New Tax Rules for 2025

New Rules for Income Tax Returns: What’s Changed for AY 2025-26?

As the financial year 2024-25 progresses, it’s time to gear up for filing your Income Tax Returns (ITR) for Assessment Year (AY) 2025-26. The Union Budget 2025 and recent notifications from the Central Board of Direct Taxes (CBDT) have introduced significant changes to simplify tax compliance, reduce burdens, and offer relief to taxpayers across India. At TaxSwift, we’re here to break down these new rules, highlight their benefits, share cautions, and guide you through what’s important for a hassle-free filing experience. Whether you’re a salaried individual, a business owner, or a senior citizen, these updates will impact how you file your ITR by the July 31, 2025 deadline. Let’s dive in!

Key Changes for AY 2025-26
The Finance Act 2024 and Budget 2025 have ushered in several updates to the Income Tax Act, 1961, effective from April 1, 2025, for FY 2024-25 (AY 2025-26). Here are the most significant changes you need to know:

1. New Tax Regime as Default with Enhanced Rebate
Change: The new tax regime under Section 115BAC is now the default for individuals, Hindu Undivided Families (HUFs), Associations of Persons (AOPs, excluding co-operative societies), Bodies of Individuals (BOIs), and Artificial Juridical Persons. Taxpayers can opt out for the old regime annually (for non-business income) or via Form 10-IEA (for business/profession income, one-time switch). The rebate under Section 87A has increased from ₹25,000 to ₹60,000, making income up to ₹12 lakh tax-free (or ₹12.75 lakh with the ₹75,000 standard deduction for salaried individuals).

New Tax Slabs (New Regime):
Up to ₹4 lakh: Nil
₹4–8 lakh: 5%
₹8–12 lakh: 10%
₹12–16 lakh: 15%
₹16–20 lakh: 20%
₹20–24 lakh: 25%
Above ₹24 lakh: 30%

Note: Old regime slabs remain unchanged (e.g., ₹3 lakh exemption for individuals, ₹5 lakh for super senior citizens).

Surcharge Cap: Maximum surcharge under the new regime is 25% (vs. 37% in the old regime), reducing tax liability for high earners.

2. Extended Timeline for Updated ITR (ITR-U)
Change: The deadline for filing an Updated ITR (ITR-U) under Section 139(8A) has been extended from 2 years to 4 years from the end of the relevant assessment year. For AY 2025-26, you can file an ITR-U until March 31, 2029, to report undisclosed income with additional tax (60% in year 3, higher in year 4).
Note: ITR-U cannot be used to claim deductions or reduce tax liability, only to report additional income.

3. Simplified ITR-1 and ITR-4 Forms
Change: The CBDT has notified ITR-1 (Sahaj) and ITR-4 (Sugam) for AY 2025-26, allowing taxpayers with Long-Term Capital Gains (LTCG) up to ₹1.25 lakh under Section 112A (e.g., equity shares, mutual funds) to use these simpler forms, provided there are no carried-forward losses. Previously, such taxpayers had to file the more complex ITR-2.

Eligibility:
ITR-1: Resident individuals with income up to ₹50 lakh (salary, one house property, other sources, agricultural income ≤₹5,000).
ITR-4: Individuals, HUFs, and firms (excluding LLPs) with income up to ₹50 lakh from business/profession.

4. Capital Gains Reporting Enhancements
Change: ITR forms (e.g., ITR-2, ITR-3, ITR-5) now require separate reporting of capital gains before and after July 23, 2024, reflecting Budget 2024’s revised LTCG rules. Additionally, capital loss on share buybacks (effective October 1, 2024) is allowed if the buyback receipt is taxed as a dividend under “Income from Other Sources.”

Tax Rates: LTCG taxed at 12.5%, Short-Term Capital Gains (STCG) at 20% for specified assets.

5. Removal of Sections 206AB and 206CCA
Change: Starting April 1, 2025, Sections 206AB and 206CCA, which mandated higher TDS/TCS rates for non-filers of ITR, have been omitted. This reduces compliance burdens for tax deductors/collectors, streamlining TDS/TCS processes.

6. Increased Deductions and Exemptions
Standard Deduction: For salaried individuals, the standard deduction remains ₹75,000 in the new regime, boosting tax-free income to ₹12.75 lakh.
Partner Remuneration: Deduction limits for remuneration paid to partners in partnership firms/LLPs have been enhanced, allowing higher tax savings.
Senior Citizens: Interest deduction limit for senior citizens doubled from ₹50,000 to ₹1,00,000.
Start-ups: Under Section 80-IAC, start-ups incorporated before April 1, 2030, can claim a 100% profit deduction for three consecutive years (out of ten), subject to conditions.

7. TDS and TCS Changes
TDS on Rent: Threshold for TDS on rent increased from ₹2.4 lakh to ₹6 lakh annually (monthly limit: ₹20,000 to ₹50,000).
TCS on LRS: TCS threshold for Liberalized Remittance Scheme (LRS) remittances raised from ₹7 lakh to ₹10 lakh.
TDS Reporting: ITR-2 now mandates reporting TDS section codes (e.g., 194I, 194J) for accurate verification.

8. Senior Citizen Benefits
Change: Senior citizens (75+ years) with pension and interest income from a specified bank are exempt from filing ITR under Section 194P (effective since April 2021). Super senior citizens (80+ years) can file ITR-1 or ITR-4 offline using paper forms.

Exemption Limits: ₹3 lakh (senior citizens, 60–79 years), ₹5 lakh (super senior citizens, 80+ years) in the old regime.

9. Form 10-IA for Deductions
Change: Taxpayers claiming deductions under Section 80DD (dependent disability) or Section 80U (self-disability) are recommended to file Form 10-IA alongside their ITR to avoid processing delays, though it can be filed later.

10. Asset and Liability Reporting
Change: The threshold for mandatory disclosure of assets and liabilities (Schedule AL) in ITR-2 has increased from ₹50 lakh to ₹1 crore of total income, relieving middle-income taxpayers from tedious record-keeping.

Benefits of the New Rules
These changes bring substantial advantages for Indian taxpayers, especially for users of TaxSwift’s e-filing services:

Higher Tax-Free Income:
The ₹60,000 rebate under Section 87A makes income up to ₹12 lakh tax-free (₹12.75 lakh for salaried individuals with standard deduction), putting more money in your pocket. This is a game-changer for salaried professionals and small business owners.

Simplified Filing for Small Investors:
The inclusion of LTCG up to ₹1.25 lakh in ITR-1 and ITR-4 makes filing easier for small investors in equity shares or mutual funds, saving time and reducing complexity. Our Standard Filing plan is perfect for these taxpayers

Flexibility with ITR-U:
The 4-year window for ITR-U allows you to correct errors or report undisclosed income until March 31, 2029, providing peace of mind. Use our Elite Filing plan for expert assistance with updated returns.

Reduced Compliance Burden:
Omitting Sections 206AB/206CCA simplifies TDS/TCS processes, ensuring smoother transactions for businesses and freelancers. The increased Schedule AL threshold (₹1 crore) eases record-keeping for middle-income earners.

Support for Start-ups and Seniors:
Start-ups benefit from extended 100% profit deductions, fostering entrepreneurship. Senior citizens enjoy higher deductions and ITR exemptions, making tax compliance easier. Our Priority Filing plan ensures seniors file accurately and on time.

Cost Savings:
Higher TDS/TCS thresholds (e.g., rent, LRS) and enhanced partner remuneration deductions reduce tax outflows, especially for landlords and partnership firms.

Cautions to Watch Out ForWhile the new rules offer relief, here are key cautions to ensure compliance and avoid penalties:

Choose the Right Tax Regime:
The new tax regime is default, but it offers fewer deductions (e.g., no Section 80C, 80D). If you have significant investments (e.g., PPF, ELSS, life insurance), the old regime may save more tax. Use TaxSwift’s tax calculator to compare regimes before filing.

Form 10-IEA Deadline:
For taxpayers with business/profession income, opting out of the new regime requires filing Form 10-IEA by July 31, 2025 (non-audit cases). Missing this deadline locks you into the new regime. Our Elite Filing plan includes form assistance.

ITR-U Limitations:
ITR-U is only for reporting additional income, not for claiming deductions or reducing liability. Be cautious of higher additional tax rates (60% in year 3, more in year 4). Consult our experts to assess if ITR-U is necessary.

Accurate Capital Gains Reporting:
Separate reporting of capital gains (pre/post-July 23, 2024) and share buyback losses requires precise records. Errors can trigger notices. Use our Priority Filing plan for expert review of capital gains schedules.

Form 10-IA Compliance:
Failing to file Form 10-IA with deductions under Sections 80DD/80U may delay processing or refunds. File it alongside your ITR to avoid inconvenience.

Penalties for Late Filing:
Missing the July 31, 2025 deadline (non-audit cases) incurs a ₹5,000 penalty (₹1,000 if income <₹5 lakh) plus 1% monthly interest under Section 234A. File early with TaxSwift to avoid fines.

Verify Pre-Filled Data:
The e-filing portal’s pre-filled data (from Form 26AS, AIS) may contain errors. Review carefully to avoid discrepancies, which can delay refunds (typically 7–20 days). Our Standard Filing plan includes data verification.

What’s Important for Taxpayers?To navigate AY 2025-26 successfully, keep these key considerations in mind:

Start Early:
ITR filing for AY 2025-26 begins April 1, 2025. Early filing ensures faster refunds (7–20 days) and avoids last-minute errors. Use TaxSwift’s user-friendly platform to upload Form 16, claim deductions, and file by July 31, 2025 (non-audit) or October 31, 2025 (audit cases).

Choose the Right ITR Form:
ITR-1: Salaried individuals, one house property, LTCG ≤₹1.25 lakh.
ITR-2: No business income, LTCG >₹1.25 lakh, or capital losses.
ITR-3: Business/profession income.
ITR-4: Presumptive business income ≤₹50 lakh.
ITR-5/7: Firms, trusts, or exempt entities.

Leverage Deductions:
In the old regime, claim Section 80C (₹1.5 lakh), 80D (health insurance), and others. In the new regime, rely on the ₹75,000 standard deduction and ₹60,000 rebate. Maximize savings with our tax planning tools.

Special Considerations:
Non-Residents: Tax rates remain unchanged, but ensure compliance with Section 6(1A) (deemed residency for income >₹15 lakh).
Businesses: Higher partner remuneration deductions and start-up benefits require accurate reporting.
Seniors: Leverage exemptions and offline filing options.

Use Technology:
The e-filing portal (incometax.gov.in) offers pre-filled data, but TaxSwift’s platform simplifies uploads, auto-calculates tax liability, and ensures error-free filing. Try our Standard Filing for a seamless experience or Priority Filing for faster processing.

How TaxSwift Can HelpAt TaxSwift, we’re committed to making ITR filing for AY 2025-26 fast, accurate, and stress-free. Our services are tailored to the new rules:

Standard Filing: Perfect for salaried individuals and small investors using ITR-1/ITR-4, with data verification and rebate optimization.
Priority Filing: Ideal for seniors, NRIs, or complex cases, with expert review and faster processing.

Why Choose TaxSwift?
User-Friendly Platform: Upload documents, and we handle the rest.
Expert Support: Our experts ensure compliance with Budget 2025 changes.
Affordable Pricing: Starting at ₹499, we fit your budget.
Mobile-Optimized: File on the go with our responsive site, featuring the new 200x67px logo.

ConclusionThe new rules for AY 2025-26 make tax filing simpler and more rewarding, with a ₹12 lakh tax-free income limit, simplified ITR forms, and extended ITR-U timelines. However, choosing the right regime, filing correct forms, and meeting deadlines are critical to avoid penalties. At TaxSwift, we’re here to guide you through every step, ensuring you maximize savings and stay compliant.
Ready to file? Start with TaxSwift today and experience swift, secure, and smart ITR filing. Visit taxswift.in to book our Standard, Priority Filing plans. Don’t wait until July 31, 2025—file early and enjoy peace of mind!