Key Taxation and Financial Regulation Updates from April 1, 2025 

Introduction

As the new financial year begins, several important changes in taxation and financial rules will come into effect from April 1, 2025. These updates will impact individuals, businesses, and financial institutions, making it necessary to stay informed and plan accordingly.

Taxpayers should be aware of revised income tax slabs, deductions, and compliance deadlines to avoid penalties. Businesses must also adapt to changes in GST regulations, corporate tax rates, and reporting requirements. Below are some important updates which an individual must know;

1. Changes in Income Tax

From 1 April, 2025, a new income tax structure will be applied, It allows individuals earn up to ₹12 lakh per year to be exempt from tax. Salaried individuals will also get a standard deduction of ₹75,000, makes annual earnings up to ₹12.75 lakh tax-free under the new tax regime.

If the salary exceeds from ₹12.75 lakh, then the new tax regimes will be applicable as per the revised income tax slabs.

Below in the table, we have mentioned the revised income tax slabs;

2. Increased TDS/TCS Limits

The government has increased the threshold limits for TDS (Tax Deducted at Source) and TCS (Tax Collected at Source) for the fiscal year 2025–2026. With this change, only transactions that surpass the new thresholds will be eligible for tax deductions and collections.

The purpose of this change is to make tax compliance easier for people and companies who do smaller transactions. The administration hopes to simplify financial processes and lessen the administrative load on taxpayers by raising these restrictions.

TDS and TCS will no longer apply to smaller transactions, enabling companies to better manage their cash flow. It is anticipated that this adjustment will simplify tax compliance and reduce paperwork for many taxpayers.

3. TDS on Partner’s Remuneration (Section 194T)

Section 194T, a new tax provision included in Budget 2024, will take effect on 1 April, 2025. According to this regulation, LLPs and businesses must deduct 10% TDS if they pay a partner more than ₹20,000 in a fiscal year.

This aims to make financial transactions in partnerships more transparent. Commissions, salaries, bonuses, and interest paid to partners are only a few of the payments that are subject to the TDS deduction under Section 194T.

The government is hoping to ensure correct tax compliance and partner earnings tracking by putting this clause into effect. Businesses are expected to be impacted by this change since it adds a new compliance obligation for LLPs and firms.

4. Removal of TCS on Sale of Goods

Earlier, under Section 206C(1H), sellers had to collect TCS on goods sold above ₹50 lakh, which often led to confusion, especially when it was combined with Section 194Q, which required TDS on the purchase of goods.

To simplify compliance, this requirement will no longer applicable from 1 April, 2025. This change will help businesses by reducing tax-related complexities and will also make smoother transactions.

5. No More Higher TDS/TCS for Non-Filers (Sections 206AB & 206CCA Removed)

Earlier, businesses had to deduct a higher TDS or TCS if the recipient had not filed tax returns in previous years. This rule required businesses to verify the taxpayer’s filing status before making payments, which adds an extra compliance burden.

The process was time-consuming and often complicated financial transactions. Many businesses faced challenges in tracking tax return histories, which was leading to unnecessary delays. From 1 April, 2025, these sections will be removed, which will make tax compliance much simpler.

Now, Businesses will no longer have to check past tax filings before deducting TDS or TCS, which will reduce the administrative work. This change will streamline financial transactions and improve the ease of doing business. It will also allow businesses to focus on growth without unnecessary tax-related complexities.

6. UPI Payment Rule Changes

Below are the two points which an individual needs to know before making transactions via UPI;

1. UPI transactions from inactive mobile numbers will no longer be allowed.
2. Users must update their mobile numbers with their banks before April 1, 2025, to avoid payment issues.

7. New Unified Pension Scheme (UPS)

In August 2024, the government introduced the Unified Pension Scheme (UPS) to replace the existing pension system. This new scheme aims to provide better financial security for central government employees after retirement. Under the UPS, employees with a minimum of 25 years of service will be eligible for a pension.

The pension amount will be calculated as 50% of the average basic salary from the last 12 months of service. This change is expected to standardize pension benefits and offer stability to retired employees. With the introduction of UPS, the government seeks to simplify the pension structure and ensure uniform benefits.

The revised system will help long-serving employees, they will receive a predictable and stable post-retirement income. By linking pension amounts to recent earnings, the scheme ensures fairness in payouts. This move is expected to enhance financial security for government retirees.

8. Key GST Rule Changes

For better and enhanced security, the GST portal will now require mandatory multi-factor authentication (MFA) for user login. This added layer of protection will help to prevent unauthorized access and also secure tax-related data. Additionally, businesses who generating E-Way Bills (EWBs), must ensure that invoices are not older than 180 days.

This rule aims to improve compliance and reduce discrepancies in goods movement. Stricter validation of invoices will streamline the tax process and also enhance transparency.
A new Input Service Distributor (ISD) system will also be introduced to ensure fair tax revenue distribution among states.

This system will help businesses allocate input tax credits more efficiently. By improving the accuracy of tax distribution, it will help to create a more balanced GST framework. These updates aim to strengthen tax compliance and make processes more efficient for businesses.

9. New Minimum Balance Rules for Banks

From 1 April, 2025, banks like SBI, Canara Bank, and PNB will raise their minimum balance requirements. an individual who fail to maintain the required balance will have to pay the penalties. The aim of this change is to ensure better fund management by banks.

That means account holders must check and update their balances to avoid extra charges. It is better for an individual to be aware of it.

10. PAN-Aadhar Linking is Mandatory for Dividend Payments

From 1 April, 2025, linking PAN with Aadhar will be mandatory to receive stock dividends. If the accounts are not linked, then dividends will not be credited, which will affect investors who are relying on them for earnings. Additionally, the government will increase TDS on capital gains for unlinked accounts, which will lead to a higher tax deductions.

The main motto of this change is to improve tax compliance and prevent tax evasion. Investors must ensure their PAN and Aadhar are linked to avoid disruptions in their income and investments.

Another key change is that tax credits for unlinked accounts will not be reflected in Form 26AS. This means taxpayers may face issues while filing returns or claiming tax benefits. To prevent complications, individuals should update their details before the deadline. These measures are part of the government’s efforts to enhance financial transparency and compliance.

11. Stricter KYC Rules for Demat & Mutual Fund Accounts

SEBI has made it compulsory for all Demat and mutual fund account holders to update their KYC details and nominee information. The aim of this rule is to enhance security and ensure accurate record-keeping in financial transactions.

Investors who fail to update these details may face account restrictions.  If the required information is not provided, then the accounts could be frozen until compliance is met. This step is intended to prevent fraud and protect investor interests.

To avoid disruptions, account holders must verify and update their details before the deadline. They have to keep KYC and nominee information up to date which will ensure seamless access to investments. SEBI’s new rule is a part of broader efforts to improve transparency in the financial system. Investors are suggested to complete the updates promptly to prevent any inconvenience.

12. Higher TDS Exemption on Fixed Deposits for Senior Citizens

The government has increased the TDS exemption limit on fixed deposit (FD) interest to provide relief to investors. For senior citizens, the exemption limit will double from ₹50,000 to ₹1 lakh, which will reduce tax deductions on their savings.

The purpose of this change is to make sure that retirees receive larger interest profits without tax breaks. For other investors, the exemption limit will rise from ₹40,000 to ₹50,000. These updates will help individuals retain more of their FD interest income.

With higher exemption limits, fewer investors will face TDS deductions on their fixed deposit interest. This move is expected to encourage more savings and investment in FDs. Senior citizens, in particular, will benefit from reduced tax burdens on their interest income. Investors should review their tax planning to make the most of these revised limits.

Conclusion

These changes in taxation and financial regulations will have a direct impact on individuals, businesses, and financial institutions. It is important to stay updated and take the necessary steps to ensure smooth compliance and financial planning.

Understanding the new rules will help in better tax savings and financial management. Timely action on compliance requirements can prevent unnecessary fines and legal issues. Both individuals and businesses should review their financial plans to align with the latest regulations.

FAQs