by The Finance Bill 2025 introduces significant amendments across Tax Deducted at Source (TDS), Goods and Services Tax (GST), and Income Tax. These changes aim to simplify compliance, provide relief to taxpayers, and enhance transparency in the taxation system. Below is a detailed breakdown of the key amendments and their implications for businesses and individual taxpayers.
Changes in TDS (Tax Deducted at Source)
Section-wise Amendments
- (a) Section 194A (TDS on Interest Income)
- Interest amount paid or credited in a financial year exceed Rs 50,000 (earlier Rs 40,000 for Financial Institution), Or Rs 10,000 (earlier Rs 5,000 in Other Cases), No TDS will be deducted if interest income earned by a Senior Citizen does not exceed Rs. 1,00,000 (earlier Rs 50000 for Senior Citizen).
- (b) Section 194BB (Winnings from Horse Race)
- TDS will now be deducted if the amount exceeds ₹10,000 in a single transaction, replacing the earlier aggregate limit for the financial year.
2. Section 194D (Insurance Commission)
- The TDS threshold has been increased from ₹15,000 to ₹20,000, providing relief to insurance agents.
3. Section 194G (Lottery Commission)
- The TDS threshold for lottery commissions has been raised from ₹15,000 to ₹20,000.
4. Section 194H (Commission or Brokerage)
- The exemption limit for TDS on commission or brokerage has been increased from ₹15,000 to ₹20,000.
5. Section 194-I (Rent)
- No TDS will be deducted on rent payments up to ₹50,000 per month, easing compliance for small landlords.
6. Section 194J (Professional and Technical Fees)
- The TDS exemption limit has been raised from ₹30,000 to ₹50,000 per month, benefiting freelancers and consultants.
7. Section 194K (Income from Mutual Funds)
- The TDS exemption limit on mutual fund income has been doubled from ₹5,000 to ₹10,000.
8. Section 194LA (Compensation on Land Acquisition)
- The threshold for TDS on land acquisition compensation has been increased from ₹2.5 lakh to ₹5 lakh.
9. Section 194LBC (Income from Securitization Trusts)
- A flat 10% TDS rate has been introduced for income from securitization trusts.
10. Section 206C(1H) (TCS on Sales of Goods)
- This provision, which mandated Tax Collected at Source (TCS) on sales of goods, has been removed effective April 1, 2025, reducing compliance burdens for businesses.
Changes in GST (Goods and Services Tax)
Key Amendments
- Input Tax Credit (ITC) Adjustments
- Section 17(5)(d) has been amended to clarify that “plant and machinery” should always be read together, ensuring ITC availability for businesses.
2. GST Reverse Charge Mechanism (RCM)
- Amendments in Section 20 extend the applicability of RCM for services under IGST Act, Section 5(3) and 5(4).
3. Track and Trace Mechanism (New Section 148A)
- A new system has been introduced to monitor supply chains, ensuring better compliance and transparency.
4. Mandatory ITC Reversal for Credit Notes (Section 34 Amendment)
- Businesses must reverse the corresponding ITC if a credit note is issued.
5. Pre-deposit for GST Appeals
- A 10% penalty pre-deposit is now required for filing appeals against penalty orders under Sections 107 and 112.
Changes in Income Tax
New Tax Slabs Under Section 115BAC (Effective from FY 2025-26 AY 2026-27)
| Income Range | Tax Rate |
|---|---|
| Up to ₹4,00,000 | Nil |
| ₹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% |
Other Notable Amendments
- Section 87A (Tax Rebate)
- The income limit for tax rebates has been increased from ₹7 lakh to ₹12 lakh, and the maximum rebate amount has been raised from ₹25,000 to ₹60,000.
2. Updated Return Filing Window Extended (Section 139)
- The time limit for filing updated returns has been extended from 24 months to 48 months, providing taxpayers with more flexibility.
3. Capital Gains Tax for Foreign Institutional Investors (Section 115AD)
- The tax rate on long-term capital gains has been increased from 10% to 12.5%.
Impact on Businesses and Retail Taxpayers
For Businesses
- Impact on Compliance Costs:
- Changes in TDS thresholds and GST ITC rules will affect cash flow and accounting costs.
- The new Track & Trace Mechanism (Section 148A) may require businesses to upgrade their compliance infrastructure.
- Ease of Doing Business:
- Simplified TDS provisions will improve cash flow for businesses.
- The extended updated return filing window provides more time for compliance.
- GST Refund Mechanisms & Appeals:
- Pre-deposit requirements for GST appeals may impact liquidity.
- Businesses need to adjust procurement strategies to align with new ITC restrictions.
For Retail Taxpayers (Salaried & Small Businesses)
- Impact on Take-Home Income:
- The new tax slabs offer higher disposable income for middle-class taxpayers.
- Who Benefits from Section 87A Rebate?
- Salaried professionals and small business owners earning up to ₹12 lakh will pay zero tax.
- Investment & Tax Planning Adjustments:
- Mutual funds & insurance investments become more attractive with revised TDS exemption limits.
- Capital Gains Changes impact long-term investment strategies, especially for high-net-worth individuals.
Conclusion
The Finance Bill 2025 brings significant relief to taxpayers through higher TDS thresholds, revised tax slabs, and increased rebate limits. Businesses must prepare for new GST compliance requirements, particularly with ITC adjustments and the track-and-trace mechanism. Staying updated with these changes will be crucial for effective financial planning and compliance in the upcoming fiscal year.
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