What are the twenty important rule changes in Income Tax FY 25-26?

Here are 20 significant income tax rule changes for the Financial Year 2025–26 (Assessment Year 2026–27).

1. Revised Income Tax Slabs Under New Regime:
Effective April 1, 2025, the new tax regime introduces updated slabs ₹0–₹4 lakh: 0%, ₹4–₹8 lakh: 5%, ₹8–₹12 lakh: 10%, ₹12–₹16 lakh15%, ₹16–₹20 lakh: 20%, ₹20–₹24 lakh: 25%, and above ₹24 lakh: 30%. This structure aims to simplify taxation and provide relief to middle-income earners.

2. Increased Basic Exemption Limit:
The basic exemption limit under the new tax regime has been raised from ₹3 lakh to ₹4 lakh, offering additional relief to taxpayers by reducing the taxable portion of their income.

3. Enhanced Rebate Under Section 87A:
Individuals with net taxable income up to ₹12 lakh are now eligible for a full tax rebate of ₹60,000 under Section 87A, effectively resulting in zero tax liability for a larger segment of taxpayers.

4. Standard Deduction Increased to ₹75,000:
The standard deduction for salaried individuals and pensioners has been increased from ₹50,000 to ₹75,000, allowing for a greater reduction in taxable income under the new tax regime.

5. Employer’s NPS Contribution Dedication Raised:
The deduction limit for employer contributions to the National Pension System (NPS) Tier-I account has been increased from 10% to 14% of the employee’s basic salary, enhancing retirement savings benefits.

6. New Tax Regime Becomes Default:
Starting FY 2025–26, the new tax regime is the default system for taxpayers. However, individuals can opt for the old regime if they prefer its deductions and exemptions.

7. Leave Travel Allowance (LTA) Exemption Not Available
Under the new tax regime, exemptions like Leave Travel Allowance (LTA) are not available, meaning such allowances are fully taxable, unlike in the old regime where specific exemptions applied.

8. Forex Fluctuation Benefit for NRIs
Non-Resident Indians (NRIs) can now factor in currency exchange rate variations when computing gains on equity investments, potentially reducing Long-Term Capital Gains (LTCG) tax liabilities.

9. ITR Filing Deadline Extended to September 15
The deadline for filing Income Tax Returns (ITRs) for FY 2024–25 has been extended from July 31 to September 15, 2025, providing taxpayers additional time to comply with updated requirements.

10.Simplified Capital Gains Reporting
The Income Tax Return forms for AY 2025–26 have been updated to simplify capital gains reporting, ensuring accurate tax reporting for various taxpayer categories.

11. Inclusion of Virtual Digital Assets in Undisclosed Income
Virtual Digital Assets (VDAs) are now included in the definition of undisclosed income, subjecting them to taxation under relevant provisions to curb tax evasion.

12.No Change in Corporate Tax Rates
The corporate tax rates remain unchanged for FY 2025–26, maintaining stability for businesses and investors.

13.Reduction in TDS Rates on Insurance Commission
Tax Deducted at Source (TDS) rates on insurance commission have been reduced, easing the tax burden on insurance agents and promoting the insurance sector.

14. Terminology Shift to ‘Tax Year’
The terms “Previous Year” and “Assessment Year” are being replaced with “Tax Year” to simplify tax-related terminology and reduce confusion among taxpayers.

15.Marginal Relief on Rebate Introduced
A marginal relief mechanism has been introduced to ensure that taxpayers slightly exceeding the ₹12 lakh income threshold do not face a disproportionately higher tax liability.

16.Two Self-Occupied Properties Tax-Free
Homeowners can now claim two self-occupied properties as tax-free, supporting residential investments and promoting homeownership, particularly in smaller cities.

17. Pre-Filled ITR Forms Enhanced
The Income Tax Department has enhanced pre-filled ITR forms, incorporating more comprehensive data to simplify the filing process and reduce errors.

18. Simplification of Income Tax Law
The Income Tax Law has undergone simplification and rationalisation, aiming to make tax compliance easier and more transparent for taxpayers.

19.No Changes in Old Tax Regime Slabs
The income tax slabs under the old tax regime remain unchanged for FY 2025–26, allowing taxpayers to choose between the old and new regimes based on their preferences.

20. Increased Focus on Digital Tax Compliance
The government continues to emphasise digital tax compliance, encouraging taxpayers to utilise online platforms for filing and communication with the Income Tax Department.

Please note that while these summaries provide an overview of the changes, it’s advisable to consult with a tax professional,” Ajay Tax Consultant,” or visit www.ajaytaxconsultant.com. refer to official resources for detailed information tailored to your specific circumstances.