Budget 2025-26 Direct Tax Changes: Income Tax, TDS and TCS
Why in the news
Finance Minister Nirmala Sitharaman unveiled direct tax proposals in Budget 2025-26 aimed at lower compliance costs, voluntary compliance and a business-friendly climate.
Key facts
- Nil tax up to Rs 12 lakh income under the new regime (about Rs 1 lakh a month).
- Salaried taxpayers get a limit of Rs 12.75 lakh because of the Rs 75,000 standard deduction.
- Updated return time limit for any assessment year goes up from 2 to 4 years.
- Details of crypto-asset transactions must be furnished in statements; the Virtual Digital Asset definition will be revised.
- Delays in TCS payment up to the filing due date are decriminalised.
TDS and TCS thresholds
| Item | Earlier | Proposed |
|---|---|---|
| TDS on interest, senior citizens | Rs 50,000 | Rs 1 lakh |
| TDS on rent | Rs 2.4 lakh | Rs 6 lakh |
| TCS on LRS remittances | Rs 7 lakh | Rs 10 lakh |
Compliance and business measures
- Registration period for small charitable trusts extends from 5 to 10 years.
- Annual value of two self-occupied properties can be claimed as nil without conditions.
- No TCS on specified goods worth above Rs 50 lakh.
- A scheme will fix the arm’s length price for international transactions over a 3-year block, and safe harbour rules will be widened to cut litigation.
- Parity of long-term capital gains tax rates for non-residents on securities transfers.
- Withdrawals from NPS accounts after 29 August 2024 are untaxed, with similar treatment for NPS Vatsalya accounts.
Employment and investment
- Presumptive taxation for non-residents providing services to Indian electronics manufacturers.
- Tonnage tax scheme for inland vessels under the Indian Vessels Act, 2021.
- Start-up incorporation benefit window extended by 5 years from 1 April 2030.
- IFSC ship-leasing units, insurance offices and treasury centres get benefits with cut-off extended to 31 March 2030.
- Tax certainty for Category I and II AIFs investing in infrastructure; investment date for sovereign wealth and pension funds extended to 31 March 2030.
Exam angle
- Remember the figures: 12 lakh, 12.75 lakh, 75,000 standard deduction.
- Related terms: TDS, TCS, LRS, safe harbour, arm’s length price.
- IFSC and start-up dates point to 2030.