The Finance Bill 2025, presented by Finance Minister Nirmala Sitharaman on February 1, 2025, proposes several direct tax amendments, effective mostly from April 1, 2025. Key changes include clarifications on significant economic presence for non-residents, extended tax exemptions for IFSC-issued insurance policies, and tax relief for minor withdrawals under the NPS scheme. The bill also proposes longer registration periods for eligible trusts and institutions, adjusted income thresholds for perquisites, and a streamlined determination of house property value. A notable amendment expands the scope of deductions under the National Pension Scheme, including contributions to minor accounts. Tax rebate eligibility is extended to incomes up to ₹12 lakh, with marginal relief provisions. The new tax regime revises slabs, with an increased basic exemption to ₹4 lakh and a maximum slab rate of 30% for incomes above ₹24 lakh. The updated return filing window extends from 24 to 48 months. Several TDS thresholds have been raised, such as exemption limits on interest, commission, rent, and professional fees. Certain sections imposing higher TDS/TCS rates are omitted, including on non-filers and high-value transactions. The bill also proposes increasing the TCS threshold for LRS remittances and exemptions for education loans. These amendments aim to simplify compliance, widen exemptions, and provide clarity in tax administration.
Finance Bill – 2025 (Bill no. 14 of 2025)
Presented by Smt. Nirmala Sitharaman
Hon’ble Minister of Finance
on 01-FEB-2025
DIRECT TAX PROVISIONS
| No. | Clause No. | Section | Existing Provisions | Proposed Amendments | Effective Date |
| 1 | 4 (a) | 9(1)(i) – Explanation 2A – proviso 2 (new) | Explanation provides that
“significant economic presence” of a non-resident in India shall constitute “business connection” in India. |
A proviso is proposed to be added to confirm that the transactions or activities which are confined to the purchase of goods in India for the purpose of export shall not constitute significant economic presence in India. | AY 2026-27 |
| 2 | 6(e) | 10(10D) – proviso 8 (to be extended) Proviso’s 4 and 5 denied exemption u/s 10(10D), with respect to certain ULIP policies issued on or after 01-FEB-2021, where the annual premium payable exceeded Rs.2.50 lakh. Proviso’s 6 and 7 denied exemption u/s 10(10D), with respect to certain LIPs issued on or after 01-APR-2023, where the annual premium payable exceeded Rs.5 lakh. |
Proviso 8 stated that the proviso’s 4,5,6,7 shall not apply in case of any sum received on the death of a person. | Proviso 8 is proposed to be extended, to the LIPs issued by IFSC insurance intermediary office. | 01-APR-2025 |
| 3 | 6(f) | 10(12BA) | New | It is proposed that any payment from NPS Trust to a parent or guardian of a minor under a pension scheme u/s 80CCD, on any partial withdrawal as per the terms and conditions specified under PFRDA Act, 2013, as does not exceed 25% of the amount of contribution made. | 01-APR-2025 |
| 4 | 7(a) | 12AB(1) – proviso (New) |
12AB(1) provided for registration of a Trust or institution, for a period of 5 years. | It is proposed to insert a proviso to section 12AB(1), where the total income of such Trust or institution, without giving effect to the provisions of sections 11 and 12, does not exceed Rs.5 cr. in each of the two previous years, preceding the previous year in which such application is made, registration shall be granted for a period of 10 years. | 01-APR-2025 |
| 5 | 7(b) | 12AB(4) – Explanation (g) | The Commissioner shall cancel the registration of the Trust or the institution, if any of the “specified violation” is proved. |
It is proposed not to consider any “incomplete” application u/s 12A(1)(ac), as “specified violation”. | 01-APR-2025 |
| 6 | 9(a) | 17(2)(iii) (c) | The value of any benefit or amenity granted or provided free of cost or at concessional rate by an employer to an employee whose income under the head “Salaries” (excluding perquisites) exceeds Rs.50,000/-. |
It is proposed to separately prescribe the Salary income limit, for this clause. | AY 2026-27 |
| 7 | 9(b) | 17(2)((vi) – Condition (B) |
Expenditure on travel shall be excluded from perquisite only in the case of an employee whose gross total income (excluding this expenditure) excluding this expenditure does not exceed Rs.2 lakh. |
It is proposed to separately prescribe the gross total income limit, for this clause. | AY 2026-27 |
| 8 | 10 | 23(2) | Annual Value of the house property to be taken as ‘nil’, if:
(a) is occupied by the owner for his own residence, or (b) cannot be occupied by the owner for reasons of his employment, business or profession, at any other place. |
It is proposed to simplify the requirement of annual value of the house property to be taken as ‘nil’, if:
(a) the owner occupies it for his own residence, or (b) cannot be occupied by the owner for any reason. |
01-APR-2025 AY 2025-26 |
| 9 | 16 | 80CCA(2)(a)– proviso 2 (New) |
It is provided that any amount standing to the credit of the NSS Account shall be fully taxable at the time of withdrawal.
The DEA has issued Notification No. G.S.R. 537(E) and Notification No. G.S.R. 538(E) both dated 29th August, 2024 providing that the balances at the credit of the subscribers of the National Savings Scheme 1987 and 1992 shall bear no interest on or after the 1st day of October, 2024. |
It is therefore proposed to exempt the withdrawal on or after the 29th August, 2024, in the case of an assessee, being an individual.
[Note: Not clear why HUF is excluded from this exemption benefit] |
with retrospective effect from the 29 August, 2024 |
| 10 | 17 | 80CCD(1B) – proviso 2 (New) |
Additional deduction of Rs.50,000/- available for contribution to assessee account in a pension scheme of the Central Govt. |
It is proposed to extend this benefit of deduction even to the account of a minor under the National Pension Scheme Vatsalya Accounts, as a parent, with a condition that the aggregate amount of deduction under this sub-section shall not exceed Rs.50,000/-. | AY 2026-27 |
| 11 | 20(a) | 87A – proviso | Where the assessee files his tax return under the new tax regime section 115BAC(1A), and his total income does not exceed Rs.7 lakh, he shall be allowed a deduction of 100% of tax amount upto Rs.25,000/-. |
(i) It is proposed to extend this limit of total income upto Rs.12 lakh, with a deduction of 100% of tax amount upto Rs.60,000/-.
(ii) It is further proposed to align the marginal tax relief provisions. |
|
| 12 | 20(b) | 87A – proviso 2 (New) | Effective 05-JUL-2024 the income tax e-filing utility for tax returns, rejected the rebate u/s 87A to tax liability u/s 111A and 112. Aggrieved by the same, a PIL was filed before the Hon’ble Bombay HC which was finally decided on 24-JAN-2025.The Hon’ble HC held that the claim under Section 87A is, highly debatable and contentious. It however concluded that the revenue was not justified in modifying the utility by which an assessee is debarred at the threshold from making the claim, which according to them, was, at best, a contentious or debatable claim. |
It is proposed to insert a new proviso restricting the claim under the first proviso for rebate u/s 87A to the amount of income tax payable u/s 115BAC(1C), only.In the memorandum explaining the provisions of the Finance Bill it is stated that:The provisions of sub-section (1A) of section 115BAC are subject to the other provisions of Chapter XII i.e. determination of tax in certain special cases. Hence, proviso to section 87A clearly provides that tax on incomes chargeable at special rates (for e.g.: capital gains u/s 111A, 112 etc.) as specified under various provisions of Chapter XII, are not included while determining the rebate of income-tax under the first proviso to section 87A.[Note: Since the proposed amendment is effective 1st April, 2026, rebate under proviso to section 87A for AY 2024-25 & AY 2025-26, towards tax liability u/s 111A and 112, will remain under litigation] |
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| No. | Clause No. | Section | Existing Provisions | Existing | Effective Date |
| 13 | 24 | 115BAC (1A) (ii) | OLD | for | AY 2025-26 |
| S. No. | Total Income | Rate of Tax | |||
| 1 | Upto Rs. 3,00,000 | Nil | |||
| 2 | From Rs. 3,00,001 to Rs. 7,00,000 | 5% | |||
| 3 | From Rs. 7,00,001 to Rs. 10,00,000 | 10% | |||
| 4 | From Rs. 10,00,001 to Rs. 12,00,000 | 15% | |||
| 5 | From Rs. 12,00,001 to Rs. 15,00,000 | 20% | |||
| 6 | From Rs. 15,00,001 and above | 30% | |||
| No. | Clause No. | Section | Proposed Amendment | Proposed | Effective Date |
| 13 | 24 | 115BAC (1A) (iii) | NEW | for | AY 2026-27 |
| S. No. | Total Income | Rate of Tax | and onwards | ||
| 1 | Upto Rs. 4,00,000 | Nil | |||
| 2 | From Rs. 4,00,001 to Rs. 8,00,000 | 5% | |||
| 3 | From Rs. 8,00,001 to Rs. 12,00,000 | 10% | |||
| 4 | From Rs. 12,00,001 to Rs. 16,00,000 | 15% | |||
| 5 | From Rs. 16,00,001 to Rs. 20,00,000 | 20% | |||
| 6 | From Rs. 20,00,001 to Rs. 24,00,000 | 25% | |||
| 7 | Above Rs. 24,00,000 | 30% | |||
| No change in Surcharge slabs and rates | |||||
| No change in Health and Education cess @ 4% | |||||
| 14 | 39 | 139(8A) | Updated Return can be filed within 24 months from the end of the relevant assessment year. | It is proposed to extend this period to 48 months. | 01-APR-2025 |
| 15 | 40 | 140B (3) – Additional income tax payable | (iii)- New
(iv)- New |
(iii) 60% of tax and interest payable, where return filed is after 24 months upto 36 months.
(iv) 70% of tax and interest payable, where return filed is after 36 months upto 48 months. |
01-APR-2025 |
| 16 | 51(a)
51(b) |
193 | There was no basic exemption provided for TDS on interest on securities, payable to a resident.
No TDS was prescribed for aggregate interest upto Rs.5,000/- during the financial year, payable by a public company to a resident individual or HUF on Debentures |
It is proposed to provide for Rs.10,000/- as aggregate amount during the financial year which will not attract TDS u/s 193.
This limit is also proposed to be increased to Rs.10,000/- |
01-APR-2025 |
| 17 | 52 | 194 | No TDS on dividend payable to individual, if the aggregate of such dividend during the financial year does not exceed Rs.5,000/-. | It is proposed to increase the exemption limit to Rs.10,000/- | 01-APR-2025 |
| 18 | 53 | 194A(3)(i) Proviso 3 | No TDS on interest other than interest on securities if:
(a) paid by Banks, Co-Op Banks or Post Office, where aggregate of interest payable during the financial year does not exceed Rs.40,000/- (b) paid by any other person, where aggregate of interest payable during the financial year does not exceed Rs.5,000/- The limit under (a) above for “senior citizens” for no TDS – Rs.50,000/- |
It is proposed to increase the limit for nil TDS on interest other than interest on securities on:
(a) upto Rs.50,000/- (b) upto Rs.10,000/- It is proposed to increase the limit for “senior citizens” for no TDS upto Rs.1,00,000/- |
01-APR-2025 |
| 19 | 54 | 194B | TDS on winning from lottery, crossword, puzzle, if the amount or aggregate amounts during the financial year exceeds Rs.10,000/- |
It is proposed that TDS on winning from lottery, crossword, puzzle, if the amount in a single transaction exceeds Rs.10,000/-. |
01-APR-2025 |
| 20 | 56 | 194D | No TDS on insurance commission where aggregate amount payable during the financial year does not exceed Rs.15,000/- | It is proposed to increase the limit for no TDS upto Rs.20,000/- | 01-APR-2025 |
| 21 | 58 | 194H | No TDS on commission or brokerage where aggregate amount payable during the financial year does not exceed Rs.15,000/- | It is proposed to increase the limit for no TDS upto Rs.20,000/- | 01-APR-2025 |
| 22 | 59 | 194I | No TDS on rent where aggregate amount payable during the financial year, does not exceed Rs.2,40,000/- |
It is proposed that no TDS on rent where the rent payable for a month or part of the month, does not exceed Rs.50,000/- | 01-APR-2025 |
| 23 | 60 | 194J | No TDS on fees for professional services, or fees for technical services, or royalty, or any sum referred to in section 28(va), where aggregate amount payable during the financial year does not exceed Rs.30,000/- | It is proposed to increase the limit for no TDS upto Rs.50,000/- | 01-APR-2025 |
| 24 | 61 | 194K | No TDS on income in respect of units where aggregate amount payable during the financial year does not exceed Rs.5,000/- | It is proposed to increase the limit for no TDS upto Rs.10,000/- | 01-APR-2025 |
| 25 | 66 and68 |
206AB and 206CCA |
TDS to be deducted at a higher rate and TCS to be collected at a higher rate, where the amount is paid/received to/from a person who has failed to file his income tax return for the immediately preceding year and his aggregate TDS and TCS liability during that previous year is Rs.50,000/- |
It is proposed to omit both these sections. | 01-APR-2025 |
| 26 | 67(b) | 206C (1G) | Tax Collected at Source on Liberalised Remittance Scheme (LRS) of RBI:
Threshold limit for no TCS – |
It is proposed to increase the threshold limit for no TCS to Rs.10,00,000/-
It is proposed not to collect TCS in case of amount being remitted out is a loan obtained from any financial institution as defined in clause (b) of sub-section (3) of section 80E, for the purpose of pursuing any education. |
01-APR-2025 |
| 27 | 67(c) | 206C (1H) | TCS @ 0.10% on sale of goods on amount exceeding Rs.50 lakhs in a financial year. | It is proposed to omit this section. | 01-APR-2025 |
| 28 | Part II of the First Schedule |
TDS Rates:
194D Resident non-corporate |
Existing Insurance commission TDS @ 5% | Proposed
Rate TDS @ 2% |
01-APR-2025 |
| 29 | Part III of the First Schedule |
Salary TDS and Advance Tax |
No change in Old Tax Regime, Surcharge, Cess | AY 2026-27 | |
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Disclaimer:
1. This document is a Compilation of Finance Bill, 2025, Direct Tax Provisions only.
2. This document deals with general provisions which may be of interest to all and hence industry specific proposals are not dealt with.
3. Utmost care has been taken while doing the compilation, however, human error is natural, which may kindly be excused.
4. This document is prepared for providing general information only and should not be relied upon, for any decision-making purpose.
5. Readers valuable suggestions / comments are welcome.
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