New Delhi, August 21, 2025:
The Income-tax (Amendment) Bill, No. 2 of 2025, has now received the assent of the Hon’ble President, officially becoming the Income-tax Act, 2025 . With this, several key changes proposed by the Government in the Income-tax regime have come into force. Applicable from FY 2026-27
Key Highlights of the Act
1. Reduced Long-Term Capital Gains (LTCG) Tax Rate
- For immovable property, unlisted securities, and other non-financial assets:
- Before 23rd July 2024 → Tax @ 20% with indexation benefit.
- On or after 23rd July 2024 → Tax @ 12.5% without indexation.
- This change aims to simplify taxation and broaden the tax base.
2. TDS Rationalisation
- Changes in thresholds and rates of TDS have been notified to reduce litigation and bring clarity for taxpayers.
- Provisions now clearly define obligations for deductors in cases of multiple income categories.
3. Advance Tax & Interest Relief
- The Act introduces rationalisation in the levy of interest u/s 234C for shortfall in advance tax, particularly in cases where income arises from capital gains, dividend, or lottery winnings during the year.
4. Compliance & Reporting
- Several reporting obligations have been eased for small taxpayers.
- Certain forms and disclosures have been streamlined in line with faceless compliance initiatives.
5. Alignment with Finance Act, 2024
- The amendments bring consistency with the Finance Act, 2024, especially where corrigenda were earlier issued by the Ministry to remove anomalies.
Impact for Taxpayers
- Property Sellers & Investors: The biggest impact will be on those selling property after 23 July 2024, who will now pay a lower flat rate of 12.5% but cannot claim indexation benefit.
- Salaried Class & Small Taxpayers: Benefit from rationalised compliance procedures and reduced burden in return filing.
- Businesses: Clearer TDS obligations reduce the risk of penalties and litigation.
Effective Date
The provisions of the Income-tax (Amendment) Act, 2025 (No. 2) come into force immediately upon notification in the Gazette following Presidential assent.
👉 This Act marks a significant shift in capital gains taxation and compliance simplification. Taxpayers need to carefully evaluate transactions, especially property sales, in light of the cut-off date of 23 July 2024.
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