The Income Tax Bill 2025 introduces several key changes aimed at simplifying taxation, promoting compliance, and providing relief to taxpayers. Here are the most significant updates:
1. Revised Tax Slabs & Rates
- Changes in individual tax slabs under both the old and new tax regimes.
- Lower corporate tax rates for MSMEs and startups.
- Rationalization of capital gains tax rates for different asset classes.
2. Expansion of Tax Exemptions & Deductions
- Increased standard deduction for salaried individuals.
- Higher deductions under Section 80C, 80D, and 80E for investments, health insurance, and education loans.
- Additional tax relief on home loans and incentives for first-time homebuyers.
3. Changes in TDS & TCS Provisions
- Higher Tax Deducted at Source (TDS) on certain high-value transactions.
- Tax Collection at Source (TCS) amendments for international transactions and large purchases.
4. Capital Gains Tax Overhaul
- Merging of short-term and long-term capital gains categories for better clarity.
- Introduction of new exemptions for reinvestment in infrastructure and startups.
5. Boost for Startups & MSMEs
- Increased turnover threshold for MSMEs to qualify for lower corporate tax rates.
- Extended tax holiday periods for startups under specific conditions.
6. Strengthening Faceless Tax Administration
- More transparency in faceless assessments and appeals.
- Use of AI-driven systems for tax dispute resolution and scrutiny.
7. Integration of GST with Income Tax
- Linking of GST returns with income tax filings to curb tax evasion.
- Mandatory GST compliance checks for businesses availing tax benefits.
8. Digital Tax & Cryptocurrency Regulation
- Introduction of new tax rules on digital assets and cryptocurrency transactions.
- Stricter reporting norms for foreign digital income.
9. International Taxation & Transfer Pricing
- Reforms in Double Taxation Avoidance Agreements (DTAA).
- Enhanced scrutiny for cross-border transactions and foreign investments.
10. Compliance & Penalty Reforms
- Simplified tax filing procedures for individuals and businesses.
- Higher penalties for non-compliance and tax evasion.
The Income Tax Bill 2025 introduces key changes to the Presumptive Taxation System, making it more beneficial for small businesses and professionals. Here are the major updates:
1. Increase in Turnover Limit for Presumptive Taxation
For Businesses (Section 44AD):
- The turnover limit has been increased from ₹2 crores to ₹3 crores for businesses opting for the presumptive taxation scheme.
- The net income is deemed at 8% of turnover (6% for digital transactions).
For Professionals (Section 44ADA):
- The threshold for professionals to opt for presumptive taxation has been raised from ₹50 lakhs to ₹75 lakhs.
- Net income is deemed at 50% of gross receipts.
2. Inclusion of More Sectors
- The presumptive taxation scheme has been extended to cover new categories of professionals and service providers.
- This includes freelancers, consultants, and digital content creators.
3. Relaxation in Audit Requirement
- Businesses and professionals opting for presumptive taxation are exempt from maintaining books of accounts and tax audits, provided their total receipts and digital transactions remain within prescribed limits.
4. Clarity on Multiple Businesses
- If a taxpayer has multiple businesses, one business can be under the presumptive scheme while others can follow the regular tax regime, with clear disclosure in returns.
5. Simplified Compliance & Lower Scrutiny
- Less scrutiny by tax authorities as long as taxpayers declare income as per presumptive taxation norms.
- Easier e-filing process with pre-filled returns for presumptive taxpayers.
The Income Tax Bill 2025 continues with both the New Tax Regime and Old Tax Regime, offering taxpayers a choice between the two. Here’s a comparative analysis of the changes:
1. Tax Slabs & Rates
New Tax Regime (2025)
- No exemptions or deductions but lower tax rates.
- Revised tax slabs for individuals:
- ₹0 – ₹3,00,000 → No tax
- ₹3,00,001 – ₹6,00,000 → 5%
- ₹6,00,001 – ₹9,00,000 → 10%
- ₹9,00,001 – ₹12,00,000 → 15%
- ₹12,00,001 – ₹15,00,000 → 20%
- Above ₹15,00,000 → 30%
- Rebate under Section 87A:
- No tax for individuals with income up to ₹7,00,000 (previously ₹5,00,000).
Old Tax Regime (2025)
- Retains existing tax slabs:
- ₹0 – ₹2,50,000 → No tax
- ₹2,50,001 – ₹5,00,000 → 5%
- ₹5,00,001 – ₹10,00,000 → 20%
- Above ₹10,00,000 → 30%
- Allows deductions like:
- Section 80C (PPF, LIC, ELSS) – Up to ₹1.5 lakhs.
- Section 80D (Health Insurance) – Up to ₹25,000 (₹50,000 for senior citizens).
- HRA, LTA, Standard Deduction (₹50,000 for salaried individuals).
2. Key Differences & Benefits
| Feature | New Tax Regime | Old Tax Regime |
|---|---|---|
| Tax Rates | Lower rates but no deductions | Higher rates but with deductions |
| Standard Deduction | Available at ₹50,000 | Available at ₹50,000 |
| 80C, 80D, 80E Deductions | Not Available | Available |
| HRA & LTA Benefits | Not Available | Available |
| Rebate under 87A | Up to ₹7,00,000 | Up to ₹5,00,000 |
| Tax Compliance | Easier (No need for detailed tax planning) | Complex (Requires record-keeping for exemptions) |
3. Key Changes Introduced in Income Tax Bill 2025
- Higher standard deduction for both tax regimes.
- New tax slabs under the new tax regime making it more attractive.
- Increase in rebate limit under Section 87A (from ₹5 lakh to ₹7 lakh).
- More digital tax filing simplifications.
Which Regime Should You Choose?
- If you have significant deductions under 80C, 80D, HRA, etc., the old tax regime may be better.
- If you want a simpler, lower-tax system, the new tax regime is ideal.
The Income Tax Bill 2025 introduces several deduction benefits for individuals, aimed at reducing tax liability and encouraging investments in specific sectors. Below are the key deductions:
1. Standard Deduction
- Increased from ₹50,000 to ₹75,000 for salaried employees and pensioners.
2. Deductions under Chapter VI-A
Section 80C – Investment & Savings
- Maximum deduction remains ₹1.5 lakh for:
- PPF, EPF, NSC, ELSS, Tax-Saver FDs (5-year lock-in).
- Life insurance premium, tuition fees, home loan principal repayment.
Section 80D – Health Insurance Premium
- Deduction for health insurance:
- ₹25,000 for individuals & families.
- ₹50,000 for senior citizens.
Section 80E – Education Loan Interest
- Interest on education loans is fully deductible with no limit.
Section 80EEA – Home Loan Interest
- Additional ₹1.5 lakh deduction on interest paid for affordable housing loans.
Section 80G – Donations
- 100% or 50% deduction on donations to specified charitable institutions.
Section 80TTB – Interest Income for Senior Citizens
- Deduction of up to ₹50,000 on interest from bank deposits, post office savings.
3. New Deductions & Incentives
- Tax benefits for electric vehicle purchases (interest deduction up to ₹1.5 lakh under Section 80EEB).
- Increase in HRA deduction limits for metro and non-metro cities.
4. Old vs. New Tax Regime Deductions
- Old Tax Regime: All the above deductions are available.
- New Tax Regime: Limited deductions, but higher rebate under Section 87A (no tax for income up to ₹7 lakh).
The Income Tax Bill 2025 brings several changes to the taxation system for domestic companies in India. Below are the key updates:
1. Corporate Tax Rates
- Base corporate tax rate remains at 25% for companies with a turnover up to ₹400 crore.
- 30% tax rate continues for companies exceeding the turnover limit.
- Concessional tax rate of 15% for new manufacturing companies under Section 115BAB remains unchanged.
2. Minimum Alternate Tax (MAT)
- MAT rate remains at 15% of book profits.
- Exemptions for certain startups and MSMEs have been proposed to reduce compliance burden.
3. Presumptive Taxation for Small Businesses
- Threshold limit increased for companies opting for the presumptive taxation scheme under Section 44AD.
- Simplified tax compliance for small businesses and startups.
4. Dividend Taxation
- Dividend Distribution Tax (DDT) remains abolished.
- Dividend is taxable in the hands of shareholders at applicable income tax rates.
- Section 80M deduction continues, allowing companies to claim deductions on dividends received from other companies.
5. Incentives for Startups & MSMEs
- Tax holiday extension for eligible startups under Section 80-IAC.
- Higher capital gains exemption limits for reinvestment in startups.
- Lower compliance requirements for small companies.
6. Changes in Depreciation Rules
- Higher depreciation rates for green energy investments.
- Additional deduction for capital expenditure in specific industries.
7. TDS & TCS Amendments
- Higher TDS rates for non-compliant companies.
- TCS provisions tightened for high-value transactions.
Under the Income Tax Bill 2025, tax audits must be conducted by a Chartered Accountant (CA) holding a valid Certificate of Practice under the Chartered Accountants Act, 1949. Key provisions regarding tax audits include:
Who Can Conduct a Tax Audit?
- A Chartered Accountant (CA) in full-time practice.
- A firm of Chartered Accountants, where a partner signs the audit report on behalf of the firm.
- The statutory auditor of a company can also perform a tax audit but is not mandatory.
Who Cannot Conduct a Tax Audit?
- A CA in part-time practice.
- Any person who has a business relationship with the auditee.
- Relatives or employees of the auditee.
- Any disqualified person under Section 288 of the Income-tax Act.
Tax Audit Threshold Limits
- For Businesses:
- ₹1 crore turnover (if cash transactions exceed 5% of total transactions).
- ₹10 crore turnover (if at least 95% of transactions are digital).
- For Professionals:
- ₹50 lakh gross receipts (₹75 lakh in special cases).
Reporting & Compliance
- Tax audits must be filed electronically using Form 3CA/3CB & 3CD.
- Failure to conduct a tax audit may attract a penalty of 0.5% of turnover, up to ₹1.5 lakh.
Under the Income Tax Bill 2025, the following categories of individuals and businesses are required to maintain books of accounts as per Section 44AA of the Income-tax Act:
1. Mandatory Maintenance of Books of Accounts
For Businesses
- If total sales, turnover, or gross receipts exceed ₹25 lakh in any of the three preceding years.
- If income from business exceeds ₹2.5 lakh in any of the three preceding years.
- Presumptive taxation opt-out: If a taxpayer opts out of the presumptive taxation scheme (under Section 44AD, 44ADA, or 44AE), they must maintain books of accounts.
- Specified businesses (like medical, engineering, accounting, interior decoration, technical consultancy, etc.) must maintain books irrespective of turnover.
For Professionals
- Professionals such as doctors, lawyers, accountants, and consultants must maintain books of accounts if their gross receipts exceed ₹10 lakh in any of the three preceding years.
- If income from profession exceeds ₹2.5 lakh, books must be maintained.
- Medical professionals (doctors, surgeons, dentists, pathologists, etc.) must maintain a daily patient register and inventory records of drugs, even if their income is below the threshold.
For Startups & MSMEs
- Startups and MSMEs claiming tax benefits under various sections must keep detailed records.
- Businesses availing tax exemptions and deductions must maintain records to substantiate claims.
2. Books of Accounts Required
- Cash Book & Bank Book
- Ledger
- Journal & Purchase/Sales Registers
- Inventory & Stock Records
- Receipts & Payment Vouchers
3. Electronic & Digital Record-Keeping
- Taxpayers can maintain digital records instead of physical books.
- Cloud-based accounting software is acceptable for compliance.
Under the Income Tax Bill 2025, high-value transactions are closely monitored to track tax compliance and prevent tax evasion. The following transactions must be reported to the Income Tax Department:
1. Cash Deposits & Withdrawals
- Cash deposits exceeding ₹10 lakh per year in savings accounts.
- Cash deposits or withdrawals exceeding ₹50 lakh per year in current accounts.
2. High-Value Property Transactions
- Purchase or sale of immovable property worth ₹30 lakh or more must be reported.
- Stamp duty valuation is considered for taxability under Section 50C.
3. Credit Card Payments
- Total annual credit card bill payments exceeding ₹10 lakh (if paid in cash, scrutiny is higher).
- ₹2 lakh or more in a single cash payment for credit card bills is flagged.
4. Shares, Mutual Funds & Bonds
- Investment or sale of shares, mutual funds, or bonds exceeding ₹10 lakh per financial year.
- Purchase of bonds or debentures exceeding ₹10 lakh in a financial year.
5. Foreign Exchange Transactions
- Remittances outside India exceeding ₹7 lakh per year (Liberalized Remittance Scheme – LRS).
- Foreign currency purchase exceeding ₹10 lakh in a financial year.
6. Business-Related Transactions
- Payments made in cash exceeding ₹2 lakh for any goods or services.
- TDS and GST mismatches between returns and actual transactions.
7. Luxury & High-Value Expenditures
- Jewelry, watches, or luxury item purchases exceeding ₹2 lakh in a single transaction.
- Hotel expenses, international travel, or education fees exceeding ₹2 lakh per year.
8. Digital & Cryptocurrency Transactions
- Cryptocurrency transactions exceeding ₹10 lakh in a year must be reported separately.
- Digital asset transactions attract a 1% TDS under Section 194S.
9. Corporate & Business Transactions
- High-value cash receipts over ₹50 lakh in business transactions.
- Unusual fluctuations in business turnover may trigger scrutiny.
10. PAN & Aadhaar Linking for High-Value Transactions
- Mandatory PAN quoting for transactions exceeding ₹2 lakh.
- Failure to report these transactions may lead to notices, penalties, or scrutiny.
These high-value transactions are monitored through SFT (Statement of Financial Transactions) filed by banks, financial institutions, and businesses with the Income Tax Department.
The Income Tax Bill 2025 introduces key provisions related to the purchase and sale of property, particularly focusing on capital gains taxation, TDS, and reporting requirements. Here are the main provisions:
1. Capital Gains Taxation
- Short-term Capital Gains (STCG):
- If a property is sold within 24 months of purchase, the gain is taxed as short-term capital gains (STCG) at normal slab rates.
- Long-term Capital Gains (LTCG):
- If held for more than 24 months, LTCG applies at 20% with indexation benefits.
- New Capital Gains Structure:
- The new tax bill proposes rationalization of capital gains tax with potential uniformity across asset classes.
2. TDS (Tax Deducted at Source) on Property Transactions
- 1% TDS on property sales exceeding ₹50 lakh under Section 194-IA.
- Higher TDS for non-PAN transactions or non-residents under Section 195.
3. Stamp Duty & Circle Rate Adjustments
- If the sale price is lower than the circle rate by more than 10%, the difference is taxed under Section 56(2)(x).
4. Deductions & Exemptions
- Section 54: LTCG exemption on reinvestment in another residential property.
- Section 54EC: LTCG exemption if invested in specified bonds (NHAI/REC) up to ₹50 lakh.
- Section 80EEA: Deduction for interest on affordable housing loans up to ₹1.5 lakh.
5. Reporting of High-Value Transactions
- Property transactions above ₹30 lakh must be reported in Statement of Financial Transactions (SFT).
- PAN/Aadhaar mandatory for all property transactions above ₹10 lakh.
The procedure for filing TDS return for an NRI purchasing residential property in India under the Income Tax Bill 2025 follows these steps:
1. Deducting TDS on Property Purchase
- Under Section 195, an NRI buyer must deduct TDS while purchasing property from a seller (whether resident or non-resident).
- The applicable TDS rate depends on the nature of capital gains:
- Long-Term Capital Gains (LTCG) (property held >24 months): 20% + surcharge & cess.
- Short-Term Capital Gains (STCG) (property held ≤24 months): Taxable at slab rates.
2. Obtain TAN (Tax Deduction and Collection Account Number)
- The NRI buyer must apply for TAN using Form 49B on the NSDL website.
3. Deduct & Deposit TDS
- TDS must be deposited with the government within 30 days of deduction using Challan ITNS 281.
- Payment is made via the Income Tax e-filing portal or designated bank.
4. Filing TDS Return (Form 27Q)
- The buyer must file TDS return using Form 27Q, as the seller is a non-resident.
- Form 27Q is filed quarterly by:
- 31st July (April – June)
- 31st October (July – September)
- 31st January (October – December)
- 31st May (January – March)
5. Issue TDS Certificate (Form 16A)
- After filing Form 27Q, the buyer must provide Form 16A to the NRI seller.
- This acts as proof of tax deducted.
6. Applying for Lower/NIL TDS Deduction
- The NRI seller can apply for a lower or NIL deduction certificate from the Income Tax Officer under Section 195(2).
- If approved, the buyer can deduct TDS at a reduced rate.
7. Compliance & Penalty
- Late filing of TDS return attracts a penalty of ₹200 per day under Section 234E.
- Non-deduction or incorrect deduction of TDS results in interest and penalties under Section 201.
The procedure to file TDS return for a resident individual buying residential property in India under the Income Tax Bill 2025 follows these steps:
1. Deducting TDS on Property Purchase
- Under Section 194-IA, TDS must be deducted at 1% of the property sale value if the purchase price exceeds ₹50 lakh.
- If the seller does not provide a PAN, TDS will be deducted at 20%.
2. Payment of TDS
- The deducted TDS amount must be deposited with the government within 30 days from the end of the month in which it was deducted.
- Payment is made using Challan ITNS 280 via the TIN-NSDL website or a designated bank.
3. Filing TDS Return (Form 26QB)
- Form 26QB must be filed online through the TRACES portal within 30 days from the deduction month.
- This return must be filed for each transaction separately.
4. Generating TDS Certificate (Form 16B)
- After filing Form 26QB, the buyer must download Form 16B (TDS Certificate) from the TRACES portal.
- This must be provided to the seller within 15 days from the TDS payment date.
5. Compliance & Penalty
- Late filing of TDS return attracts a penalty of ₹200 per day under Section 234E.
- Failure to deduct TDS results in an interest charge of 1% per month on the undeducted amount.
Key Points to Remember
- PAN of both buyer and seller must be provided.
- No exemption is available for first-time homebuyers.
- If multiple buyers/sellers are involved, each party must file Form 26QB separately.
Here’s a step-by-step guide to filing Form 26QB online for TDS payment on property purchase under Section 194-IA:
Step-by-Step Process to File Form 26QB & Download Form 16B
Step 1: Visit the TIN-NSDL Website
- Go to the TIN-NSDL e-Payment portal:
https://www.tin-nsdl.com & www.incometax.gov.in - Click on “e-Payment of Taxes”, then select “TDS on Property (Form 26QB)”.
Step 2: Fill in the Form 26QB
You’ll need to enter the following details:
A. Buyer Details
- PAN of Buyer
- Name of Buyer
- Contact Details (Mobile & Email)
B. Seller Details
- PAN of Seller (Ensure PAN is valid to avoid 20% TDS)
- Name of Seller
- Address & Contact Details
C. Property Transaction Details
- Property Address
- Total Property Value (Mention the agreement value)
- TDS Amount (1% of property value if above ₹50 lakh)
- Payment Type (Lump sum or Installments)
Step 3: Make the TDS Payment
- Choose your payment mode:
- Net Banking (Direct Debit from your bank)
- e-Payment through Challan (Manual payment at an authorized bank)
- Click Proceed and verify the details.
- Make the payment online and generate the Challan 280.
Step 4: Download & Verify TDS Payment
- After payment, a Challan counterfoil with CIN (Challan Identification Number) will be displayed.
- Save and print the receipt for records.
Step 5: Register on TRACES & Download Form 16B
- Visit the TRACES website: https://www.tdscpc.gov.in
- Click Register as a Taxpayer using your PAN & Challan details.
- After registration, log in and navigate to Downloads > Form 16B (TDS Certificate).
- Enter the Acknowledgment Number from Form 26QB and request the certificate.
- Once available, download and provide Form 16B to the Seller.
Important Points to Remember
File Form 26QB within 30 days from the end of the transaction month. Provide Form 16B to the seller within 15 days after filing Form 26QB. Incorrect PAN details may lead to higher TDS deduction (20%). Late filing attracts a penalty of ₹200 per day (Section 234E).
Step-by-Step Guide to Register on TRACES & Download Form 16B
The TRACES (TDS Reconciliation Analysis and Correction Enabling System) portal is used to manage TDS-related services, including downloading Form 16B for TDS on property purchases.
Step 1: Visit the TRACES Website
- Go to the TRACES portal: https://www.tdscpc.gov.in
- Click on “Register as New User” → Select “Taxpayer (Deductor)”.
Step 2: Fill in the Registration Details
You will need to enter the following details:
A. Personal & PAN Details
- Select Category: Taxpayer
- PAN of Buyer (Your PAN)
- Date of Birth/ Incorporation
- Name of Buyer (As per PAN Card)
B. TDS Payment Details
- TAN is NOT required for a property buyer.
- Select “Form 26QB” as the relevant form.
- Enter Acknowledgment Number from Form 26QB Challan (generated during TDS payment).
- Enter Challan Identification Number (CIN) details:
- BSR Code of Bank
- Date of TDS Payment
- Challan Serial Number
C. Contact & Login Details
- Mobile Number (OTP verification required)
- Email ID (For notifications)
- Create Username & Password
Click Submit to complete registration.
Step 3: Activate TRACES Account
- You will receive an activation link on your registered email.
- Click the link and enter the OTP sent to your mobile/email.
- Your TRACES account is now active!
Step 4: Download Form 16B (TDS Certificate)
-
Login to TRACES:
- Visit TRACES
- Enter Username (your PAN) & Password
-
Navigate to Downloads > Form 16B
- Select Assessment Year (AY) (The year following the transaction year).
- Enter PAN of Seller & Transaction Details.
- Click Proceed & Submit Request.
-
Download Form 16B
- Once processed, go to Downloads > Requested Downloads.
- Download Form 16B (PDF file with TDS details).
- Provide Form 16B to the Seller as proof of TDS deduction.
Troubleshooting Issues
Forgot Password?
Use “Forgot Password” option on TRACES and reset via OTP/email verification.
Mismatch in Challan Details?
Verify details entered in Form 26QB match the TDS Challan receipt.
Unable to Download Form 16B?
Ensure Form 26QB has been correctly filed and wait for processing (can take up to 48 hours).
Author Name:
CA Irshad Khan