India Tax Changes — Live Tracker

What changed

From FY 2024-25, the new tax regime (introduced in FY 2020-21 as an optional alternative) became the **default** regime. Any individual or Hindu Undivided Family (HUF) that does not actively select the old regime is automatically taxed under the new regime. For **companies**, this change is less directly impactful since companies use the corporate regimes (Section 115BAA/115BAB/old 30% regime) rather than individual slab rates. However, it directly affects company directors and employees, who are now defaulted to the new personal tax regime when the company computes TDS under Section 192. **New regime slab rates (FY 2025-26, AY 2026-27):** - Up to INR 3 lakh: Nil - INR 3-7 lakh: 5% - INR 7-10 lakh: 10% - INR 10-12 lakh: 15% - INR 12-15 lakh: 20% - Above INR 15 lakh: 30% A rebate under Section 87A now covers income up to INR 7 lakh under the new regime (effectively zero tax up to INR 7 lakh). **Budget 2025 enhancement:** The nil-rate threshold in the new regime was raised from INR 2.5 lakh to INR 3 lakh, and the Section 87A rebate was extended to cover income up to INR 7 lakh (up from INR 5 lakh). **Key trade-off:** The new regime offers lower rates but disallows HRA exemption, LTA, Section 80C (INR 1.5 lakh), Section 80D (health insurance), and most other deductions. Employees with high home loan interest, significant HRA, and Section 80C investments typically benefit from sticking with the old regime.

Who it affects

• All individuals, HUFs, and company directors/employees for personal income tax
• Companies computing TDS under Section 192 on employee salaries — must default to new regime unless employee submits Form 12BB opting out
• High-earning employees who benefit from multiple deductions under the old regime

What to do

For company payroll/HR: employees who wish to remain in the old regime must submit Form 12BB to the employer at the start of each financial year declaring their choice. The default is the new regime — no action needed from employees who prefer the new regime. For companies computing director TDS: confirm each director's regime preference annually.

What changed

Section 56(2)(viib) of the Income Tax Act previously taxed closely held companies when they issued shares to investors at a price exceeding the shares' fair market value. The excess amount was treated as 'income from other sources' of the company — at up to 30% plus surcharge and cess. This created a significant burden for startups raising early-stage investment: angel investors typically invest at a valuation premium above book value, which is the economic reality of risk capital. DPIIT-recognised startups had a partial exemption, but the tax still applied to many others and created uncertainty and litigation. **Budget 2024 (presented 23 July 2024) abolished Section 56(2)(viib) entirely**, effective from AY 2025-26 (FY 2024-25 onwards). This means: - No more Angel Tax on any share premium, for any company - No more fair market value computation requirement for share issues - No more DPIIT exemption complexity — the entire provision is gone - Pending litigation and assessments under this section become moot This was one of the most welcome changes for the Indian startup ecosystem in recent years, removing a tax that was widely seen as misaligned with how early-stage investing works.

Who it affects

• All closely held companies (Private Limited companies) that have raised or plan to raise equity investment
• Angel investors and early-stage startups that were previously subject to scrutiny on share premium valuations
• Companies that had pending tax notices or assessments under Section 56(2)(viib) — these should now be closed

What to do

No ongoing action required — the provision is repealed. Companies that received tax notices under Section 56(2)(viib) for AY 2024-25 or earlier should consult their CA on pending litigation. All future equity fundraising rounds at market/above-book valuations are now free from this tax for any amount.

What changed

E-invoicing under GST was first introduced in October 2020 for businesses above INR 500 crore, then progressively extended. The mandatory thresholds have been: - October 2020: INR 500 crore+ - January 2021: INR 100 crore+ - April 2021: INR 50 crore+ - April 2022: INR 20 crore+ - October 2022: INR 10 crore+ - **August 2023: INR 5 crore+** (current) Under e-invoicing, every B2B invoice, credit note, and debit note must be: 1. Submitted to the Invoice Registration Portal (IRP) in JSON format before or at issuance 2. Digitally signed and stamped with an IRN (Invoice Reference Number) and QR code by the IRP 3. The signed invoice is then issued to the buyer E-invoice data auto-populates GSTR-1 — removing the separate data entry burden for IRP-covered invoices. **Future roadmap:** The government has indicated intent to progressively lower the threshold toward INR 1-2 crore, eventually covering most GST-registered businesses.

Who it affects

• All businesses with aggregate turnover above INR 5 crore in any year since FY 2017-18 for all B2B supplies
• Buyers from these businesses who now see auto-populated GSTR-2B from e-invoices
• SEZs, export transactions, and government department supplies are excluded from e-invoicing requirements
• B2C supplies (end consumers) and certain notified sectors (banking, insurance, NBFCs) are exempt

What to do

If your aggregate turnover has exceeded INR 5 crore in any year since FY 2017-18, you must generate IRN for every B2B invoice before issuing it. Set up your accounting/ERP software to connect to the IRP via API, or use a GST Suvidha Provider (GSP) that offers e-invoicing integration. B2C invoices remain unchanged. Verify your turnover against the threshold — the lookback period covers all years from 2017-18.

What changed

The Faceless Assessment Scheme was launched on 25 September 2020 under Section 144B and has been progressively expanded. It fundamentally changed the interaction model between the Income Tax Department and taxpayers: **Before Faceless Assessment:** - Your case was handled by the Assessing Officer (AO) in your jurisdiction - Personal meetings and informal discussions were common - Human discretion (and potential for corruption or coercion) was embedded in the system - Taxpayers often needed local contacts or chartered accountants with AO relationships **Under Faceless Assessment:** - Cases are randomly allocated to Assessment Units (AUs) anywhere in India - All notices, queries, and responses are through the Income Tax portal's messaging system - Final assessment orders are reviewed by independent Review Units (RU) - Penalty proceedings are faceless - CIT (Appeals) — first level appeal — is also faceless - No video conferencing unless specifically requested and approved **Implications for companies:** - All scrutiny notices arrive digitally on the portal (not by post to the registered office) - Responses must be submitted digitally through the portal within the specified time - The CA/tax consultant handles everything remotely — no need for physical presence in any city - Prior relationships with local AOs are irrelevant **CBDT Central Processing Centre (CPC):** Routine processing, refunds, and TDS credit adjustments are handled by the CPC in Bengaluru, separate from the faceless assessment units.

Who it affects

• All companies selected for income tax scrutiny assessment
• Companies receiving income tax notices for any reason
• CAs and tax consultants handling assessment proceedings — must be portal-literate
• Companies with refunds pending — processed centrally by CPC

What to do

Register the company's authorised representative (CA/tax consultant) on the Income Tax portal as an Authorised Representative. Ensure all portal notifications and emails from incometax.gov.in are actively monitored — failing to respond within the deadline results in ex-parte orders (assessment without the taxpayer's response). Keep all financial records in digital form for easy uploading in response to queries.

What changed

Key corporate changes from Union Budget 2025 (Finance Act 2025, effective AY 2026-27): **1. Section 115BAB extension:** The 15% concessional rate for new manufacturing companies under Section 115BAB was extended — new manufacturing companies that commence production by 31 March 2025 (extended by one year from the previous 31 March 2024 deadline) remain eligible. This ensures companies that missed the original deadline but completed factories by March 2025 can still access the lowest corporate tax rate in India. **2. Enhanced Section 80JJAA:** The deduction for new employee costs under Section 80JJAA was enhanced — the salary ceiling for qualifying 'new employees' was revised upward, and the definition was clarified to include employees hired on fixed-term contracts. This benefits labour-intensive sectors. **3. TDS/TCS rationalisation:** Several TDS/TCS thresholds were adjusted: - TDS on rent under Section 194IB (by individuals) threshold raised from INR 50,000/month to INR 50,000/month (unchanged but clarified) - TCS on foreign remittances (Liberalised Remittance Scheme): threshold for 20% TCS raised from INR 7 lakh to INR 10 lakh per year per individual, reducing burden on individuals remitting for education and travel **4. Presumptive taxation (Section 44AD):** The turnover ceiling for the presumptive business income scheme (Section 44AD) was maintained at INR 2 crore for non-cash businesses. Companies opting for 44AD pay presumptive income at 8% of turnover (6% if receipts are via banking channels) and file a simplified return. **5. Revised processing time for refunds:** CBDT committed to processing all refund claims within 30 days for returns filed without errors, reducing the wait for companies owed tax refunds. **No change to key corporate rates:** - Section 115BAA rate: remains 22% (effective ~25.17%) - Section 115BAB rate: remains 15% (effective ~17.01%) - Old regime base rate: remains 30% - MAT rate: remains 15% of book profit - DDT: remains abolished (dividends taxed in shareholders' hands)

Who it affects

• New manufacturing companies completing factories before 31 March 2025 — benefit from extended Section 115BAB eligibility
• Labour-intensive businesses in manufacturing and services — enhanced Section 80JJAA deduction
• Companies with foreign remittances (LRS) for directors or employees studying/travelling abroad — TCS threshold change
• Small businesses considering the Section 44AD presumptive taxation route

What to do

New manufacturing companies that commenced production between 31 March 2024 and 31 March 2025 should confirm eligibility for Section 115BAB with their CA and elect the 15% rate in their first ITR-6 for the qualifying year. Labour-intensive companies should review eligibility for enhanced Section 80JJAA and ensure new employee documentation (employment contracts, attendance records) is in order to support the claim.