The Finance Act 2024 brings significant changes to income tax laws effective from 1st April 2025. Key amendments include the extension of tax benefits under Section 80-IAC for startups incorporated till 31st March 2030, encouraging entrepreneurship. TDS thresholds have been rationalized, including increases for rent (₹50,000/month), senior citizens’ interest income (₹1 lakh/year), and insurance commission (₹20,000). A new 10% TDS on payments exceeding ₹20,000 to partners has been introduced under Section 194T. Additionally, TCS on goods is eliminated if buyers deduct TDS under Section 194Q, streamlining compliance. Individual taxpayers benefit from a higher rebate limit under Section 87A (up to ₹12 lakh) and an increased standard deduction (₹75,000), making incomes up to ₹12.75 lakh tax-free under the new regime. Filing updated returns (ITR-U) is now allowed up to 4 years from the relevant assessment year, encouraging voluntary compliance. Procedural reforms include extended timelines for block assessments (12 months) and a 10-year validity for charitable trust registrations under Section 12AB. For trusts, Section 13(3) narrows the scope of “specified persons” to donors contributing over ₹1 lakh. The new NPS Vatsalya Scheme permits parents/guardians to claim deductions under Section 80CCD for contributions to a minor child’s NPS account.
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1. Startup Incentives – Section 80-IAC
The benefit under Section 80-IAC, which provides 100% tax deduction for three consecutive years out of ten, has been extended to startups incorporated till 31st March 2030 (earlier 31st March 2025). This aims to bolster innovation and entrepreneurship in India.
2. TDS Rationalisation
– TDS on Rent (Section 194-I): Threshold increased from ₹2.4 lakh per annum to ₹50,000 per month.
– TDS on Interest (Section 194A): For senior citizens: threshold raised from ₹50,000 to ₹1 lakh/year; for others: raised to ₹50,000 for banks/co-ops and ₹10,000 for others.
– TDS on Insurance Commission (Section 194D): Threshold increased to ₹20,000 from ₹15,000.
– TDS on Payments to Partners (Section 194T): Newly introduced; firms/LLPs must deduct TDS @10% on payments exceeding ₹20,000 to partners (remuneration, interest, bonus, etc.).
3. TCS Rationalisation – Section 206C(1H)
To avoid duplication of compliance, TCS is no longer applicable on sale of goods if the buyer deducts TDS under Section 194Q. This change ensures a one-time deduction mechanism and simplifies obligations for sellers.
4. Individual Tax Relief
– Section 87A Rebate: Limit increased from ₹7 lakh to ₹12 lakh (under the new tax regime).
– Standard Deduction: Raised from ₹50,000 to ₹75,000 for salaried taxpayers.
– Combined effect: Tax-free salary income up to ₹12.75 lakh for individuals under the new regime.
5. ITR-U Filing – Section 139(8A)
The time period for filing an updated return (ITR-U) has been extended from 2 years to 4 years from the end of the relevant assessment year. This change encourages voluntary compliance and revenue collection from previously unreported income.
6. Procedural Changes and Trust Reforms
– Block Assessment Completion (Section 158BE): Timeline extended to 12 months from the end of the quarter (earlier from end of the month) in which search/requisition is conducted.
– Charitable Trust Registration (Section 12AB): Validity extended to 10 years (from 5 years) for trusts with income less than ₹5 crore.
– Specified Person for Trusts (Section 13(3)): Now restricted only to donors contributing more than ₹1 lakh, as against earlier provision covering donor’s relatives and related concerns.
7. NPS Vatsalya Scheme – Section 80CCD
Deduction under Section 80CCD previously allowed only for contributions to the assessee’s own NPS account. With effect from 1st April 2025, parents/guardians can also claim deduction for contributions made to a minor child’s NPS account under the newly introduced Vatsalya scheme.
Conclusion
The amendments coming into effect from 1st April 2025 reflect a policy shift toward simplifying tax laws and promoting voluntary compliance. With more favorable thresholds for TDS/TCS, generous rebate limits, longer return filing periods, and greater startup/trust incentives, the tax environment is being made more predictable and business-friendly. Stakeholders should align their systems and practices to ensure timely compliance and leverage available benefits.
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