The Indian tax structure has seen notable changes in the current financial year following amendments to the Income Tax Act and updated government policies. These reforms influence tax planning for salaried individuals, professionals, small businesses and partnership firms. With updates to slab rates, changes in TDS and TCS compliance requirements and the removal of certain levies, taxpayers now need to evaluate their filing approach with greater attention to detail. Awareness of these rules is essential for complying with regulations, minimising tax liability and avoiding penalties.
1. A simplified Income Tax Act with digital and faceless assessments
The tax department has taken steps to simplify the Income Tax Act by combining multiple provisions, reducing legal ambiguity and focusing on clarity in interpretation. The intent is to reduce litigation and improve transparency. Under the modernised system, faceless assessments now apply to a wider base of taxpayers. This system is designed to eliminate unnecessary face to face interaction with tax authorities. It promotes a standardised and technology driven process that reduces subjectivity and speeds up dispute resolution. The government expects this framework to continue expanding and may soon cover more assessment and appeal processes.
2. Revised tax slabs and the new tax regime becoming the default filing option
One of the most significant changes affects salaried individuals and professionals. Under section 115BAC, the new tax regime has become the default structure starting financial year 2025 to 2026. The new regime increases the zero tax slab and expands lower rate slabs for individuals. In addition, the rebate under section 87A has been increased for those filing under the new system which results in income up to a higher threshold becoming tax free for many taxpayers. However, the old regime has not been abolished. Taxpayers who still prefer deductions such as HRA, home loan interest and 80C investments may manually opt for the old structure while filing. Since exemptions are limited in the new regime, the financially beneficial choice will differ across individuals. It is advisable for every taxpayer to conduct a calculation comparison during filing rather than choosing an option automatically.
3. Updated TDS and TCS rules simplified compliance for businesses
Businesses and professionals must note important changes relating to withholding. The higher TDS and TCS rates that earlier applied to non filers under sections 206AB and 206CCA have now been removed. This reduces compliance work because payers no longer need to verify if the recipient has filed an income tax return in previous years. TCS on sale of goods under section 206C(1H) has also been discontinued. At the same time, the tax department has introduced and updated certain TDS provisions which affect partnership firms and LLPs. One of the key additions is TDS on partner remuneration under section 194T. Firms will now have to withhold tax before distributing remuneration to partners. This rule is expected to impact internal accounting procedures and cash flow planning for many professional and business partnerships.
4. Withdrawal of the equalisation levy on specific digital advertising services
The equalisation levy previously applied to certain digital advertising and cross border online marketing payments. This levy has been withdrawn from 1 April 2025. Companies that had earlier paid or withheld this levy must reassess invoices, vendor contracts and tax reporting. The withdrawal changes the total tax burden when engaging digital service providers located outside India. It can also influence advertising budgets and allocation decisions for businesses that rely heavily on online promotions on global platforms. Ensuring that contracts reflect updated tax rates will help avoid payment disputes in future assessments.
5. Procedural amendments affecting ITR deadlines marginal relief and filing safeguards
Along with major structural reforms, the tax administration has issued procedural notifications that influence timelines and calculations connected to filing. Some due dates for returns and audit report submissions have been modified for specific categories of taxpayers. In addition, there are revised rules for calculating marginal relief for incomes that are near tax slab breakpoints. Marginal relief ensures that taxpayers do not end up paying disproportionately high taxes simply because their income crossed a slab threshold by a small amount. These procedural changes can have a direct financial impact if taxpayers or accountants fail to apply them correctly. Therefore, checking the latest circulars from the Central Board of Direct Taxes before filing is recommended.
What taxpayers should do next
Taxpayers should compare their liability under both the old and new tax regimes before selecting one during filing. They should ensure that payroll software, invoicing systems and TDS or TCS modules reflect the updated regulations. Partnership firms should rework internal payout policies in view of TDS on partner remuneration. Businesses that use international digital service providers should review contracts and invoicing structures to reflect the withdrawal of the equalisation levy. Monitoring CBDT notifications will help taxpayers stay updated on procedural deadlines. In cases involving significant business turnover, capital gains, multinational income or complex deductions, expert tax consultancy is recommended for accurate compliance.
