Navigating the Latest Tax Amendments: What Businesses Need to Know

The year 2025 is a watershed moment in India’s tax history, marked by the introduction of the Income Tax Act, 2025. This new Act, which aims to simplify, consolidate, and restructure the 1961 Act, brings critical clarity and certainty for businesses. Beyond the structural overhaul, key amendments to existing provisions focus on ease of compliance for small enterprises, rationalization of withholding taxes, and modernization of the digital economy.

1. The New Statutory Framework: Income Tax Act, 2025

The most significant change for FY 2026-27 is the replacement of the Income Tax Act, 1961, with the Income Tax Act, 2025. The New Act will come into force from April 1, 2026.

• Simplification of Terminology: The new Act replaces the traditionally confusing terms 'Assessment Year' and 'Previous Year' with a single, unified concept: the 'Tax Year'. This directly aligns the income-earning period (financial year) with the period of assessment, drastically simplifying tax language and compliance for all entities.

• Focus on Clarity: The official rationale states the new Act streamlines the law, removes obsolete provisions, and utilizes plain language to reduce litigation and enhance voluntary compliance.

• No Major Tax Policy Changes: Importantly, the transition to the new Act is primarily structural. The government has focused on textual simplification and continuity, meaning there are no fundamental modifications of corporate tax rates or basic policy, preserving predictability for businesses.

2. Incentives for MSMEs: Enhanced Presumptive Taxation

The government has significantly boosted the threshold limits under the Presumptive Taxation Scheme, a major relief for Micro, Small, and Medium Enterprises (MSMEs) and small professionals. These limits apply to the Previous Year 2024-25, relevant for the current business period.

A. Presumptive Taxation for Businesses (Section 44AD)

Condition	Threshold Limit (FY 2025-26)	Statutory Basis
Normal Turnover Limit	₹2 Crore	Section 44AD
Enhanced Turnover Limit	₹3 Crore	Section 44AD (if cash receipts <=5% of total turnover)

• Rate of Presumed Income: The income to be declared remains 6% of the turnover or gross receipts received digitally (Account Payee Cheque/Draft, ECS, or other prescribed electronic modes) and 8% of the of the turnover or gross receipts received in cash.

B. Presumptive Taxation for Professionals (Section 44ADA)

Condition	Threshold Limit (FY 2025-26)	Statutory Basis
Normal Gross Receipts Limit	₹50 Lakh	Section 44ADA
Enhanced Gross Receipts Limit	₹75 Lakh	Section 44ADA (if cash receipts <=5% of total gross receipts)

• Rate of Presumed Income: The income to be declared remains a minimum of 50% of the total gross receipts.

3. Rationalization of TDS Thresholds

To reduce the administrative burden on businesses for low-value transactions, several Tax Deducted at Source (TDS) thresholds have been substantially increased.

Section	Nature of Payment	Previous Threshold (FY 2024-25)	Revised Threshold (FY 2025-26)
194-I	Rent of Land, Building, or Furniture	₹2.4 Lakh (per annum)	₹6 Lakh (per annum)
194J	Fees for Professional or Technical Services	₹30,000 (per annum)	₹50,000 (per annum)
194A	Interest other than Interest on Securities (for Banks/Co-op. Soc.)	₹40,000 (₹50,000 for senior citizens)	₹50,000 (₹1,00,000 for senior citizens)

• TDS on Partner Remuneration (Section 194T): A new section, Section 194T, has been inserted, requiring TDS to be deducted on Partner's Remuneration and Interest at a rate of 10%. No deduction is required if aggregate of such sum paid/payable does not exceed Rs. 20,000 during the financial year.

  
  

4. Taxation of Virtual Digital Assets (VDA)

The taxation regime for Virtual Digital Assets (VDAs), which include cryptocurrencies and Non-Fungible Tokens (NFTs), remains stringent and continues to be governed by Section 115BBH and Section 194S of the Income Tax Act

• Flat Tax Rate: Income from the transfer of any VDA is subject to a flat tax rate of 30%, irrespective of the taxpayer’s income slab.

• Restricted Deductions: No deduction of any expenditure (other than the cost of acquisition) or allowance or set-off of any loss is allowed against VDA income. Furthermore, loss from the transfer of a VDA cannot be set off against any other income and cannot be carried forward to subsequent years.

• TDS on Transfer (Section 194S): Tax must be deducted at source at the rate of 1% on the consideration paid for the transfer of a VDA, subject to specified monetary limits. The new Act confirms specific compliance rules for VDA exchanges and brokers.

  
  

5.Compliance and Start-up Relief

A. Extension of Time for Updated Returns

The time limit for filing an Updated Income Tax Return (ITR-U) under Section 139(8A) has been extended from two years to four years from the end of the relevant assessment year. This gives businesses a significantly wider window to voluntarily correct errors or omissions in their income reporting.

B. Start-up Tax Holiday

The eligibility period for availing the 100% tax holiday on profits for three consecutive assessment years (out of ten years) under Section 80-IAC has been extended for eligible start-ups incorporated up to March 31, 2030. 

C. Penalty and Default Relief

The government has taken steps toward decriminalization by announcing the Decriminalization of the delay in TCS payment. This is a move toward treating delays as a civil, rather than criminal, default, easing the regulatory pressure on businesses.

A Shift Towards Simplicity and Digital Compliance

The FY 2025-26 tax amendments, encapsulated by the new Income Tax Act, 2025, signal a decisive move towards a simplified, litigation-free, and digitally-enabled tax regime. Businesses must prioritize updating their accounting systems to leverage the enhanced presumptive limits and comply with the revised TDS thresholds. The perfect alignment of your financial data with the Tax Department's digital records (AIS/TIS) is no longer optional—it is the foundation of compliance in this new 'Tax Year' era.