The new financial year 2025-26 has introduced significant tax and financial changes that will impact individuals, businesses, financial institutions, and most importantly, Chartered Accountants managing compliance and advisory services. These reforms aim to simplify taxation, enhance regulatory compliance, and drive economic growth. As a CA, staying updated with these changes is essential to guide clients efficiently and ensure smooth financial transitions.
This blog provides an in-depth analysis of the key amendments and their implications.
1. Increased Income Tax Exemption and Relief
One of the most notable updates in the new tax regime is the increased income tax exemption limit. Individuals earning up to ₹12 lakh annually will now be tax-exempt, offering significant relief to the middle-class workforce. Additionally, salaried employees will benefit from an enhanced standard deduction of ₹75,000, making income up to ₹12.75 lakh tax-free.
For CAs, this presents an opportunity to assist clients in recalculating their tax liabilities and optimizing their tax planning. While the revised structure applies to income earned from April 1, 2025, to March 31, 2026, taxpayers must still file their income tax returns to claim these benefits.
2. Deactivation of UPI for Inactive Numbers
The National Payments Corporation of India (NPCI) has introduced a security measure to deactivate UPI IDs linked to mobile numbers that have been inactive for an extended period. If a mobile number associated with a UPI account is reassigned or remains unused, banks may remove the number from their records and suspend related UPI services.
Advisory for CAs: Clients should be advised to update their registered mobile numbers before April 1 to avoid disruptions in digital transactions. This initiative enhances digital payment security and prevents fraudulent activities.
3. Introduction of the Unified Pension Scheme (UPS)
The Unified Pension Scheme (UPS) for central government employees, replacing the National Pension System (NPS), has come into effect. Employees with at least 25 years of service will be entitled to 50% of their average basic salary over the last 12 months as a pension.
CA’s Role: Government employees seeking financial planning advice will require guidance on the impact of this transition and how to manage their retirement benefits effectively.
4. Mandatory PAN-Aadhaar Linking
Taxpayers failing to link their Permanent Account Number (PAN) with Aadhaar by March 31, 2025, will face severe financial restrictions, including:
- Loss of dividend income
- Increased Tax Deducted at Source (TDS) rates
- Inability to claim credit under Form 26AS
CA’s Responsibility: Urge clients to complete the PAN-Aadhaar linkage immediately to avoid these financial complications.
5. Amendments in GST Laws
Several key updates to the Goods and Services Tax (GST) laws have been enforced:
- Mandatory Multi-Factor Authentication (MFA) for logging into the GST portal.
- E-way bill restrictions: E-way bills can only be generated for invoices that are less than 180 days old.
- Revised GST on hotel restaurant services: Hotels with a daily room tariff exceeding ₹7,500 will now attract an 18% GST on restaurant services.
CA’s Insight: Businesses must be advised on the compliance requirements to avoid penalties.
6. Revised Banking and KYC Regulations
Public sector banks, including SBI, PNB, and Canara Bank, have revised their minimum balance requirements based on account location (rural, semi-urban, urban). Failure to maintain the prescribed minimum balance will result in penalties.
Additionally, KYC verification is now mandatory for all mutual fund and demat accounts, with nominee details requiring re-verification.
7. Increased Home Loan Limits Under Priority Sector Lending (PSL)
To support the real estate sector, the loan limits under Priority Sector Lending (PSL) have been revised:
- ₹50 lakh in metro cities
- ₹45 lakh in Tier-2 cities
- ₹35 lakh in smaller cities
This is an opportunity for CAs advising clients in real estate investments or tax deductions related to home loans.
8. Introduction of Cheque Positive Pay System
To curb cheque fraud, banks now require issuers to electronically submit cheque details before clearance for transactions above ₹50,000.
9. Increased TDS Limits for Senior Citizens
Senior citizens will benefit from higher TDS exemption limits:
- TDS on interest income raised from ₹50,000 to ₹1 lakh.
- TDS on bank interest increased to ₹50,000.
- TDS on dividend income threshold increased to ₹10,000.
CA’s should ensure senior citizen clients update their tax planning strategies accordingly.
10. Changes in Tax Collected at Source (TCS)
The TCS threshold on overseas remittances under the Liberalised Remittance Scheme has been raised from ₹7 lakh to ₹10 lakh, effective April 1, 2025.
11. Revision in LPG Cylinder Prices
As of April 1, 2025, the price of a 19 kg commercial LPG cylinder has been reduced by ₹41, bringing the new retail price in Delhi to ₹1,762.
Conclusion:
The financial year 2025-26 introduces critical tax and financial amendments that will significantly impact CAs, businesses, and individuals. These changes emphasize compliance, financial security, and tax simplification. As a CA, it is essential to stay informed and proactively advise clients on aligning their financial strategies with these new regulations. By leveraging these updates, CAs can optimize tax planning, ensure seamless compliance, and enhance their advisory services in the evolving financial landscape.