Taxpayers Must Be Aware of These Ten Major Changes in Income Tax Rules in 2025
Generally, amendments are introduced in the tax slabs and rates every year by the Finance Ministry in February while presenting the annual budget. However, when it comes to the changes in tax rules and guidelines, the Income Tax Department regularly informs taxpayers via official circulars and notifications.
This financial year, 2024-25, also followed the same pattern; while presenting the Union Budget in February, the Finance Minister, Nirmala Sitharaman, announced major changes in the Income Tax Rules. Many of these changes provided relief to taxpayers, while some also became reasons for concern. These changes have provided major relief to the tax-burdened middle class and normal taxpayers. Till now, many other changes in tax rules have been introduced that are directly affecting the pockets of taxpayers. Below are the top 10 major changes introduced this financial year, 2024-25.
- No Tax Needed to be Paid on Income Up to Rs. 12 Lakh
With the release of Budget 2025, the finance ministry announced that now individuals who earn an annual income up to Rs. 12 lakh are not required to pay any sort of tax on it, meaning they are free from the tax burden. This rule is also beneficial for salaried employees; even after adding the Rs 75,000 standard deduction, the taxpayer is not required to pay tax on income up to Rs 12.75 lakh. This rule has reduced the tax burden from many taxpayers’ heads. Big relief for small businesses and salaried employees.
2. Updated Income Tax Return (ITR-U): 48-Month Time Limit
The Finance Ministry has introduced a change in the time limit to file an updated return (ITR-U). Earlier, taxpayers were awarded a time of 24 months (2 years) to correct any mistakes and discrepancies in ITR; now the ministry has updated this time limit to 48 months (4 years). Meaning, now taxpayers have more time to correct mistakes.
3. No More Notional Rent on Self-occupied Property
Now, according to the new change, if you own a second home or property that is vacant or self-occupied, then you are no longer required to show its notional rental income from that. This change has provided big relief, especially to government employees who usually keep their houses empty or vacant due to frequent transfers.
4. TDS Limit on Annual Rent Increased
The finance ministry has increased the TDS (tax deducted at source) limit on rent payments. Now TDS will be cut on rental payments if the annual rent exceeds Rs. 6 lakh. Earlier, this limit was Rs. 2.4 lakh. This has eliminated the need for deducting TDS on small and medium rent payments.
5. Higher Tax Benefit on Interest Income for Senior Citizens
The Finance Ministry has caused major relief to senior citizens and reduced the tax burden. Now, the individuals who are aged 60 years and above can claim a tax deduction of up to Rs. 1 lakh on interest earned from banks and post offices. Previously, this limit was Rs 50,000.
6. TCS Rules on LRS: Limit Raised
Now, tax will be collected at source (TCS) only if you send more than Rs. 10 lakh abroad in a year. Also, there will be no TCS at all on money sent abroad for education. This is good news for students and their families.
7. ITR Deadline Extended to September 15 (Non-Audit Cases)
For people who don’t need to get their accounts audited, the last date to file Income Tax Returns (ITR) has been extended from July 15 to September 15, 2025. This was done to give more time due to system upgrades.
8. Advance Tax Interest Rate Remains 1%
There was confusion that the interest on unpaid advance tax would go up from 1% to 3%. But the government clarified that it was just a mistake in the draft; the interest rate remains 1% per month, as before.
9. No Prosecution for Late TCS Filing If Tax Is Paid
If you delay filing your TCS statement, but the actual tax is already paid, you won’t face legal trouble. Also, higher TDS will now only apply if you don’t have a PAN, making things simpler.
10. New Revised Income Tax Bill 2025 Passed in Lok Sabha
The revised/updated Income Tax Bill 2025 has been successfully passed by the Lok Sabha. The aim of this new bill is to replace the 60-year-old Income Tax Act 1961 and make tax filing easier, digital, and more transparent. New tools like NIL-TDS certificates will help taxpayers avoid unnecessary deductions.
