India’s income tax landscape is constantly evolving, and recent updates have brought significant changes, particularly concerning the new tax regime and filing deadlines for the Financial Year 2024-25 (Assessment Year 2025-26).
ITR Filing Deadline Extension for FY 2024-25 (AY 2025-26)
Extended Due Date
The deadline for filing Income Tax Returns (ITR) for individuals whose accounts are not required to be audited (which includes most salaried individuals, pensioners, and those opting for ITR-1, ITR-2, or ITR-4) for FY 2024-25 (AY 2025-26) has been extended from July 31, 2025, to September 15, 2025.
Impact on Penal Interest (Section 234A)
This extension is significant because it will likely waive penal interest under Section 234A if the self-assessment tax is paid by the extended date of September 15, 2025. This differs from past instances where extensions did not always waive this interest.
Advance Tax Penalties (Sections 234B & 234C)
It’s crucial to note that this extension does not affect the applicability of penal interest under Sections 234B and 234C for deficiencies in advance tax payments. These penalties will still apply if advance tax installments were not paid on time or were short.
Changes to the New Tax Regime (Default Regime)
The new tax regime (under Section 115BAC) continues to be the default tax regime. This means if you don’t explicitly choose the old tax regime, your income will be taxed under the new regime. Recent changes, primarily from Budget 2024 and 2025, have made the new regime more attractive:
Revised Tax Slabs (FY 2025-26 / AY 2026-27)
- Up to ₹4 lakh: Nil
- ₹4 lakh to ₹8 lakh: 5%
- ₹8 lakh to ₹12 lakh: 10%
- ₹12 lakh to ₹16 lakh: 15%
- ₹16 lakh to ₹20 lakh: 20%
- ₹20 lakh to ₹24 lakh: 25%
- Above ₹24 lakh: 30%
Important Note
For FY 2024-25 (AY 2025-26), the slab rates for the new tax regime remain as they were after Budget 2023, which is slightly different. The most commonly cited slab for FY 2024-25 starts with a basic exemption of ₹3 lakh. The new slabs mentioned above are proposed for FY 2025-26 (AY 2026-27). Always ensure you are referring to the correct financial year when discussing tax slabs.
Increased Rebate under Section 87A (FY 2025-26 / AY 2026-27)
The rebate under Section 87A for the new tax regime has been increased from ₹25,000 to ₹60,000. This means that individuals with taxable income up to ₹12 lakh will have no tax liability under the new regime for FY 2025-26. For salaried individuals, this effectively means incomes up to ₹12.75 lakh (after considering the increased standard deduction) can be tax-free.
Higher Standard Deduction
Under the new tax regime, the standard deduction for salaried individuals has been increased to ₹75,000 (from ₹50,000) for FY 2024-25 onwards.
- For those receiving family pensions, the deduction has also been increased from ₹15,000 to ₹25,000.
Increased Deduction for Employer’s NPS Contribution
The deduction limit on employer’s contribution to NPS (National Pension System) has been increased to 14% of salary (from 10%) under the new tax regime.
Reduced Surcharge
For individuals with income exceeding ₹5 crore, the highest surcharge rate under the new tax regime has been reduced from 37% to 25%.
Old Tax Regime
No Major Changes
The old tax regime slabs and deductions remain largely unchanged. You can still opt for the old regime if you wish to claim various deductions and exemptions (e.g., Section 80C, 80D, HRA, home loan interest).
Rebate under Section 87A
Under the old tax regime, the rebate under Section 87A allows for zero tax liability for resident individuals with taxable income up to ₹5 lakh (maximum rebate of ₹12,500).
Other Important Updates
Delayed ITR Utilities (ITR-2, ITR-3)
As of mid-June 2025, the ITR-2 and ITR-3 utilities for FY 2024-25 (AY 2025-26) were delayed, impacting taxpayers with capital gains, foreign income, or business/professional income. Taxpayers need to keep an eye on the Income Tax e-filing portal for their release.
Stricter Rules for Inaccurate Returns
The Income Tax Department has introduced stricter rules, with potential penalties of up to 200% of the tax due, 24% annual interest, and even prosecution for individuals and businesses misreporting income or claiming false deductions.
PAN-Aadhaar Linkage
Ensure your PAN and Aadhaar are linked to avoid your PAN becoming inoperative, which can lead to various consequences like withheld tax refunds and higher TDS/TCS rates.
Updated Tax Return (ITR-U)
The time limit for filing an updated income tax return has been extended from two years to four years from the end of the relevant assessment year, providing a longer window to rectify errors or declare undisclosed income.
TDS Thresholds
Some TDS threshold limits have been revised to reduce compliance burden, for example, for interest on deposits for senior citizens and rent payments.
Omission of Sections 206AB and 206CCA
These sections, which mandated higher TDS and TCS rates for non-filers, have been omitted to simplify compliance.
Taxation of ULIPs
Unit Linked Insurance Plans (ULIPs) with annual premiums exceeding ₹2.5 lakh will now be taxed as capital gains upon maturity.
Relaxation of Deemed Let-Out Property
Individuals can now treat two properties as self-occupied without attracting tax on notional rent, a relaxation from the previous rule where a second self-occupied property was deemed let out.
Focus on Foreign Assets and Crypto Income
The Income Tax Department is actively scrutinizing undeclared foreign assets and un-reported income from Virtual Digital Assets (cryptocurrency), urging taxpayers to declare such income.