Income Tax Act 2025 – Major Updates & Amendments Explained

Income Tax Act, 2025 – Major Updates & Amendments

Comprehensive Summary with Reference to Income Tax Act, 1961 | Effective from Tax Year 2026–27

🔹 Definitions

Sec 2(32)
Reference to Multi-State Co-operative Societies Act, 2002 added.
Sec 2(40)(f) + Sec 69 – Buyback Taxation
  • Buyback removed from deemed dividend category.
  • Now taxable as capital gains transaction.
  • Promoters to pay additional tax over normal capital gains.
Transaction Domestic Promoter Other than Domestic
STCG 2% 10%
LTCG 9.5% 17.5%

🔹 Business Income (PGBP)

Sec 29 – PF/ESIC Contribution
  • Deduction allowed only if deposited up to due date under Sec 263(1).
  • Earlier allowed till respective Act due date.

🔹 Capital Gains

Sec 70(1)(x) – Sovereign Gold Bonds
  • Redemption not treated as transfer.
  • Exemption only if held till maturity.
  • Extended to future gold schemes.

🔹 Income from Other Sources

Sec 93 – Dividend Deduction Removed
  • No deduction allowed against dividend income.
  • Earlier 20% interest expense allowed.

🔹 MAT Changes

Sec 206 – MAT Rate
  • Reduced from 15% to 14%.
  • No MAT credit generation from Tax Year 2026-27.

🔹 Updated Return & Reassessment

  • Loss return can now be reduced via updated return.
  • Updated return not allowed if assessment already started.
  • Additional tax increased by 10% in reassessment-linked cases.

🔹 TDS / TCS Amendments

Sec 393 – TDS Changes
  • No TDS on Motor Accident Claims Tribunal interest.
  • Electronic TDS certificate allowed for dividend & interest income.
Sec 394 – TCS Rate Changes
  • Alcoholic liquor – 2%
  • Scrap – 2%
  • Minerals – 2%
  • Overseas tour – 2%
  • LRS (Education/Medical >10L) – 2%

🔹 Penalty & Prosecution Changes

  • Late fee for SFT reduced to ₹200 per day (max ₹1,00,000).
  • Misreporting penalty strengthened.
  • TDS default punishment tiered by amount.
  • Repeat offence punishment reduced to 3 years.
  • Crypto non-reporting penalty ₹200 per day.

🔹 Newly Added Exemptions

Schedule III
  • Disability pension to armed forces – Exempt.
  • Interest on MACT award – Exempt.
  • Compensation under Land Acquisition Act – Exempt.
Schedule IV
  • Income of foreign company supplying capital goods to Indian manufacturer – Exempt (subject to conditions).
This summary provides a structured overview of major amendments under the Income Tax Act, 2025. Most provisions are effective from Tax Year 2026–27. Review applicability carefully before compliance planning.