Staying abreast of income tax updates in India is crucial for every business, especially for Small and Medium Enterprises (SMEs). The Indian tax landscape is dynamic, with the Union Budget and subsequent amendments frequently introducing changes that impact your tax liability, compliance requirements, and financial planning.
The Finance Act 2024 and the Union Budget 2025-26 have brought several significant changes that Indian businesses need to be aware of. Navigating these updates effectively can help you optimize your tax strategy and ensure seamless compliance.
Key Income Tax Updates for FY 2024-25 (Assessment Year 2025-26)
While the full Budget for 2025-26 has introduced some forward-looking changes, here are some key points relevant for the current Financial Year (FY 2024-25, which ends on March 31, 2025), impacting businesses for Assessment Year 2025-26:
- New Tax Regime as Default:
- For individuals and HUFs, the new tax regime (Section 115BAC) has become the default option.
- Impact on Businesses: While primarily for individuals, if you operate as a proprietorship or HUF, you'll need to decide whether to opt out of the new regime to claim certain deductions available under the old regime. This choice needs to be made by furnishing Form 10-IEA on or before the due date for filing your income tax return.
- New Tax Regime Slabs (FY 2024-25 / AY 2025-26):
- Up to ₹3,00,000: Nil
- ₹3,00,001 to ₹6,00,000: 5%
- ₹6,00,001 to ₹9,00,000: 10%
- ₹9,00,001 to ₹12,00,000: 15%
- ₹12,00,001 to ₹15,00,000: 20%
- Above ₹15,00,000: 30%
- A rebate under Section 87A makes income up to ₹7,00,000 tax-free under the new regime.
- Section 43B(h) - MSME Payment Rule (Effective from April 1, 2024):
- This crucial amendment mandates that payments to Micro and Small Enterprises registered under the MSMED Act, 2006, can only be claimed as a deduction in the financial year when the payment is actually made, if the payment is delayed beyond the specified time limits.
- Time Limits: 15 days without a written agreement, or 45 days if there's a written agreement.
- Impact on Businesses: This is a significant change aimed at ensuring prompt payments to MSMEs. Businesses buying goods or services from registered MSMEs must ensure timely payments to claim deductions in the same financial year. Delayed payments will only be deductible in the year of actual payment, regardless of the accrual method of accounting. This affects your profitability and cash flow.
- TDS and TCS Rationalization:
- While specific thresholds can change, the government continuously rationalizes TDS (Tax Deducted at Source) and TCS (Tax Collected at Source) provisions to ease compliance. Businesses need to ensure their accounting software is updated to reflect the latest rates and thresholds for various transactions (e.g., rent, professional fees, sale of goods).
Forward-Looking Changes from Union Budget 2025-26 (Impacting FY 2025-26 onwards)
The Union Budget 2025-26 has also laid out some proposals that will take effect from April 1, 2025 (FY 2025-26 / AY 2026-27):
- Further Tweaks to New Tax Regime (Individuals/HUFs):
- Increased Basic Exemption Limit: The basic exemption limit under the new tax regime is proposed to be hiked to ₹4 lakh (from ₹3 lakh currently).
- Enhanced Rebate under Section 87A: The tax rebate under Section 87A is proposed to be applicable for taxable incomes up to ₹12 lakh, meaning individuals with income up to ₹12 lakh may have zero tax liability under the new regime.
- Revised New Tax Regime Slabs (Proposed for FY 2025-26 / AY 2026-27):
- Rs 0- Rs 4 lakh: Nil
- Rs 4 lakh - Rs 8 lakh: 5%
- Rs 8 lakh - Rs 12 lakh: 10%
- Rs 12 lakh - Rs 16 lakh: 15%
- Rs 16 lakh - Rs 20 lakh: 20%
- Rs 20 lakh - Rs 24 lakh: 25%
- Above Rs 24 lakh: 30%
- Extension of Time Limit for Updated Tax Returns (ITR-U):
- The deadline for filing an Updated Tax Return (ITR-U) under Section 139(8A) has been extended from 24 months to 48 months from the end of the relevant assessment year. This provides businesses and individuals more time to correct errors or omissions in previously filed returns by paying additional tax, thereby promoting voluntary compliance and reducing litigation.
- Omission of Sections 206AB and 206CCA (From April 2025):
- These sections, which required tax deductors/collectors to determine higher TDS/TCS rates for non-filers of income tax returns, are proposed to be omitted. This aims to reduce the compliance burden on businesses.
- TDS/TCS Threshold Enhancements (From April 2025):
- Specific threshold limits for various TDS sections (e.g., interest, rent) and TCS on foreign remittances (LRS) have been proposed to be increased. This will impact when TDS/TCS is required to be deducted or collected. For example, the TDS limit on rent is proposed to increase from ₹2.4 lakh to ₹6 lakh per annum. TCS on overseas remittances under LRS is proposed to increase to ₹10 lakh from ₹7 lakh.
- Concessional Corporate Tax Rates for MSMEs:
- The concessional corporate tax rate of 15% for new domestic manufacturing companies (under Section 115BAB) and 22% for certain other domestic companies (under Section 115BAA) continues to be available, provided they forgo certain deductions and exemptions. This provides a significant tax benefit for eligible businesses.
How Tririd Biz Helps You Stay Compliant
Navigating these continuous changes manually can be overwhelming for Indian SMEs. This is where a robust and updated accounting software solution like Tririd Biz becomes invaluable:
- Up-to-Date Compliance: Tririd Biz is designed to stay abreast of the latest income tax and GST updates in India. This ensures your software's functionalities, tax calculations, and reporting formats are always compliant with current regulations.
- Accurate Record-Keeping: Meticulous record-keeping is the foundation of tax compliance. Tririd Biz helps you maintain accurate books of accounts, track expenses, manage income, and handle invoices, ensuring all financial data is organized and easily accessible for tax filing.
- Automated Tax Calculations: The software can automate the calculation of your income tax liability, including TDS and TCS, based on the latest rules, reducing manual errors.
- Seamless Reporting: Generate essential financial reports (like Profit & Loss, Balance Sheet) and tax-specific reports to prepare for your Income Tax Return filing.
- Facilitates Decision Making (New vs. Old Regime): By keeping accurate records, Tririd Biz helps you analyze your financial position to make informed decisions, such as which tax regime (old or new) would be more beneficial for your proprietorship or HUF.
- MSME Compliance Support: For Section 43B(h), while the software itself can't force payments, it can help track vendor payments and highlight potential disallowances if payments to registered MSMEs are delayed beyond the prescribed limits.
Conclusion
Understanding and adapting to the latest income tax updates is not just about compliance; it's about making informed financial decisions that impact your business's bottom line. While the new tax regime aims for simplification for individuals, businesses need to carefully consider its implications and the continuing benefits of the old regime's deductions.
By leveraging an intelligent accounting software for Indian businesses like Tririd Biz, you can significantly simplify the process of staying compliant, reduce the risk of errors, and free up valuable time to focus on what you do best – growing your business.
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