WRITE UP ON DIRECT & INDIRECT TAX PROVISION AS
PRESENTED IN FINANCE BILL 2025
BSK Associates LLP
CHARTERED ACCOUNTANTS
Prepared by Nabiha Khan Reviewed by CA Abdul Halim Siddique
INCOME TAX
A) CHANGES IN TAX RATE: -
1) There is no change in Old Regime of Taxation (i.e., Regime allowing Investment deduction
u/s 80C, 80D etc.). As such, the exemption limit for Individual/HUF/AOP/BOI/Artificial
Juridical Person under old regime stands at Rs. 2,50,000/- with further rebate (i.e., Tax
Discount) of Rs. 12,500/- thereby making Total Income upto Rs. 5,00,000/- Tax free for
earner having Income Upto Rs. 5,00,000/- only.
2) The Slab under the New Tax Regime (Sec 115BAC) for Individual/HUF/AOP/BOI/Artificial
Juridical Person has been changed and the New Slab wise Rates are as below: -
INCOME (In Rs.) TAX RATE (%)
0 – 4 LAKHS NIL
4 – 8 LAKHS 5%
8 – 12 LAKHS 10%
12 – 16 LAKHS 15%
16 – 20 LAKHS 20%
20 – 24 LAKHS 25%
ABOVE 24 LAKHS 30%
Thus, under the New Regime Tax Regime Individual earning Income is upto Rs. 4,00,000/- is Tax
Free. Further for A Y 2026-27 (i.e., F Y 2025-16), the rebate i.e. (Tax Discount) under the new
regime has been extended to Rs. 60,000/-. As such, effective Total Income of Rs. 12,00,000/-
has been made Tax Free for Assessee having Total Income Upto Rs. 12,00,000/- ONLY.
Further, the rebate of Rs. 60,000/- from Income tax from Income between Rs. 4,00,000/- to Rs.
12,00,000/- will not be applicable to Income which are taxed at Special Rate i.e. Capital Gain,
Cryptocurrency etc.
3) Tax Rate of Firm is same as last year @ 30% of the Total Income
4) Tax Rate of Domestic Companies stand as below: -
a. Sec 115BA - 25%
b. Sec 115BAB - 15%
c. Sec 115BAA - 22%
d. Small Companies (Turnover < 400 Crores) - 25%
e. Other - 30%
5) Tax Rate on Foreign Companies stand at 35%
6) There is no change in surcharge and Health and Education Cess.
7) Minimum Alternate Tax for Companies and Alternate Minimum Tax on Firm remains
unchanged. MAT is not applicable to Companies opting Concessional Tax Regime u/s
15BAA and 15BAB.
B) CHANGES IN SALARY HEAD: -
1) Amendment has been made under Perquisites - Section 17(2)(Viii) has been amended to
enhance the limit of Total income of employee upto Rs. 2,00,000/- . As such, Employee
having Income Upto Rs. 2,00,000/- can claim tax free amount for expenditure incurred by
employer for travel outside India on the Medical Treatment or any Member of such
employee’s Family - Not of much relevance
C) CHANGES IN HOUSE PROPERTY HEAD: -
1) Amendment has been proposed in Sec 23(2) so as to allow claim of 2 House property as
Self occupied without any condition attached to it.
D) CHANGES IN BUSINESS AND PROFESSION HEAD: -
1) Sec 44BBD has been introduced which allow Presumptive taxation scheme to Non-
Resident who are providing Services or technology for the purpose of setting up Electronics
Manufacturing Facility or production of electronic goods in India. The presumptive margin
is 25% adhoc of the Gross Receipt/Sales.
E) CHANGES IN RETURN FILING OPTIONS:
1) Section 139(8A) has been amended to provide to extent the time limit of filing the ITR from
existing 24 months from the end of Assessment Year TO 48 months from the end of
Assessment Year. There is certain restriction placed in filing the return beyond 36 months.
The restrictions and additional tax payable in such case as tabulated below:
Criteria Existing Provision Proposed Provision
Time Limit for 24 Months from the End of 48 Months from the End of
Filing Assessment Year Assessment Year
Additional Tax Filing within 12 Months: 25% Filing within 12 Months: 25% of
Payable of Tax & Interest Tax & Interest
Between 12-24 Months: Between 12-24 Months: 50%
50% of Tax & Interest of Tax & Interest
NA Between 24-36 Months: 60%
of Tax & Interest
NA Between 36-48 Months: 70% of
Tax & Interest
Restriction on No updated return allowed if a No updated return allowed if
Filing show cause notice under Section 148A show-cause no-
Section 148A was issued tice is issued after 36 months,
However, where subse-
quently an order is pass ed
unde r sub-section (3) of sec-
tion 148A of the Act determin-
ing that it is not a fit case to
issue notice under section 148
of the Act, updated return
may be filed upto 48 months
from the end of the relevant
assessment year
F) ADDITIONAL TAX SAVING OPTION: -
1) It has been proposed to allow deduction u/s 80 CCD to contribution made to NPS VATSALYA
Account subject to overall capping of Rs. 50,000/- u/s 80CCD(1B). However, amount
withdrawn including Interest would be taxable at the time of withdrawal.
2) The Timeline of Sec 80-IAC has been extended upto 01/04/2030 (Earlier 01/04/2025). As
such Start-up incorporated before the expiry date are allowed to claim 3 Assessment Year
out of 10 Assessment Year from the date of Incorporation as completely Tax Free. The 3
Assessment Year will be selected at the Option of Assessee. Condition as prescribed u/s 80
IAC should be complied with before claiming the said exemption.
3) Sec 9 which state condition which are deemed to accrue or arise in India has been
amended to provide that having Activities confined to Purchase in India for the Purpose of
Export outside India shall not be treated as having Significant Economic presence in India
and as such Non-Resident will not be liable to deem tax in India on such Export Income.
G) COMPLIANCE REDUCTION/RATIONALIZATION: -
1) The Registration period u/s 12AB of small Trust shall be of 10 Year (Earlier 5 Years). This
increase in registration period gives smaller Trust breathing time for getting itself re-
registered and thereby reducing the compliance cost. Small Trust mean Trust whose Total
Income is upto Rs. 5 Crores (Without giving effect to Sec 11 & Sec 12) during each of the
Two Previous Year, preceding to the Previous Year in which Application is made. As such,
only those Trust whose Gross Collection is Less than or Equal to Rs. 5 Crores are eligible for
extended period of Registration of 10 Years.
2) Section 13(3) specify list of Person to whom Trust Benefit should not be diverted in order
to claim benefit u/s 11 and 12 of the Act. The list inter alia prescribed person who has made
Rs. 50,000/- or more of contribution to Trust as Substantial Contributor. Further, any
relatives or entity in which such substantial contributors are having control were also
included. The List of same need to be filed with Audit Report. Due to practical challenges
faced by the Trust in compiling the said list of substantial contributors during Audit, the
meaning of Substantial Contributor has been proposed to be amended so as to mean
Person who has contributed Rs. 1 Lakhs in Previous Year OR Rs. 10,00,000/- upto the end
of relevant Previous year. Relatives and entity wherein such contributor has interest are
deleted.
3) Crypto exchanges are now obligated to file SFT u/s 285BAA which shall now be Auto
reported in AIS and TIS for filing purpose. As such, VDA Service provider are now classified
as Reporting entity.
H) CHANGES IN TDS AND TCS PROVISION: -
Higher Threshold for LRS Remittances: The TCS threshold for foreign remittances under
the Liberalized Remittance Scheme (LRS) has been increased from ₹7 lakh to ₹10 lakh.
TCS Exemption for Education Loans: No TCS will be collected on education-related
remittances funded by loans from recognized financial institutions.
Removal of TCS on Sale of Goods: To ease compliance, TCS will no longer apply to
transactions involving the sale of goods u/s 206C(1h). The same shall be governed by TDS
u/s 194Q alone.
Section 206AB and 206CCA has been omitted: As such, higher rate of TDS/TCS @ 20% will apply
only to Non-PAN Holder/ Inoperative PAN Holder. Non-Filer of ITR category for higher TDS rate has
been omitted.
Changes in TDS/TCS Rates:
Section Description Present TDS/TCS Rate Proposed TDS/TCS Rate
25% (if payee is
194LBC Income from securitization trust Individual/HUF) 30% 10%
(otherwise)
206C (1) TCS on timber/forest produce 2.5% 2%
206C TCS on remittance under LRS for
0.5% (after ₹7 lakh) Nil
(1G) education financed by loan
193 Interest on securities Nil ₹10,000
₹1,00,000 (senior
₹50,000 (for senior
citizens), ₹50,000
citizens), ₹40,000 (others)
194A Interest other than on securities (others for bank/post
for bank/post office;
office); ₹10,000 (other
₹5,000 (other cases)
cases)
194 Dividend for individual shareholders ₹5,000 ₹10,000
Income from mutual funds/
194K ₹5,000 ₹10,000
specified companies
Winnings from lottery, crossword Aggregate over ₹10,000 ₹10,000 for single
194B
puzzles, etc. in a financial year transactions
194D Insurance commission ₹15,000 ₹20,000
Income from lottery ticket
194G ₹15,000 ₹20,000
commission, etc.
194H Commission or brokerage ₹15,000 ₹20,000
194I Rent ₹2,40,000 (annually) ₹50,000 (monthly)
Fee for professional/technical
194J ₹30,000 ₹50,000
services
Income from enhanced
194LA ₹2,50,000 ₹5,00,000
compensation
Remittance under LRS, overseas
206C(1G) ₹7,00,000 ₹10,00,000
tour program package
Other Miscellaneous Changes in Income Tax: -
a) Time Limit for passing Penalty Order has been streamlined and now Penalty Order need to
passed within 6 months from end of the Quarter in which Penalty trigger.
b) The Benefit of unabsorbed Losses of Amalgamating Company to Amalgamated entity will
be 8 Assessment Year immediately succeeding the Assessment Year for which such loss
was first Computed. As such, the accumulated loss of the predecessor company which
were carried forward for 8 AY from the PY in which amalgamation took place stand
modified.
c) Certain Penalties viz; 271C, 271CA, 271D, 271DA, 271DB and 271E were passed by Joint
Commissioner alone. Now, Assessing officer of any rank can impose this penalty.
d) Period for passing the order u/s 270AA for granting immunity from penalty in case of
under-reporting of Income has been extended to 3 months from the end of Quarter in
which application for immunity is received by the Assessing Officer.
e) Gain arising from maturity of certain ULIP are made taxable under the head Capital Gains.
As such, those ULIP to which sec. 10(10D) is not applicable will be taxable under the head
Capital Gains.
f) Further, Income Tax Bill 2025 has been introduced in the Parliament which will replace the
existing Income Tax Act 1961 after passing both the House and receiving President accent.
Details of the same will be notified before the Act get notified and Provision are enforced.
AMENDMENT IN GST
1. The ISD has been made eligible to distribute IGST Paid under RCM as per sec 5(3) and 5(4)
of IGST Act. ISD registration is mandatory from 01/04/2025. Further Cross Charges and ISD
are not inter-changeable. Distribution of ITC through ISD has to be on monthly basis.
2. Time of Supply for Voucher has been omitted as the same is to be treated as Currency.
3. Supply from SEZ/FTWZ to any person before clearance to DTA to be treated as neither
Supply of Good or Service.
4. Section 17(5)(d) has been amended to overrule the Supreme Court Judgment in case of
Safari Retreats case wherein Plant OR Machinery has been interpreted differently. As Such,
no ITC of Immovable Property would be allowed even though the same would-be nature
of Plant for the Taxable Person and generating revenue.
5. Additional Condition has been brought in for reduction of liability through Credit Note so
as to ensure that the buyer has reversed the ITC availed on Original Tax Invoice. This is
harsh measure as it would be very difficult for seller to ensure that buyer has reversed the
ITC on account of CN issued by Seller.
6. Pre-Deposit of Penalty Order @ 10% of the amount has been introduced at the time of
filing Appeal.
