Budget 2026: Key Changes in Income Tax
Introduction On February 1, 2026, Finance Minister Nirmala Sitharaman presented the Union Budget for the financial year 2026-27. This Budget introduced landmark reforms in direct taxation, focusing on simplification, rationalisation of tax rates, reduction of litigation, and incentivisation of investment. The centrepiece of these reforms is the Income Tax Act, 2025, which will replace the existing law from 1st April 2026. Key Highlights Income Tax Act, 2025 The Income Tax Act, 2025 will replace the Income Tax Act, 1961 from 1st April 2026. The new law has been designed to simplify provisions, reduce ambiguity, and introduce redesigned forms for easier compliance. Changes in TDS Rates Manpower supply services have been clarified as contractor payments, and TDS will now be deducted at 1% or 2%. Property purchases from non-residents will allow resident buyers to deduct TDS using PAN, eliminating the requirement of TAN. Form 15G and 15H can now be submitted to depositories for dividends, interest, and mutual fund income, making compliance easier for small taxpayers. Changes in TCS Rates The rate of TCS on overseas tour packages has been reduced to 2%, compared to the earlier 5% or 20%. The rate of TCS on education and medical remittances under the Liberalised Remittance Scheme (LRS) has been reduced to 2%, compared to the earlier 5%. The rate of TCS on liquor, scrap, and minerals has been increased to 2%. The rate of TCS on tendu leaves has been reduced from 5% to 2%. Following is the detailed table of TCS rate changes: Sl. No. Nature of Receipt Current Rate Proposed Rate 1 Sale of alcoholic liquor for human consumption 1% 2% 2 Sale of tendu leaves 5% 2% 3 Sale of scrap 1% 2% 4 Sale of minerals (coal, lignite, iron ore) 1% 2% 5 Remittance under Liberalised Remittance Scheme (LRS):(a) For education or medical treatment(b) For other purposes (a) 5%(b) 20% (a) 2%(b) 20% 6 Sale of overseas tour programme package (including travel, hotel, boarding, lodging, etc.) (a) 5% up to ₹10 lakh(b) 20% above ₹10 lakh 2% TDS Compliance Changes A fully automated online process has been introduced for issuing lower or nil deduction certificates, particularly benefiting small taxpayers. A one-time disclosure scheme called FAST-DS (Foreign Asset Disclosure Scheme) has been introduced to allow small taxpayers to declare undisclosed overseas assets or income. Changes for Companies (including MAT and other changes) The Minimum Alternate Tax (MAT) has been reduced from 15% to 14%, providing relief to corporates. The set-off of old MAT credit will now be allowed only in the new regime, and it will be capped at 25% of liability. Gains from buyback of shares will now be taxed as capital gains, resulting in higher effective tax for promoters (22% for corporates and 30% for non-corporates). The safe harbour margin for IT services has been fixed at 15.5%, and the threshold has been raised to ₹2000 crore. Changes for Co-operative Societies The scope of deductions available to co-operative societies has been expanded to include those engaged in the supply of cattle feed and cotton seed, thereby supporting rural and agricultural communities. Dividend income earned by one co-operative society from another has been allowed as a deduction under the new regime, encouraging inter-cooperative collaboration and reducing tax burden. Dividend income of notified national cooperative federations has been exempted, provided the investments are made up to 31st January 2026, which strengthens the financial viability of apex cooperative institutions. These measures are designed to empower co-operatives, enhance their competitiveness, and ensure that they continue to play a vital role in supporting farmers, rural entrepreneurs, and community-driven enterprises. Tax Holidays Foreign companies providing global cloud services through Indian data centres will enjoy a tax holiday till 2047. Toll manufacturing in bonded zones will be eligible for a 5-year tax holiday. Global experts working in India will have their non-India income exempt for 5 years. Non-residents under presumptive taxation will be exempt from MAT. Incomes Made Exempt Interest awarded by the Motor Accident Claims Tribunal has been exempted from tax, and no TDS will be required. Disability pensions for armed forces and paramilitary personnel invalided due to disability have been fully exempted. Compensation received from compulsory land acquisition under the RFCTLARR Act, 2013 has been exempted. Capital gains on Sovereign Gold Bonds will be exempt only if they are subscribed at issue and held till maturity. Dividend income of notified national cooperative federations has been exempted for investments made up to 31st January 2026. Updated ITR Changes Pre-filled ITR forms will now cover more categories of taxpayers, reducing errors and simplifying filing. Revised and belated returns can now be filed until 31st March, subject to a nominal fee. Due Date Changes The due date for filing returns for non-audit businesses and trusts has been extended to 31st August. Audit cases will continue to follow the existing timelines. Penalty and Fine A common order for integrated assessment and penalty has been introduced to reduce multiplicity. The immunity framework has been extended to misreporting cases, subject to payment of 100% additional tax. Penalties for technical defaults such as audit reports and transfer pricing reports have been converted into fees. Minor offences have been decriminalised and converted into fines only. The maximum imprisonment for tax offences has been capped at 2 years, with minor offences attracting only fines. New penalties have been introduced for inaccurate reporting of cryptocurrency transactions. Safe Harbour Scheme The safe harbour scheme for IT and IT-enabled services has been updated, with the margin fixed at 15.5% and the threshold raised to ₹2000 crore. This scheme provides certainty in transfer pricing and reduces disputes for large service exporters. Conclusion The Direct Tax proposals in Budget 2026-27 represent a major step towards a simplified and transparent tax regime. With the introduction of the Income Tax Act, 2025, rationalisation of TDS and TCS rates, targeted exemptions, tax holidays for strategic sectors, and decriminalisation of minor offences, the government has created a taxpayer-friendly environment. These reforms are expected to
Tobacco Goods- GST to be paid on RSP from Feb 1, 2026
Introduction On January 23, 2026, the Goods and Services Tax Network (GSTN) released an important advisory regarding the reporting of taxable value and tax liability under Retail Sale Price (RSP)-based valuation for notified tobacco goods. This update is highly relevant for businesses engaged in the supply of tobacco products, as it directly impacts how invoices, e-way bills, and GST returns must be reported. Tobacco products have always been under strict regulatory scrutiny due to their high tax incidence and potential for revenue leakage. With this advisory, GSTN aims to ensure uniformity, transparency, and compliance in reporting, thereby reducing mismatches and audit risks. For businesses, this is not just a procedural update—it is a compliance mandate that requires immediate attention. Key Highlights of the Advisory Applicability The advisory applies to notified tobacco goods under GST law. Businesses dealing in such products must adopt Retail Sale Price (RSP) -based valuation instead of transaction value for tax reporting. Scope of Reporting The advisory covers three major compliance areas: e-Invoices – Taxable value and tax liability must be reported on the basis of RSP. e-Way Bills – Movement of goods must reflect RSP-based valuation. GSTR-1 / GSTR-1A / IFF – Outward supplies must be reported consistently with RSP valuation. Purpose of RSP-Based Valuation Ensures uniform taxation across the supply chain. Prevents undervaluation and revenue leakage. Aligns reporting across invoices, transport documents, and returns. Understanding RSP-Based Valuation Retail Sale Price (RSP) valuation means that GST is calculated based on the declared retail sale price printed on the product packaging, which can be same or different from the transaction value between supplier and buyer. For example: If a tobacco product has an RSP of ₹200, the GST liability must be calculated on ₹200, even if the supplier sells it to a distributor at ₹150. This ensures that the tax base remains consistent and prevents manipulation of transaction values. Goods covered: Vide Notification Nos. 19/2025-Central Tax and 20/2025-Central Tax, both dated 31.12.2025, Retail Sale Price (RSP)-based valuation for specified tobacco and tobacco-related products has been prescribed with effect from 01.02.2026. The said notifications cover the following HSN codes and descriptions: 2106 90 20 – Pan masala 2401 – Unmanufactured tobacco; tobacco refuse (other than tobacco leaves) 2402 – Cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes 2403 – Other manufactured tobacco and substitutes; homogenised/reconstituted tobacco; tobacco extracts and essences (other than biris) 2404 11 00 – Products containing tobacco or reconstituted tobacco intended for inhalation without combustion 2404 19 00 – Products containing tobacco or nicotine substitutes intended for inhalation without combustion As per the notifications, valuation of the notified goods is required to be carried out on the basis of the declared RSP. The taxable value for GST purposes is no longer linked to the actual sale price but derived from the RSP printed on the package. Computation of Tax under RSP-Based Valuation For goods notified under RSP-based valuation, tax is computed using the formula: Tax Amount = (RSP × GST Rate %) ÷ (100 + Sum of applicable tax rate) Deemed Taxable Value = RSP – Tax Amount Thus, GST liability is determined with reference to RSP, irrespective of the actual sale price. Example (IGST @ 40%): Total RSP: ₹1,00,000 Tax Amount: ₹28,571.43 Deemed Taxable Value: ₹71,428.57 Commercial transaction values may differ (e.g., net sale value ₹60,000), but statutory tax is always derived from RSP. Existing System Validations Currently, e-Invoice, e-Way Bill, and GSTR-1 systems validate that: Taxable Value + Tax Amount ≤ Total Invoice Value In RSP-based valuation, deemed taxable value plus tax may exceed the commercial transaction value. Hence, special reporting guidance is provided. Reporting Guidance for RSP-Based Valuation Goods For e-Invoice and e-Way Bill: Report Net Sale Value (commercial consideration) in the taxable value field. Report Tax Amount as per RSP formula. Report Total Invoice Value as Net Sale Value + Tax Amount. For GSTR-1 / GSTR-1A / IFF: Report Net Sale Value in taxable value field. Report Tax Amount as per RSP formula (editable if system auto-calculates differently). Report Total Invoice Value as Net Sale Value + Tax Amount. Compliance Requirements Businesses must immediately align their systems and processes with the advisory. Key compliance requirements include: e-Invoice Reporting Ensure taxable value reflects RSP-based valuation. Tax liability must match the notified rules. e-Way Bill Generation Goods in transit must show RSP-based taxable value. Prevents discrepancies between invoices and transport documents. GSTR-1 / GSTR-1A / IFF Filing Outward supplies must be reported with RSP-based values. Ensures consistency across returns and invoices. Risks of Non-Compliance Failure to comply with the advisory can lead to serious consequences: Mismatch Notices – Incorrect reporting may trigger notices from GST authorities. Financial Penalties – Wrong valuation can result in penalties and interest. Audit Red Flags – Tobacco goods are high-risk items for GST audits; errors increase scrutiny. Operational Disruptions – Incorrect e-way bills can delay transportation and supply chain operations. Action Points for Businesses To ensure smooth compliance, businesses should take the following steps: Review Internal Systems Check whether invoicing software applies RSP-based valuation automatically. Update ERP/Accounting Software Configure systems to capture RSP values correctly in e-Invoices and e-Way Bills. Train Staff and Accountants Educate teams on new reporting requirements to avoid manual errors. Cross-Check GSTR-1 Filings Ensure outward supplies match invoices and transport documents. Download and Study the Advisory PDF Refer to the official GST advisory for detailed instructions. Conclusion The GST advisory on RSP-based valuation of tobacco goods is a crucial compliance update that businesses cannot afford to ignore. By mandating RSP-based reporting across e-Invoices, e-Way Bills, and GSTR-1 filings, GSTN has reinforced its commitment to transparency and revenue protection. For businesses, this means revisiting internal systems, updating software, and training staff to ensure accurate reporting. Non-compliance can lead to penalties, audit risks, and operational disruptions. On the other hand, timely adoption of these guidelines will ensure smooth compliance, reduce risks, and build trust with tax authorities. In essence, this advisory is not just a technical update; it is a compliance
GST Reforms 2025: Part II
Introduction 2025 has truly been a turning point for GST in India. A host of reforms were introduced to make the system simpler, more equitable, and easier to navigate. From rationalising tax rates on essential goods to fixing inverted duty structures and easing compliance for businesses, these changes have touched households, MSMEs, and professionals alike. At the start of the year, the GST Council focused on targeted reliefs bringing down rates on education supplies, healthcare products, and farming equipment to ease the burden on families and farmers. Midway through the year, attention shifted to compliance, with measures like quicker refunds for exporters and a simplified registration process for small businesses. The most significant reform came later, during the Council’s 56th meeting on 4th September 2025, chaired by Union Finance Minister Smt. Nirmala Sitharaman, where a streamlined two-slab structure of 5% and 18% was approved, effective from 22nd September 2025. Part I covered the GST rate changes of 2025. To read Part I, click here. In this section, we turn to the equally important compliance updates introduced during the year. Key Changes You Should Be Aware Of Waiver Scheme under Section 128A Taxpayers now have access to Forms GST SPL-01 and SPL-02 on the portal to apply under the waiver scheme. A crucial condition is withdrawing any pending appeals related to the demand order before filing the waiver application. For older appeals (filed before March 2023), manual withdrawal through the Appellate Authority is required. E-Way Bill Updates Gold Movement in Kerala: For intrastate movement of gold (Chapter 71, excluding imitation jewellery), generating an E-Way Bill is now mandatory. Form ENR-03 for Unregistered Dealers: Unregistered dealers can enrol themselves on the EWB portal and generate bills using a unique Enrolment ID. Return Filing Enhancements Non-editable GSTR-3B Liability: From July 2025 onwards, auto-populated liabilities in GSTR-3B cannot be edited. Any corrections must be routed through GSTR-1A. HSN Code Reporting: Dropdown-based HSN selection has replaced manual entry, with validations introduced (currently in warning mode). Restriction on Late Filing: Returns cannot be filed after three years from the original due date, effective November 2025. Refund Process Improvements Refund filing has shifted to an invoice-based system for categories like exports, SEZ supplies, and deemed exports. QRMP taxpayers faced initial issues with IFF invoices, but system validations have now been updated to resolve this. Refund applications are strictly linked to filing of relevant returns, ensuring better compliance. Invoice Management System (IMS) Enhancements Taxpayers can now keep credit notes pending for one tax period. Flexibility to declare ITC reversal amounts has been added, reducing disputes. Import of Goods details are integrated into IMS from October 2025. ITC reversal adjustments can be made when accepting credit notes. Bank Account Furnishing (Rule 10A) Taxpayers must furnish bank account details within 30 days of registration or before filing GSTR-1/IFF. Non-compliance could lead to suspension of GST registration, so updating details promptly is critical. Simplified GST Registration Scheme (Rule 14A) Small taxpayers with monthly output tax liability below ₹2.5 lakh can opt for simplified registration. Aadhaar authentication is mandatory, and approval is granted electronically within three working days. Withdrawal conditions are clearly defined to prevent misuse. Electronic Credit Reversal & RCM Ledger Validations The Reclaim Ledger and RCM Liability/ITC Statement have been strengthened with new validations. Negative balances will block GSTR-3B filing unless corrected, ensuring accurate ITC reporting and reducing errors. Conclusion GST compliance in 2025 is all about streamlining processes while tightening accountability. From invoice-based refunds to stricter return filing timelines, these changes are designed to make compliance more predictable and transparent. Businesses should act early—update records, reconcile returns, and adopt new portal features to stay ahead of deadlines and avoid disruptions. The bottom line: GST is evolving into a smarter, more digital system. Staying proactive today will save you from compliance headaches tomorrow.
Income Tax Act, 2025: A Simplified Tax Era
Introduction For more than six decades, India’s taxation framework was governed by the Income Tax Act, 1961. While it was a landmark law in its time, the Act became increasingly complex due to thousands of amendments, scattered provisions, and archaic language. Taxpayers, professionals, and businesses often struggled to interpret its dense legal text, leading to frequent disputes and compliance burdens. Recognizing these challenges, the Government of India introduced the Income Tax Act, 2025, which will come into effect from April 1, 2026. This new legislation is not about altering tax rates or due dates; it is about simplifying the tax experience. By streamlining sections, consolidating provisions, and embracing digital-first compliance, the Act aims to make taxation more transparent, predictable, and globally aligned. Legislative Journey The journey to the Income Tax Act, 2025 reflects the government’s commitment to consultation and reform: This timeline shows how the government incorporated feedback from stakeholders, industry bodies, and tax professionals to ensure the new law is practical and future-ready. Key Differences Between Income Tax Act, 1961 and 2025 Aspect Income Tax Act, 1961 Income Tax Act, 2025 Number of Sections 819+ sections (expanded over decades with amendments) 536 sections (sequentially numbered, simplified) Chapters 47 chapters 23 chapters (logically reorganized) Schedules 14 schedules 16 schedules (with tables & formulae for clarity) Terminology “Assessment Year” & “Previous Year” Unified “Tax Year” (April–March) TDS Provisions Spread across multiple sections (192–194T) Consolidated under Section 393 Virtual Digital Assets (VDAs) Narrow definition, limited scope Broader definition covering cryptocurrencies, tokenized assets, and digital value systems Default Tax Regime Section 115BAC Section 202 Presentation Style Dense legal language, fragmented structure Plain language, streamlined layout, improved accessibility Content Length ~823 pages ~622 pages (shorter, clearer) Effective Date Already in force Applicable from April 1, 2026 Why the Change Was Needed The 1961 Act had been amended nearly 65 times, with more than 4000 changes introduced through annual Finance Acts and separate Taxation Laws Amendment Bills. While these amendments were meant to keep the law relevant, they made it longer, fragmented, and harder to interpret. The 2025 Act addresses these issues by simplifying language, removing redundant provisions, and reorganizing sections logically. Key Features of the Income Tax Act, 2025 1. Introduction of ‘Tax Year’ The Act replaces the confusing terms Assessment Year and Previous Year with a single, unified Tax Year. Defined as the financial year starting April 1, this change makes it easier for taxpayers to understand which period their income and filings relate to. 2. Streamlined Structure Sections have been reduced from 819 to 536, and chapters from 47 to 23. The Act also introduces 16 schedules with tables and formulae for clarity. This structural simplification improves readability and reduces compliance errors. 3. Digital-First Enforcement The Act embraces technology by enabling faceless assessments and digital compliance. It also defines Virtual Digital Assets (VDAs) broadly, covering cryptocurrencies, tokenized assets, and cloud-based holdings. This ensures India’s tax law keeps pace with global financial innovations. 4. Simplified Compliance Provisions like Tax Deducted at Source (TDS), earlier scattered across multiple sections, are now consolidated under Section 393. This makes compliance easier for taxpayers, professionals, and authorities. 5. Dispute Resolution Framework A more robust, taxpayer-friendly mechanism has been introduced to minimize litigation and foster trust between taxpayers and authorities. Objectives of the 2025 Act The reform is guided by four core objectives: Conclusion The Income Tax Act, 2025 represents a paradigm shift in India’s tax landscape. By reducing complexity, consolidating provisions, and embracing digital realities, it empowers taxpayers with clarity and confidence. While tax rates and due dates remain unchanged, the experience of compliance is set to become smoother, more predictable, and globally aligned. This reform is not just about taxation, it is about building trust between taxpayers and the system. Guided by the vision of a developed and inclusive India, the Act lays the foundation for a transparent, efficient, and future-ready fiscal framework.
Old Regime vs New Regime u/s 115BAC – FY 2025-26 (AY 2026-27): Which Income Tax Regime Should You Choose?
Introduction: As FY 2025-26 nears its end, taxpayers face a critical phase where accurate TDS deductions, advance tax payments, and final submission of tax declarations to their employer companies must be completed without error. At this juncture, the choice between the Old Tax Regime and the New Tax Regime becomes decisive, as it directly influences your tax liability for Assessment Year 2026-27. While the New Regime is now the default option, employees still have the flexibility to opt for the Old Regime if it proves more beneficial. Let’s understand the differences, benefits, and key factors while choosing tax regime! Tax Rates: New Tax regime u/s 115BAC Old tax regime (non senior citizen) Income Tax Slabs Tax rates Income Tax Slabs Tax rates Up to Rs. 4 lakh Nil Up to 2,50,000 Nil Rs. 4 lakh to Rs. 8 lakh 5% 2,50,001 – 5 lakh 5% Rs. 8 lakh to Rs. 12 lakh 10% 5 lakh – 10 lakh 20% Rs. 12 lakh to Rs. 16 lakh 15% Above 10 lakh 30% Rs. 16 lakh to Rs. 20 lakh 20% Rs. 20 lakh to Rs. 24 lakh 25% Above Rs. 24 lakh 30% Allowances and deductions available: Allowance / Deduction Section of IT Act New Regime Allowed? Old Regime Allowed? Leave Travel Allowance (LTA) Sec 10(5) ❌ ✅ House Rent Allowance (HRA) Sec 10(13A) ❌ ✅ Standard Deduction (Salary/Pension) Sec 16(ia) ✅ Rs. 75,000 ✅ Rs. 50,000 Entertainment Allowance (Govt. employees) Sec 16(ii) ❌ ✅ Professional Tax Sec 16(iii) ❌ ✅ Interest on Housing Loan (Self-occupied property) Sec 24(b) ❌ ✅ Rs. 2,00,000 Interest on Housing Loan (Rented property) Sec 24(b) ✅ ✅ Deduction for Investments (LIC, PPF, ELSS, etc.) Sec 80C ❌ ✅ NPS (Employer Contribution) Sec 80CCD(2) ✅ ✅ NPS (Employee Contribution) Sec 80CCD(1B) ❌ ✅ Health Insurance Premium Sec 80D ❌ ✅ Education Loan Interest Sec 80E ❌ ✅ Donations to Charitable Institutions Sec 80G ❌ ✅ Savings Interest (up to ₹10,000) Sec 80TTA ❌ ✅ Senior Citizens – Savings Interest (up to ₹50,000) Sec 80TTB ❌ ✅ Additional Depreciation (Plant & Machinery) Sec 32(1)(iia) ❌ ✅ SEZ Unit Deduction Sec 10AA ❌ ✅ Rebate Sec 87A ✅ Available if Income upto Rs. 12 Lakhs- Maximum rebate Rs. 60,000 ✅ Available if Income upto Rs. 5 Lakhs- Maximum rebate Rs. 12,500 Key points to be noted while choosing tax regime: Conclusion: The decision between the Old and New Tax Regime is not one-size-fits-all; it depends on your income structure, deductions, and long-term financial planning. The New Regime offers simplicity and higher rebates, making it attractive for those with fewer exemptions, while the Old Regime continues to reward structured tax planning and significant investments. Before filing your return for AY 2026-27, evaluate both regimes with your actual deductions and income profile. A timely, well-informed choice will not only optimize your tax liability but also ensure smooth compliance with employer submissions and year-end obligations.
Pradhan Mantri Viksit Bharat Rozgar Yojana (PMVBRY): A Complete Guide
Introduction India’s vision of Viksit Bharat@2047 emphasizes employment generation as a cornerstone of development. To accelerate formal job creation, the Government of India announced the Pradhan Mantri Viksit Bharat Rozgar Yojana (PMVBRY) in the Union Budget 2024–25. Implemented by the Ministry of Labour and Employment through the Employees’ Provident Fund Organisation (EPFO), the scheme incentivizes both employees and employers, particularly in labour‑intensive manufacturing sectors. Objectives of the Scheme The PMVBRY has been designed to stimulate sustained employment creation, formalize the workforce, and enhance employability. Together, these measures aim to foster a dynamic, inclusive, and formal labour market that particularly benefits India’s youth. Applicability The scheme applies to establishments registered under the EPF & MP Act, 1952, including exempted establishments maintaining their own provident fund trusts. Key timelines: Baseline determination: Employers must meet threshold criteria to qualify: at least two additional jobs for establishments with fewer than 50 employees, and at least five for those with 50 or more. How to Apply for PMVBRY Applying for the Pradhan Mantri Viksit Bharat Rozgar Yojana (PMVBRY) is designed to be simple and fully digital, ensuring transparency and ease of compliance. Employers and employees follow slightly different steps, but the process is integrated through the official portal. For Employers: For Employees: This streamlined process ensures that employers can quickly register and claim incentives, while employees are seamlessly integrated into the formal workforce without additional paperwork. Benefits of PMVBRY For Employees (Pointers + Para) Together, these benefits make formal employment more attractive and sustainable for new entrants. For Employers (Pointers) For the Economy (Para only) At a macro level, PMVBRY strengthens India’s organized sector, expands the social security net, and contributes to GDP growth by increasing workforce participation. It is a step toward inclusive development under the vision of Viksit Bharat@2047. Incentive Payment Mechanism Payments under the scheme are made through Direct Benefit Transfer (DBT). Employees receive incentives directly into Aadhaar‑seeded bank accounts, while employers receive payments into PAN‑linked accounts. In cases where multiple establishments share the same PAN, a single nominated account is used. Incentives are disbursed within 45 days of fulfilling eligibility conditions and filing ECRs. However, payments cease if employees exit, establishments close, or fraudulent activity is detected. Compliance and Safeguards To maintain integrity, the scheme incorporates robust safeguards: This dual‑layered governance structure ensures accountability and responsiveness. Special Provisions Exempted establishments are also eligible but must file monthly returns with EPFO and ensure Aadhaar‑authenticated UANs for all employees. Seasonal industries enjoy flexibility in filing ECRs for first‑time employees, recognizing the unique nature of their operations. For calculation purposes, averages and baselines are rounded to the nearest integer, simplifying compliance. Grievance Redressal and IT Support The PMVBRY portal provides a dedicated grievance redressal mechanism. Employers and employees can raise complaints online, with escalation procedures in place for unresolved issues. Technical support is available for login problems, password resets, and data uploads. By integrating grievance handling with IT support, the scheme ensures transparency and trust. Conclusion The Pradhan Mantri Viksit Bharat Rozgar Yojana (PMVBRY) is a landmark initiative that balances the needs of employers and employees while advancing India’s employment agenda. For employers, it reduces hiring costs and encourages workforce expansion. For employees, it provides financial support, social security, and financial literacy. For the nation, it strengthens the organized sector and contributes to sustainable economic growth. By combining incentives, compliance safeguards, and digital transparency, PMVBRY represents a forward‑looking approach to job creation — one that empowers individuals, supports businesses, and drives India’s economic transformation.
GST Reforms: 2025: Part I
Introduction The year 2025 has been a landmark year for GST in India, with several important changes rolled out to make the system simpler, fairer, and more inclusive. From rationalising tax rates on essentials to correcting inverted duty structures and easing compliance for businesses, GST has undergone a series of updates that directly impact households, MSMEs, and professionals. Early in the year, the GST Council focused on sector-specific reliefs lowering rates on education supplies, healthcare products, and farming equipment to reduce costs for families and farmers. Mid-year discussions brought clarity on compliance, with faster refunds for exporters and simplified registration for small businesses. Finally, in its 56th meeting on 4th September 2025, chaired by Union Finance Minister Smt. Nirmala Sitharaman, the Council approved the most significant change: a two-slab structure of 5% and 18%, effective from 22nd September 2025. In this part, GST rate changes in 2025 are discussed. GST Council Meetings in 2025 GST Rate Structure Changes The biggest highlight is the two-slab structure of 5% and 18%. The GST rate structure in India has been rationalized following the 56th GST Council meeting, introducing GST 2.0 reforms. The revised primary GST rates now consist mainly of two slabs: 5% and 18%, replacing the earlier 0%, 5%, 12%, 18%, and 28% slabs. A higher 40% rate is applied to select luxury and sin goods, while a few niche rates like 3% and 0.25% continue to exist. Key Highlights by Sector GST Rate Change Table Goods / Services HSN/SAC (Indicative) Old Rate New Rate Date of Change Indian breads, paneer, UHT milk 0406 / 0401 5–12% Nil 22-Sep-2025 Soaps, shampoos, toothpaste, toothbrushes 3401 / 3305 / 3306 12% 5% 22-Sep-2025 Packaged namkeens, pasta, chocolates 1905 / 1806 12–18% 5% 22-Sep-2025 TVs (LCD/LED >32”), ACs, dishwashers 8528 / 8415 / 8422 28% 18% 22-Sep-2025 Cement 2523 28% 18% 22-Sep-2025 Marble, granite, sand-lime bricks 2515 / 2516 / 6810 12% 5% 22-Sep-2025 Bamboo flooring, packing cases (wood) 4409 / 4415 12% 5% 22-Sep-2025 Small cars (≤1200cc petrol, ≤1500cc diesel) 8703 28% 18% 22-Sep-2025 Two-wheelers ≤350cc 8711 28% 18% 22-Sep-2025 Auto parts, buses, trucks 8708 / 8702 / 8704 28% 18% 22-Sep-2025 Tractors 8701 12% 5% 22-Sep-2025 Tractor tyres & parts 4011 / 8708 18% 5% 22-Sep-2025 Harvesters, threshers, sprinklers, drip irrigation 8432 / 8424 12% 5% 22-Sep-2025 Bio-pesticides, natural menthol 3808 / 3301 12% 5% 22-Sep-2025 Hotel stays ≤ ₹7,500/day SAC 9963 12% 5% 22-Sep-2025 Gyms, salons, yoga services SAC 9997 18% 5% 22-Sep-2025 Notebooks, pencils, sharpeners, erasers 4820 / 9609 12% Nil 22-Sep-2025 Geometry boxes, school cartons 9017 / 4823 12% 5% 22-Sep-2025 Life-saving drugs, diagnostic kits 3004 / 9027 12% Nil 22-Sep-2025 Other medicines (Ayurveda, Homoeopathy) 3003 / 3004 12% 5% 22-Sep-2025 Spectacles, corrective goggles 9004 28% 5% 22-Sep-2025 Medical oxygen, thermometers, surgical instruments 2804 / 9025 / 9018 12–18% 5% 22-Sep-2025 Individual life & health insurance premiums SAC 9971 18% Nil 22-Sep-2025 Handicraft idols, statues, paintings, toys 9703 / 9503 12% 5% 22-Sep-2025 Manmade fibre & yarn 5503 / 5509 12–18% 5% 22-Sep-2025 Conclusion The GST updates of 2025 are more than just rate cuts — they represent a year-long effort to simplify and strengthen India’s indirect tax system. By lowering taxes on essentials, correcting duty structures, and easing compliance, these changes provide relief to households, empower MSMEs, and strengthen state revenues. In short, GST in 2025 has taken another step closer to its vision of “One Nation, One Tax” — while keeping the common man at the centre of policy.
GSTN Update: Opt-In Declaration for Specified Premises for Hotels is live from January 2026!
Introduction The GSTN has enabled electronic filing of Opt-In Declarations for Specified Premises under Notification No. 05/2025 – Central Tax (Rate), dated 16th January 2025. This facility applies to taxpayers supplying hotel accommodation services who wish to declare their premises as “specified premises” And pay 18% GST with ITC. W.e.f. 01.04.2025, the definition of specified premises shall be as under: “Specified premises”, for a financial year, means,- (a) a premises from where the supplier has provided in the preceding financial year, ‘hotel accommodation’ service having the value of supply of any unit of accommodation above seven thousand five hundred rupees per unit per day or equivalent; or (b) a premises for which a registered person supplying ‘hotel accommodation’ service has filed a declaration, on or after the 1st of January and not later than 31st of March of the preceding financial year, declaring the said premises to be a specified premises; or (c) a premises for which a person applying for registration has filed a declaration, within fifteen days of obtaining acknowledgement for the registration application, declaring the said premises to be a specified premises. Entry 7(vi) of notification No. 11/2017-CTR dated 28.06.2017 prescribes the rate of 18% with ITC for restaurant services supplied at specified premises. For restaurant services supplied outside specified premises, the rate of 5% without ITC is applicable as per entry 7(ii) of notification No. 11/2017-CTR dated 28.06.2017. 1. Eligibility The electronic facility simplifies compliance for hotel accommodation service providers. Taxpayers and Chartered Accountants must ensure timely filing within the prescribed window. Proper record‑keeping of ARN and reference numbers is essential. Action required: File Annexure VII electronically between 1st January 2026 and 31st March 2026 for FY 2026–27. Blog By : Mittal & Co.
Income Tax Reforms – Union Budget 2025
As Financial Year 2025-26 draws to a close, it is the right time to revisit and take stock of the income tax changes applicable for this year. The Union Budget 2025, presented by Finance Minister Nirmala Sitharaman, introduced several reforms that directly impact individual taxpayers, businesses, and institutions. These changes are designed to simplify compliance, provide greater relief, and encourage investment in key sectors. Understanding these reforms is essential for effective tax planning and ensuring timely compliance as we move into the next assessment year. Below is a consolidated summary of the Income Tax Reforms 2025 that clients should be aware of. Revised Tax Slabs – New Regime (AY 2026-27) Under Section 115BAC, the new regime will apply with the following slab rates: Income Range Tax Rate ₹0 – ₹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% Section 87A Rebate – Enhanced Relief House Property – Self-Occupied Status From AY 2025-26, a house property will be treated as self-occupied (annual value = nil) if: This widens relief compared to earlier restrictions. Updated Returns – Extended Filing Window Exemption for NSS Withdrawals – Senior Citizens Withdrawals from National Savings Scheme (NSS) by senior citizens (from August 29, 2024 onwards) are exempt. Similar benefit extended to NPS Vatsalya accounts. TDS Reforms Other Key Reforms Conclusion: These reforms will directly impact tax planning, compliance timelines, and investment strategies. Taxpayers are advised to:
GST Advisory- December 2025: Negative Balances in ITC Reclaim and RCM Ledgers can block GSTR-3B Filing!
Introduction The GSTN has issued an important Advisory & FAQs on 29 December 2025 introducing strict system-level validations for Input Tax Credit (ITC) reversal, ITC reclaim, and Reverse Charge Mechanism (RCM) ITC reporting in GSTR-3B. With the implementation of the Electronic Credit Reversal and Re-claimed Statement and the RCM Liability/ITC Statement, GST compliance is now moving from disclosure-based to ledger-based auto-controls. Shortly, negative balances and excess ITC claims will not bepermitted, and GSTR-3B filing will be blocked unless discrepancies are corrected. What is the Electronic Credit Reversal and Re-claimed Statement? GSTN introduced the Electronic Credit Reversal and Re-claimed Statement in August 2023. It tracks temporary reversal of ITC and re-claim of the same on fulfilment of certain conditions. It captures the data from GSTR 3B- Table 4B(2)- temporary reversal of ITC and Table 4D(1) and 4A(5)- reclaim of ITC. Path to view:Dashboard → Services → Ledger → Electronic Credit Reversal and Re-claimed Cases where temporary ITC reversals and re-claims are made: Temporary ITC reversals and re-claims are typically required in following cases: New GSTN Validations Impacting GSTR-3B Filing GSTN has clarified that negative balances or excess ITC availment will soon not be allowed. ITC reclaimed in Table 4(D)(1) must be less than or equal to: Excess reclaim beyond this limit will block GSTR-3B filing. What is the RCM Liability/ITC Statement under GST? To streamline reporting under Reverse Charge Mechanism (RCM), GSTN introduced the RCM Liability/ITC Statement in August 2024.It captures RCM liability declared in Table 3.1(d) of GSTR-3B and ITC claimed in Table 4A(2) and 4A(3). Path to view:Services → Ledger → RCM Liability/ITC Statement New Validation for RCM ITC Claim in GSTR-3B: RCM ITC claimed in Table 4A(2) and 4A(3) must be less than or equal to: Any mismatch will result in non-submission of GSTR-3B. 4. How to file GSTR-3B if closing balance of Electronic Credit Reversal and Re-claimed Statement (ITC reclaim ledger) is already Negative? If the closing balance of the ITC reclaim ledger is negative, it indicates that excess ITC was reclaimed earlier. Therefore, to file GSTR-3B, you must reverse the excess claimed ITC in Table 4B(2) of the respective return period, up to the amount of the negative closing balance. This will allow you to correct the discrepancy and proceed with filing the return. In case there is no ITC available, this reversal declared in table 4(B)2 will be added to your liability in current period while filing GSTR-3B. Example: The closing balance of the ITC reclaim ledger for the current return period is -₹10,000, which means ₹10,000 of excess ITC has been reclaimed in earlier periods. To file your GSTR-3B, you would need to reverse this earlier excess reclaimed ITC of ₹10,000 in Table 4B(2) for the current period. How to file GSTR-3B if closing balance of RCM Liability/ITC Statement is Negative? If the closing balance of the RCM Liability/ITC Statement is negative, it indicates that excess RCM ITC has been claimed earlier. To proceed with filing, you must either pay the outstanding RCM liability in Table 3.1(d) or reduce the ITC being claimed in Table 4A(2) or 4A(3) in the current return period, equivalent the amount of the negative closing balance. Once the discrepancy is corrected, you will be able to file your return. Example: Let’s assume that the closing balance of the RCM Liability/ITC Statement is -₹5,000. This means that ₹5,000 of excess RCM ITC has been claimed earlier. To resolve this and file your GSTR-3B, you can: 1. Pay the RCM liability: You can pay additional ₹5,000 in Table 3.1(d) for the current return period to cover the excess ITC claimed. OR 2. Reduce the ITC claimed: You can reduce ₹5,000 from the RCM ITC in Table 4A(2) or Table 4A(3) for the same period, if RCM ITC is available more than ₹5,000 in current period. Once either the excess RCM liability is paid or the requisite ITC is reduced from available ITC to match the available negative closing balance, the discrepancy will be resolved, and you can proceed with filing your return. Conclusion The GST Advisory dated 29 December 2025 signals a major shift towards automated ITC governance. With ledger-based validations becoming mandatory, taxpayers must ensure real-time reconciliation of ITC reversals, reclaims, and RCM transactions. Businesses should immediately review their ITC Reclaim Ledger and RCM Liability/ITC Statement, rectify negative balances, and align GSTR-3B reporting to avoid return filing disruptions, interest, and penalties.