April 2025: New Income Tax rules, What taxpayers must know

Direct Taxes

As Finance Bill 2025 has been enacted with notification of Finance Act 2025, here are key changes in the Income Tax will come into effect from Tuesday and will be reflected in the Income Tax Returns for Assessment Year 2026-27:

a. Income Tax Rebate

For individual opting new Income Tax regime, the limit of total income to avail rebate under section 87A will now be ₹12 lakh as against ₹7 lakh. This means an individual earning up to ₹12 lakh will not be required to pay income tax. In other words, any individual earlier was required to pay a tax of ₹80,000 (in the new regime) for an income of ₹12 lacs. Now he will not be required to pay tax on such income However, this does not mean she/he will be out of the Income Tax net. She/he will continue to file Income Tax Return.

b. Salaried person

Limit of total income added by standard deduction of ₹75,000 will mean a salaried person will not have to pay income tax for total annual income up to ₹12.75 lakh under new Income Tax Regime. However, she/he will be required to file the Income tax Return.

c. Marginal Relief

This will be applicable for individual who earn (after total deductions) a total income of more than ₹12 lakh but up to ₹12.70 lakh (₹12,70,587 after standard deductions, to be precise). These individuals will get the benefit of marginal relief and will be required to pay only marginal amount of tax equal to the amount of income above ₹12 lakh so that his carry home is also ₹12 lakh. For example, if total income is ₹12.10 lakh, then tax liability will be ₹10,000 and so on.

The maximum rebate available is ₹60,000 which is there for a taxpayer having income of ₹12 lakh on which tax is payable as per the new slabs.

d. Reworked structure under new IT regime

Along with rebate, slabs and rates under new IT regime has also been changed. Now there will be 7 slabs (₹0-4 lakhs, ₹4-8 lakhs, ₹8-12 lakhs, ₹12-16 lakhs, ₹16-20 lakhs, ₹20-24 lakhs and more than ₹24 lakhs). This means there will not be tax on income up to ₹4 lakh (earlier ₹3 lakh) and maximum rate will come into effect for income above ₹24 lakhs (earlier ₹15 lakhs)

Please note there is no change in rates for corporate tax and old Income Tax regime

e. End of Equalisation Levy

There will be no equalisation levy (EL) or digital tax on online advertisements starting April . The levy is charged at 6 per cent in respect of the sum received or receivable by a non-resident for online advertisement services. In 2020, EL was also imposed on non-resident e-commerce operators. The rate was 2 per cent, but it was removed in 2024.

Indirect Taxes: GST

a. Mandatory new Input Service Distributor mechanism

It will be effective from April 1. It will be mandatory for offices receiving tax invoices towards receipt of input services (including RCM transactions) for or on behalf of distinct persons. These offices must obtain ISD registration and distribute credit through prescribed documents in accordance with the GST framework. Till date, businesses had the flexibility to distribute common input tax credits through either the ISD mechanism or a cross-charge model.

b. Multi Factor Authentication (MFA)

It will be mandatory for all GST assesses for generation of e-way bill and e invoice. This required login using a username, password, and OTP (sent to the registered mobile number, Sandes app, or similar platforms)