The Union government usually announces any changes in tax slabs and rates while presenting the annual Budget in the month of February every year. However, when it comes to tax rules and guidelines, the Income Tax Department regularly issues circulars and notifications to inform taxpayers about necessary changes over time.
While presenting the budget for the financial year 2025-26 in February this year, Finance Minister Nirmala Sitharaman announced several relief measures in personal tax, giving much-needed relief to the tax-burdened middle-class and ordinary taxpayers. After this, from February to August 2025, many circulars, deadline changes, and amendments in the rules came, which will directly affect the pocket of the taxpayers.
10 major tax-related changes announced in 2025
- New tax slab: No tax up to Rs 12 lakh
In Budget 2025, the government announced that under the new tax regime, now total income up to Rs 12 lakh will be tax-free. If you are salaried, then after adding standard deduction of Rs 75,000, you will not have to pay any tax on income up to Rs 12.75 lakh. This is considered to be the biggest step to reduce the tax burden.
- Updated Return (ITR-U): Now filing possible for 48 months
The important change is that the time limit for updated return (ITR-U) — which was earlier 24 months — has been extended to 48 months. That is, if there is any mistake in return filing, then there is now a chance to correct it, add additional income and claim refund for four years.
- Deduction on self-occupied property
Now the concept of ‘notional rent’ on self-occupied / vacant property has been removed. That means you will not show fictitious rental income of that property — this change has brought relief to every household, especially to many government sector employees who keep vacant properties due to frequent transfers.
- TDS threshold on rent increased: Rs 2.4 lakh to Rs 6 lakh
The threshold for TDS deduction on rent payment has been increased from Rs 2.4 lakh to Rs 6 lakh. This has substantially reduced unnecessary complexities in deducting TDS on small-medium rents.
- Relief on interest income for 60+ citizens: 80TTB limit increased to Rs 1 lakh
A big tax relief for senior citizens: People above 60 years of age can now save tax up to Rs 1 lakh on interest received from banks/DPOCs instead of Rs 50,000. This has significantly reduced the tax burden on their annual income.
- TCS rules on LRS: Threshold raised from Rs 7 lakh to Rs 10 lakh
The threshold amount for TCS (tax collected at source) on remittances abroad (LRS) has been raised to Rs 10 lakh, and TCS is completely removed on remittances for educational purposes — bringing great relief to students and their families.
- Relief in TDS/TCS compliance: No more prosecution on delays
Delayed submission of individual TCS statements will not attract prosecution if the tax has been paid on time. Also, the higher TDS rate will only apply if there is no PAN, reducing the risk of confusion and penalties.
- New Income Tax Bill passed: Digital-first and simplified compliance
In August 2025, Parliament passed the new Income Tax Bill, which will replace the Income Tax Act, 1961. The bill aims to make the process digital, transparent and simple. This will include new tools like NIL-TDS certificates, which will help taxpayers prepare better.
- Extension of ITR deadline: Till September 15 for non-audit cases
Surprising change — The CBDT in May extended the deadline to September 15 to file ITR for taxpayers who were not required to file audits. The earlier deadline was July 15, 2025. This extension has been given due to upgrades in the system and ease of use.
- Interest rate on advance tax remains the same = 1% (Misconception cleared)
There was a misconception in the draft of the new bill that the interest rate on advance tax shortfall will increase from 1% to 3%. But after clarification by Parliament and the government, it was decided that the interest rate will remain only 1% per month — it was a draft error, the rule has not changed.
Key suggestions for taxpayers
-Be sure to compare the new regime vs the old one—the old regime may be beneficial in some cases.
-File ITR by September 15 to avoid late fees and interest.
-Incorporate LRS, TDS/TCS, ITR-U and senior citizen rules into your personal financial plan.
-Make future tax assistance easier by adopting digital compliance and the benefits of the new bill.
Summing up…
From Budget 2025 to the passage of the new Income Tax Bill in Parliament, the government has made several changes keeping the individual taxpayer in mind, bringing changes on every front, from tax abolition to the compliance process. It is now important that you understand these changes, plan, and take timely action to protect yourself from tax risks.