Income Tax: Latest Amendments and Key Legal Provisions - The Income Tax Act, 1961, serves as the cornerstone of India's direct taxation system. This comprehensive legislation has undergone significant modifications through various Finance Acts, with the most recent amendments coming through the Finance Act, 2024, and preparations for the Finance Bill, 2025. Understanding these changes is crucial for taxpayers, professionals, and businesses navigating India's evolving tax landscape.
Current Tax Structure and Latest Amendments
New Tax Regime as Default (Section 115BAC)
One of the most significant changes is that Section 115BAC has been amended to make the new tax regime the default option for individuals, Hindu Undivided Families (HUFs), Association of Persons (AOPs) that are not cooperative societies, Body of Individuals (BOIs), and Artificial Juridical Persons, effective from Assessment Year 2024-25.
Revised Income Tax Slabs for FY 2025-26 (AY 2026-27)
The income tax structure has been updated with enhanced benefits:
For Individual Taxpayers:
- Income up to ₹4,00,000: Nil tax rate
- Zero tax liability for income up to ₹12,00,000 (considering rebate under Section 87A)
Key Changes in Deductions:
- Standard deduction under salary head increased from ₹50,000 to ₹75,000
- Family pension deduction limit raised from ₹15,000 to ₹25,000
- Rebate under Section 87A enhanced to ₹60,000 from the previous ₹25,000 for the New Tax Regime
Important Sections of the Income Tax Act, 1961
Chapter IV - Computation of Total Income
Section 5: Scope of Total Income This section defines the scope of total income and establishes the charging provisions for different categories of taxpayers based on their residential status.
Section 10: Incomes Not Included in Total Income Contains various exemptions including:
- Section 10(10AA): Special exemptions for certain income
- Section 10(38): Exemption for long-term capital gains on listed securities
Section 11-13: Income from Property Held for Charitable Purposes These sections provide the framework for taxation of charitable institutions and trusts.
Chapter VII: Rates of Income Tax
Section 87A: Rebate for Certain Individuals Provides rebate to taxpayers with lower income levels, rebate of Rs. 60,000 is allowed under the new regime for an income up to Rs. 12 lakhs.
Section 115BAC: Optional Taxation for Individuals Introduced the alternative tax structure with lower rates but restricted deductions, now made the default regime.
Recent Amendments through Finance Act, 2024
Capital Gains Tax Modifications
The Finance Act, 2024 brought significant changes to capital gains taxation:
- Tax rate for foreign companies reduced from 40% to 35%
- Amendments to buyback provisions for companies purchasing their own shares
- Revised holding periods and tax rates for various asset classes
Residential Status Amendments (Section 6)
Section 6(1A) has been strengthened to prevent tax avoidance:
- Indian citizens with total income exceeding ₹15 lakh (excluding foreign sources) are deemed residents
- The 60-day rule extended to 120 days for high-income individuals
- Enhanced provisions to determine residential status for taxation purposes
Anti-Avoidance Measures
Several provisions have been tightened to prevent tax evasion:
- Enhanced reporting requirements under various sections
- Stricter compliance norms for high-value transactions
- Improved mechanisms for information exchange and verification
Compliance and Procedural Updates
Due Date Modifications for AY 2025-26
Recent notifications have modified several compliance deadlines:
- Form 64A and 64E submission due date preponed to June 15, 2025
- Various other compliance dates have been adjusted through CBDT notifications
E-filing and Digital Initiatives
The Income Tax Department continues to enhance digital infrastructure:
- Improved e-filing systems for various forms and returns
- Enhanced taxpayer services through online portals
- Streamlined refund and assessment processes
Key Considerations for Taxpayers
Choice Between Tax Regimes
Taxpayers need to carefully evaluate:
- Benefits of the new default regime versus the old regime
- Impact of available deductions and exemptions
- Long-term tax implications based on income patterns
Planning Strategies
Effective tax planning should consider:
- Optimal utilization of available deductions
- Strategic timing of income recognition
- Investment planning aligned with tax benefits
- Compliance with enhanced reporting requirements
Sectoral Specific Provisions
Creative Professionals and Inventors
Recent amendments have introduced specific benefits:
- Enhanced deductions for patent royalties (up to ₹3 lakh annually)
- Special provisions for literary and creative works
- Encouraging innovation through tax incentives
Business and Professional Income
Chapter IV-C and IV-D: Profit and Gains from Business or Profession These chapters contain detailed provisions for:
- Business income computation
- Allowable deductions and expenses
- Special provisions for different types of businesses
Future Outlook and Finance Bill 2025
The upcoming Finance Bill, 2025 is expected to bring further refinements to the tax structure. Taxpayers and professionals should stay updated with these developments as they may introduce additional compliance requirements or modify existing provisions.
Conclusion
The Income Tax Act, 1961, continues to evolve with changing economic conditions and policy objectives. The recent amendments through Finance Act, 2024, represent a significant shift toward simplification while maintaining revenue adequacy. Taxpayers must stay informed about these changes and adapt their compliance and planning strategies accordingly.
The emphasis on digital compliance, enhanced anti-avoidance measures, and the default adoption of the new tax regime signal the government's commitment to creating a more efficient and equitable tax system. Professional advice remains crucial for navigating these complex provisions and ensuring optimal tax compliance.
Understanding these amendments and their implications is essential for all stakeholders in the Indian taxation ecosystem, from individual taxpayers to large corporations, as they navigate the evolving landscape of income tax law in India. For More Information Call Now:- +91 9999 139 391,
