1. The New Income Tax Framework – A Big Shift (Effective FY 2025-26)
By CA Pankaj Agrawal, Partner – M/s Pankaj Agrawal & Associates, Chartered Accountants, Indore
Introduction
India’s direct taxation landscape is undergoing a major transformation. With the proposed Income Tax Bill, 2025, the government seeks to modernise the six-decade-old Income Tax Act, 1961. The focus is on simplification, transparency, and a digital-first compliance ecosystem. For taxpayers in Indore — salaried individuals, professionals, and business owners — this shift presents both opportunities and compliance challenges.
As practising Chartered Accountants, it is our responsibility to interpret these reforms not only from a legal standpoint but also from a strategic financial perspective.
Key Highlights of the New Framework
1. Revised Income Tax Slabs under the New Regime
Under the new structure proposed for FY 2025-26 (AY 2026-27), the government has rationalised slab rates to ensure equitable taxation:
| Income Range (₹) | Proposed Tax Rate |
|---|---|
| Up to ₹ 4,00,000 | Nil |
| ₹ 4,00,001 – ₹ 8,00,000 | 5% |
| ₹ 8,00,001 – ₹ 12,00,000 | 10% |
| ₹ 12,00,001 – ₹ 16,00,000 | 15% |
| ₹ 16,00,001 – ₹ 20,00,000 | 20% |
| ₹ 20,00,001 – ₹ 24,00,000 | 25% |
| Above ₹ 24,00,000 | 30% |
💡 Key takeaway: Individuals earning up to ₹ 12 lakh annually may effectively pay zero tax after rebate u/s 87A under the new regime. This will significantly benefit the lower-middle income group and salaried professionals.
2. Enhanced Rebate and Simplified Deductions
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Rebate under Section 87A has been increased, ensuring complete tax exemption up to around ₹ 12 lakh taxable income (subject to final Finance Act approval).
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The standard deduction of ₹ 75,000 continues under the new regime, providing equitable relief to salaried individuals and pensioners.
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The government intends to phase out complex deductions and exemptions (e.g., HRA, LTA, 80C) to simplify compliance and remove interpretational disputes.
Impact for Indore taxpayers: Clients must revisit their investment and salary structures — older tax planning models relying heavily on exemptions will need revision.
3. Relief on Perquisites & Allowances for Salaried Employees
To ease taxation on benefits in kind, the Finance Act 2025 has proposed to:
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Increase the monetary ceiling for tax-free overseas medical treatment to ₹ 8 lakh per annum.
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Expand the definition of “specified employee” to align with new income thresholds, thereby reducing unintended perquisite taxation.
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Clarify valuation norms for employer-provided facilities (accommodation, conveyance, and stock options).
Professional Insight: Employers in Indore should be advised to revise salary structures and perquisite policies before April 2025 to maximise employee benefit within the new law.
4. Digital-First Assessment System
The new Income Tax framework emphasizes faceless, algorithm-based assessments and seamless integration with the National Faceless Appeal Centre (NFAC).
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Notice generation, assessment, rectification, and appeal will now be completely digital.
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A “Taxpayer Charter 2.0” ensures accountability, promising faster grievance redressal and transparent timelines.
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AI-based risk selection and pre-filled return data from AIS/TIS will become standard practice.
Action for CA Firms: As trusted advisors, we must assist clients in maintaining digitally organised documentation — invoices, investment proofs, perquisite details — to ensure smooth compliance and reduce litigation risk.
Strategic Implications for Clients
| Client Category | Impact | Suggested Action Plan |
|---|---|---|
| Salaried Employees | Lower effective tax rate under new regime | Compare both regimes; optimise salary structure; plan perquisites |
| Business Owners/Proprietors | Possible alignment of business income tax rates | Evaluate presumptive taxation u/s 44AD/44ADA vs regular |
| Professionals (Doctors, CAs, Architects) | Higher rebate and simplified compliance | Maintain digital books, reconcile AIS/TIS with accounts |
| Senior Citizens | Extended rebate and simplified return process | Reassess income distribution and deductions |
CA’s Advisory Role – Turning Change into Opportunity
For clients across Indore, the change in tax law is not merely a compliance update — it’s a strategic planning opportunity.
As a practising Chartered Accountant, you should:
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Conduct Tax Regime Comparison Analysis for every client.
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Update Form 16 templates, salary slips, and TDS calculations in accordance with new slabs.
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Educate clients about benefit optimisation under both regimes — old and new.
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Implement document-digitisation protocols to prepare for faceless assessments.
✅ Pro Tip: Introduce a short “Income Tax Health Check Session” for each client in February–March 2025 to decide their optimal regime choice before FY 2025-26 begins.
Conclusion
The New Income Tax Framework marks one of India’s most significant direct tax reforms since 1961. It aims to create a fair, transparent, and digital tax system. For taxpayers in Indore and across Madhya Pradesh, this is the right time to reassess financial strategies, investment choices, and compliance processes.
At M/s Pankaj Agrawal & Associates, we guide our clients through every phase of this transition — from slab analysis and salary structuring to filing strategy under the new law — ensuring complete compliance with the latest Income Tax, GST, and accounting standards.
