Guide to Tax, TDS & GST Changes Effective from 1st April 2025
Executive Summary: Key Tax & Compliance Updates
Starting 1st April 2025, the government has introduced several significant changes in Income Tax, TDS (Tax Deducted at Source), and GST (Goods and Services Tax). These updates will have substantial implications for both businesses and individuals, including NRIs. Key changes include:
🔹 Revised Income Tax Slabs offering relief to middle-income earners.
🔹 Higher TDS Thresholds to reduce compliance burdens for various transaction types.
🔹 Updated Tax Audit Limits beneficial for businesses relying on digital transactions.
🔹 TCS on High-Value Transactions revised for improved tracking and compliance.
🔹 Stricter GST Compliance Rules, including mandatory e-invoicing and invoice matching.
🔹 Mandatory Disclosure Requirements for Foreign Assets & Cryptocurrency Transactions.
🔹 Tax Benefits for Startups extended until 2030.
🔹 Strategic Tax Planning Insights for businesses, professionals, and NRIs.
Income Tax, TDS & Compliance Updates
Key Changes in TDS Rules
Below are the major TDS (Tax Deducted at Source) updates, including threshold changes:
| Transaction Type | TDS Rate (Until 31.03.2025) | New TDS Rate (From 01.04.2025) | New Threshold |
|---|---|---|---|
| Rental Income (Sec 194I) | 10% | 10% | ₹6 lakh/year (previously ₹2.4 lakh) |
| Interest Income (Sec 194A) | 10% | 10% | ₹1 lakh/year (previously ₹40,000) |
| Property Sale (Sec 194IA) | 1% | 1% | ₹50 lakh (unchanged) |
| Commission & Brokerage (Sec 194H) | 5% | 5% | ₹50,000 (previously ₹15,000) |
Tax Planning Strategies on TDS
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For Landlords: If your annual rent is close to ₹6 lakh, splitting the rental income across multiple tenants can help avoid TDS deductions.
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For Fixed Deposits (FDs): Reinvest across multiple banks or accounts to ensure interest income remains below ₹1 lakh per account, thus avoiding TDS deductions.
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For Property Sellers: Plan property sales across two financial years to stay under the ₹50 lakh threshold, reducing your TDS liability.
Tax Audit Threshold & Compliance Changes
Revised Tax Audit Limits
Changes in the tax audit limits now benefit digital businesses:
| Entity Type | Previous Limit | New Limit (From 01.04.2025) |
|---|---|---|
| Businesses (Cash Transactions >5%) | ₹1 crore | ₹1 crore (unchanged) |
| Businesses (95%+ Digital Transactions) | ₹10 crore | ₹20 crore |
| Professionals | ₹50 lakh | ₹75 lakh |
Compliance Action Plan for FY 2025-26
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Ensure digital transactions exceed 95% to avail a higher tax audit threshold.
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Review vendor contracts for updated TDS changes.
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Reconcile GST-ITR turnover to avoid mismatches and potential scrutiny.
GST Updates: Compliance & ITC Changes
Major GST Changes Effective from 1st April 2025
| Change | Previous Rule | New Rule (From 01.04.2025) |
|---|---|---|
| E-Invoicing | Mandatory for businesses with ₹10 Cr+ turnover | Mandatory for ₹5 Cr+ turnover |
| Input Tax Credit (ITC) Matching | Allowed with minor mismatches | Strict invoice matching required |
| GST Amnesty Scheme | Last announced in 2024 | No new scheme announced |
| Late Fee for GSTR-1 Non-Filing | ₹50 per day | ₹100 per day |
Tax Planning Strategies for GST
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Ensure timely e-invoicing compliance to avoid penalties and ensure smooth filing.
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Reconcile GST filings with ITR to prevent mismatches and reduce the risk of scrutiny.
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Utilize available ITC optimally to reduce GST liabilities and ensure the full benefit of input credits.
TCS on High-Value Transactions
Major TCS Changes
| Transaction Type | Previous TCS Rate | New TCS Rate (From 01.04.2025) | New Threshold |
|---|---|---|---|
| Foreign Remittance (LRS) | 20% | 10% | ₹10 lakh/year |
| Purchase of Goods Above ₹50 Lakh | 0.1% | Removed | Not Applicable |
| Overseas Tour Packages | 5% | 5% | ₹10 lakh/year |
Tax Planning Tips on TCS
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For NRIs: Split remittances across multiple years to stay below the ₹10 lakh threshold and avoid the 10% TCS.
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For High-Value Goods Purchasers: The removal of TCS on goods purchases above ₹50 lakh is a major benefit for businesses involved in bulk purchases. Focus on ensuring TDS compliance under Section 194Q.
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For Overseas Tourists: Plan your travel expenses to ensure the total cost remains below ₹10 lakh per year to avoid TCS. If exceeding ₹10 lakh, the TCS rate increases to 20% on the excess.
New Disclosure Requirements & Risk Areas
Mandatory Disclosures in ITR
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Foreign Assets: NRIs and residents are now required to report foreign investments and assets more comprehensively.
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Cryptocurrency Transactions: Separate disclosure for cryptocurrency holdings and transactions is now mandatory.
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GST & Income Tax Turnover Matching: Businesses must ensure that the turnover reported in GST returns matches the figures in their Income Tax Returns (ITR).
Risk Areas & Penalties
| Non-Compliance | Penalty |
|---|---|
| Non-disclosure of foreign assets | Up to ₹10 lakh per default |
| Mismatch in GST & ITR turnover | Tax scrutiny and demand |
| TDS non-compliance | 100% penalty on TDS amount + interest |
Tax Planning Strategies for NRIs, Startups, and Businesses
For NRIs
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Invest in NRE Fixed Deposits to earn tax-free interest in India.
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Use Capital Gain Bonds (Sec 54EC) to reduce tax on property sale.
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Split foreign remittances across years to avoid TCS.
For Startups
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80-IAC Tax Benefits for startups have been extended until 2030.
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Angel Tax Exemption is applicable for DPIIT-registered startups.
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Lower Corporate Tax (15%) for new manufacturing units until 2027.
For Businesses
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Explore Tax Incentives for Digital Transactions: Digital businesses can benefit from increased tax audit limits and other incentives.
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Lower Corporate Tax Rate for new businesses in the manufacturing sector (15% until 2027).
Compliance Checklist for FY 2025-26
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✅ Review new TDS limits for rent, interest, and commission.
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✅ Verify tax audit applicability based on turnover and digital transactions.
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✅ Ensure foreign asset & cryptocurrency disclosures in ITR.
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✅ Update accounting software to comply with new GST-ITR reconciliation rules.
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✅ Plan remittances to optimize TCS exposure and avoid penalties.
The tax landscape in India has undergone substantial changes with the new tax and compliance regulations. By understanding and implementing these updates, businesses, professionals, and NRIs can ensure that they remain compliant while optimizing their tax liabilities. Key areas to focus on include TDS threshold changes, updated tax audit limits, and GST reconciliation. With proper tax planning and strategic compliance, taxpayers can minimize penalties and avoid scrutiny
