Enhanced for comprehensive asset/liability reporting, capital gains splitting, and inclusion of new TDS section codes.

• The new income tax portal simplifies filing with increased automation.

5. Due Dates for Filing ITR

• Individuals (non-audit): July 31, 2025
• Businesses (audit): October 31, 2025
• Transfer pricing cases: November 30, 2025
• Belated/revised returns: December 31, 2025
• Updated return (ITR-U): Within four years from the end of the relevant assessment year.

6. Digital Filing and Portal Enhancements

• The new e-filing portal is user-friendly, facilitates faster processing, and includes pre-filled forms along with multi-channel support (call, chat, mobile app).

• E-Pay Tax: Enhanced support for a broader range of banks for seamless payment processing.

7. Additional Important Amendments

• Self-occupied property: Taxpayers can declare up to two properties as self-occupied with NIL annual value, regardless of the reason for non-occupation.

• The equalisation levy on digital advertisements has been withdrawn effective April 1, 2025.

• Increased TDS/TCS thresholds and updated reporting requirements.

Outdated or Amended Information to Note

• The previous rebate limit of ₹25,000 for income up to ₹7 lakh has been replaced by the current ₹60,000 for income up to ₹12 lakh.

• Traditional paper-based filing and submission of manual Form 16/26AS have become obsolete; all processes are now digital and auto-populated.

• Tax credit statements are no longer emailed; they can be accessed directly via the online portal.

Nuanced Details and Tips for Taxpayers

1. Compare Old vs. New Regime: The new regime is default; choose the old regime only if you wish to claim specific deductions or exemptions.

2. Pre-filled ITRs: Salary, property, capital gains, and interest details will be auto-filled when reported by employers or banks.

3. Enhanced Asset Reporting: The ITR-3 threshold for asset/liability reporting has increased to ₹1 crore (from ₹50 lakh).

4. Capital Gains Reporting: Separate reporting for gains accrued before and after July 23, 2024, with new options for property LTCG tax rates.

5. Late Filing Penalties: Penalties for belated returns can go up to ₹5,000; ₹1,000 applies if income is below ₹5 lakh.

6. Updated Return (ITR-U): Can be submitted within four years after the end of the relevant assessment year, subject to additional taxes or penalties.

How to File Your Income Tax Return Online for 2025

1. Register/Login:

   • Visit the Income Tax e-filing portal. Register or log in using your PAN or Aadhaar number.

2. Download/View Forms:

   • Access applicable forms such as ITR-1 or ITR-4. Utilize pre-filled data for accuracy.

3. Fill and Verify:

   • Carefully check all details, particularly TDS, capital gains, and deductions. Use Form 26AS and AIS for verification.

4. Submit and E-Verify:

   • Submit your return and complete e-verification using Aadhaar OTP, net banking, or digital signature.

5. Track Status:

   • Check your refund status, outstanding actions, and notifications on the portal.

Conclusion

The 2025 income tax modifications provide enhanced relief, transparency, and digital convenience for taxpayers. By taking advantage of the new portal, restructured forms, and updated tax slabs, you can optimize your tax savings and ensure smooth compliance.