BUDGET MAJOR UPDATES 2025-26

BUDGET UPDATE 2025

Income Tax Deduction and Advance Tax Computation for FY 2025-26: A Comprehensive   Overview:

Introduction

The financial year 2025-26 (Assessment Year 2026-27) brings significant updates in the rates for deduction of income tax at source from salaries, computation of advance tax, and charging of income tax in special cases. These rates shall apply to all categories of assessees. They are also relevant for accelerated assessments in cases such as non-resident shipping profits, individuals leaving India permanently, and short-duration bodies.

1. Tax Rates for Individuals, HUFs, AOPs, BOIs, and Artificial Juridical Persons

1. 1. New Tax Regime under Section 115BAC (1A)

The revised tax slab rates applicable for individuals, Hindu Undivided Families (HUFs), Association of Persons (AOPs), Body of Individuals (BOIs), and Artificial Juridical Persons (AJP) are as follows:

However, individuals opting for taxation under Section 115BAC(6) will be subject to tax rates as per Part III of the First Schedule.

1. 2. Regular Tax Regime

For those not opting for the new tax regime, the tax rates remain as follows:

General Individuals, HUFs, AOPs, BOIs, and AJPs

Senior Citizens (60 - 79 years)

Super Senior Citizens (80+ years)

2. Surcharge on Income Tax

The amount of income tax computed shall be increased by a surcharge based on the following conditions:

1. 1. Total income exceeding Rs.50 lakh but up to Rs.1 crore - 10% of tax
   2. Total income exceeding Rs.1 crore but up to Rs.2 crore - 15% of tax
   3. Total income exceeding Rs.2 crore but up to Rs.5 crore (excluding capital gains under sections 111A, 112, 112A)

- 25% of tax

1. 4. Total income exceeding Rs.5 crore (excluding capital gains under sections 111A, 112, 112A) - 37% of tax
   5. Total income exceeding Rs.2 crore (including capital gains under sections 111A, 112, 112A) - 15% of tax However, for persons taxed under Section 115BAC(1A), the surcharge rate is capped at 25% instead of 37% for incomes above Rs.5 crore.

Marginal relief is provided in all cases of surcharge.

3. Taxation of Co-operative Societies

• Normal Tax Rates remain unchanged.
• Surcharge:
  • 7% for total income exceeding Rs.1 crore but up to Rs.10 crore.
  • 12% for total income exceeding Rs.10 crore.
• Optional Tax Rate: Co-operative societies can opt for 22% tax under Section 115BAD, with a surcharge of 10%.

4. Taxation of Firms and Local Authorities

• Firms and LLPs continue to be taxed at 30%.
• Surcharge of 12% applies for total income exceeding Rs.1 crore.

5. Taxation of Companies

• Domestic Companies:
  • 25% if turnover in FY 2023-24 is up to Rs.400 crore.
  • 30% in all other cases.
  • Optional Tax Regime:
    • 22% under Section 115BAA (surcharge at 10%).
    • 15% under Section 115BAB for new manufacturing companies.
• Foreign Companies:
  • 40% base tax rate.
  • Surcharge:
    • 2% if total income exceeds Rs.1 crore but up to Rs.10 crore.
    • 5% if total income exceeds Rs.10 crore.

6. Health and Education Cess

An additional 4% cess is levied on income tax plus surcharge. No marginal relief applies.

7. Rebate under Section 87A

• Regular Tax Regime: Full tax rebate up to Rs.12,500 for total income up to Rs.5 lakh.
• New Tax Regime (115BAC): Enhanced rebate of Rs.60,000 for total income up to Rs.12 lakh.

CHANGES IN TDS/TCS COMPLIANCE

Conclusion

The proposed tax rates and surcharge structure for FY 2025-26 offer flexibility to taxpayers, allowing them to choose between the regular and new tax regimes. The updates in rebate limits, surcharge caps, and concessional tax rates for co-operative societies and companies further ensure a progressive tax structure that aligns with economic growth.