Finance Minister Nirmala Sitharaman announced Budget reforms easing tax filing and payments through timelines, lower TCS rates, tax-exempt compensation, and asset disclosures. The measures cut compliance burdens, reduce cash outgo, enable error correction before the Tax Act, April 1.
NEW DELHI: Finance Minister Nirmala Sitharaman utilized her Budget address to reform the tax filing, disclosure, and payment procedures for ordinary Indians. She introduced new timelines, reduced TCS rates, tax-exempt compensation rules, and a comprehensive disclosure option for foreign assets.
These adjustments aim to alleviate compliance burdens, lower upfront cash expenses, and provide taxpayers with greater flexibility to rectify errors before the implementation of the new Income Tax Act on April 1, 2026.
At the heart of these announcements is the transition to the new Income Tax Act set for April 1, 2026, which the government asserts will modernize and streamline the tax system. In preparation for this change, filing deadlines are staggered: individuals submitting ITR-1 and ITR-2 will maintain the July 31 deadline, while non-audit business entities and trusts have until August 31.
Moreover, the deadline for revising returns will be extended to March 31 each year, accompanied by a nominal fee, granting taxpayers additional time to correct mistakes.
Key Highlights:
New Tax Framework
- The new Income Tax Act will be effective starting April 1, 2026, establishing a modernized tax system.
Filing & Revision Deadlines
- ITR-1 and ITR-2: The deadline remains July 31.
- Non-audit businesses & trusts: Filing deadline is August 31.
- Revised returns: Extended to March 31 with a small fee.
- Updated returns: Permitted even after assessment commences, subject to an extra 10% tax.
Basic exemption limit is relaxed:
- Under the New Income Tax system 2025, the basic exemption threshold has been increased to Rs 4 lakh. This change provides substantial relief to lower and middle income earners, helping them save more while strengthening overall financial security.
Rationalised Deductions
- The standard deduction of Rs 75,000 continues for salaried taxpayers.
- Only select deductions are retained, including Employer’s contribution to NPS and Interest deduction on housing loans for let-out properties
- Broader exemptions like 80C, HRA, and 80D largely remain unavailable unless opting for the Old Regime.
Lower TCS Rates
- Foreign tour packages: TCS has been reduced to a flat 2%, with no threshold (down from 5% and 20%).
- Education & medical remittances under LRS: TCS decreases from 5% to 2%.
Relief for Accident Victims
- Interest awarded by the Motor Accident Claims Tribunal is now fully tax-exempt, with no TDS applicable.
Simplified TDS for Small Investors
- CDSL and NSDL will accept Form 15G/15H and forward them to companies, preventing unnecessary TDS for eligible low-income individuals.
One-Time Foreign Asset Disclosure Window
- A six-month scheme for small taxpayers, students, and NRIs.
- Category A covers undisclosed assets up to Rs 1 crore, taxed at a total of 60%.
- Category B allows disclosure of previously unreported assets up to Rs 5 crore for a fee of Rs 1 lakh.
- Both categories provide immunity from prosecution and penalties.
Compliance & Dispute Resolution
- Assessment and penalty proceedings will be integrated for quicker resolution.
- The pre-deposit for staying demand is reduced from 20% to 10%.
- Non-production of books and certain minor offences will be decriminalized, replaced by fines.
Gouri Puri said,
“Procedural compliance for small taxpayers takes a central role in this budget. Reduction in TCS rates, automate facility to procure low and nil withholding tax certificates, ability to disclose foreign assets and extended timelines to file revised returns are all key examples,”
OBJECTIVES OF THE NEW INCOME TAX ACT, 2025
The New Income Tax framework for 2025 has been introduced with following objectives,
- To simplify India’s tax system while promoting fairness and transparency.
- To eliminate the previous complicated array of exemptions and deductions, making tax compliance more accessible for average citizens.
- A key focus is to provide significant relief to the middle class by implementing progressive tax slabs and increased rebates, which can enhance disposable income and support household budgets.
- To foster voluntary tax compliance by establishing trust through clarity, reduced litigation, and predictable regulations.
- To ensure digital governance, the initiative intends to streamline processing, minimize human intervention, and enhance administrative efficiency.
BREAKING | New Income Tax Bill 2025 Withdrawn: Centre in Lok Sabha
COMPARISION TABLE:
| Income Range | Tax Rate FY 2025-26 | Earlier Income Range (FY 2024-25) | Tax Rate FY 2024-25 | Change Made |
|---|---|---|---|---|
| Up to Rs 4 lakh | Nil | Up to Rs 3 lakh | Nil | Slab increased by Rs 1 lakh |
| Rs 4 lakh – Rs 8 lakh | 5% | Rs 3 lakh – Rs 7 lakh | 5% | Slab increased by Rs 1 lakh |
| Rs 8 lakh – Rs12 lakh | 10% | Rs 7 lakh – Rs 10 lakh | 10% | Slab increased by Rs 2 lakh |
| Rs12 lakh – Rs16 lakh | 15% | Rs 10 lakh – Rs 12 lakh | 15% | Slab increased by Rs 4 lakh |
| Rs16 lakh – Rs20 lakh | 20% | Rs 12 lakh – Rs 15 lakh | 20% | Slab increased by Rs 5 lakh |
| Rs20 lakh – Rs24 lakh | 25% | Above Rs 15 lakh | 30% | New separate slab introduced |
| Above Rs24 lakh | 30% | Above Rs 15 lakh | 30% | Split of old 30% slab |
The implementation of the New Income Tax Act, 2025 updates long standing provisions, minimizes legal disputes, and fosters a clearer, more compliance driven tax framework.
Overall, the revised system enhances financial stability, increases disposable income, promotes a culture of sincere tax compliance, and advances India’s vision of a modern, efficient, and progressive taxation regime.
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