Income Tax Alert: Filing Deadline, ITR‑3, KYC & Tax Slab Updates
The Income Tax Department has extended the ITR deadline to September 15, enabled ITR‑3 filing, and introduced significant updates to KYC and tax slabs. Get to know the new rules and compliance tips for Assessment Year (AY) 2025‑26.
Crucial Updates for Taxpayers: Navigating AY 2025-26
The Income Tax Department of India has rolled out several key announcements and updates that are vital for taxpayers preparing to file their Income Tax Returns (ITRs) for Assessment Year (AY) 2025-26 (Financial Year 2024-25). These changes aim to streamline the filing process, enhance transparency, and adapt to the evolving economic landscape. From extended deadlines to new tax slabs and updated compliance norms, staying informed is crucial for a smooth tax season.
Here's a detailed breakdown of the latest developments you need to know.
ITR Filing Deadline Extended to September 15, 2025
In a significant relief for individual taxpayers and Hindu Undivided Families (HUFs) whose accounts are not subject to audit, the Central Board of Direct Taxes (CBDT) has extended the due date for filing Income Tax Returns for AY 2025-26. Originally set for July 31, 2025, the deadline has now been pushed to **September 15, 2025**.
This extension, announced in late May 2025, comes in response to extensive structural and content revisions introduced in the notified ITR forms for AY 2025-26. The CBDT acknowledged the additional time required for system readiness, rollout of ITR utilities, and the reflection of TDS statements, which typically begin in early June. While this provides more time, taxpayers are encouraged to file their returns well in advance to avoid last-minute rushes.
- New Deadline for Non-Audit Cases: September 15, 2025
- Deadline for Audit Cases: October 31, 2025
- Deadline for Transfer Pricing Cases: November 30, 2025
Tax experts are still observing the situation, as utilities for certain ITR forms (like ITR-5, 6, and 7) were not fully available online even with the extended deadline, potentially leading to further considerations if issues persist.
ITR-3 Online Filing Now Live for AY 2025-26
A significant update for individuals and Hindu Undivided Families (HUFs) with income from business or professional activities is the activation of the **ITR-3 online filing utility** on the Income Tax e-filing portal. This form is crucial for those with diverse income sources, including:
- Income from profits and gains of business or profession (including audit and non-audit cases)
- Income from share trading (including Futures & Options - F&O)
- Investments in unlisted equity shares
- Being a director in a company
- Having capital gains or foreign income/assets
- Partners in firms receiving interest, salary, bonus, commission, or remuneration
- Individuals with salary, property income, or pension, who are not eligible for ITR-1, ITR-2, or ITR-4.
Key changes in ITR-3 for AY 2025-26 include:
- Mandatory selection for Form 10-IEA (for new tax regime confirmation).
- Revised capital gains reporting, requiring split disclosures for gains before and after July 23, 2024 (due to Finance Act, 2024 changes).
- Separate indexation disclosures for resident taxpayers.
- Higher reporting threshold for assets and liabilities (now ₹1 crore and above, previously ₹50 lakh).
- Inclusion of Section 44BBC for presumptive taxation applicable to cruise operations.
- Detailed reporting of dividend income under Section 2(22)(f).
- Specific treatment of capital loss on share buybacks if corresponding dividend income is shown as income from other sources (post-October 1, 2024).
- More granular disclosures for TDS sections and various deductions (e.g., 80C, 80E, 10(13A)).
Taxpayers should ensure they carefully review their eligibility before selecting ITR-3.
Simplified KYC Norms and "Enforcement with Empathy"
While specific KYC updates directly within the Income Tax Act for AY 2025-26 haven't been as prominent as other changes, the broader regulatory environment is seeing a push towards simplified Know Your Customer (KYC) norms. The Reserve Bank of India (RBI), in June 2025, announced a major overhaul of its KYC guidelines for banks, aiming to ease periodic compliance for customers. These changes, though primarily for banking, reflect a wider government emphasis on reducing compliance burdens.
- Easier Bank KYC: Banks are now required to simplify periodic KYC updates through advance reminders, simpler e-KYC methods (like Aadhaar OTP, Video KYC), and allowing updates at any branch. This aims to prevent rightful account holders from losing access to funds due to paperwork delays.
- Self-Declarations: For minor changes like address updates, a simple self-declaration may suffice, reducing the need for fresh documents.
Complementing this, the CBDT has reiterated its commitment to "enforcement with empathy." CBDT Chairman Ravi Agarwal, speaking at the 166th Income Tax Day, emphasized that the department is framing rules and procedures for the new Income Tax Bill, 2025, with a focus on clarity, simplicity, and taxpayer convenience. The "Nudge campaign" and use of data analytics are examples of this approach, guiding taxpayers to voluntarily update their filings rather than immediately resorting to compliance measures. This signifies an evolving mindset towards building trust with taxpayers.
Understanding the New Tax Slabs for AY 2025-26
For Assessment Year 2025-26 (Financial Year 2024-25), the new tax regime continues to be the default option, though taxpayers can still opt for the old regime if it benefits them. Significant changes were introduced in the new tax regime in Budget 2024 (effective FY 2024-25 / AY 2025-26).
New Tax Regime (Default) for AY 2025-26:
| Taxable Income (₹) | Tax Rate (%) |
|---|---|
| Up to ₹3,00,000 | Nil |
| ₹3,00,001 to ₹6,00,000 | 5% |
| ₹6,00,001 to ₹9,00,000 | 10% |
| ₹9,00,001 to ₹12,00,000 | 15% |
| ₹12,00,001 to ₹15,00,000 | 20% |
| Above ₹15,00,000 | 30% |
Key point: Under the new tax regime, individuals with taxable income up to ₹7 lakh are eligible for a tax rebate under Section 87A, effectively making their tax liability zero.
Old Tax Regime for AY 2025-26:
| Taxable Income (₹) | Tax Rate (%) |
|---|---|
| Up to ₹2,50,000 | Nil |
| ₹2,50,001 to ₹5,00,000 | 5% |
| ₹5,00,001 to ₹10,00,000 | 20% |
| Above ₹10,00,000 | 30% |
The old regime allows various deductions and exemptions (e.g., Section 80C, HRA, LTA), which are generally not available under the new regime. Taxpayers should carefully compare both regimes to choose the one that results in lower tax liability.
ITR-U: Extended Window for Rectifying Errors
The concept of an Updated Income Tax Return (ITR-U), introduced in Budget 2022, allows taxpayers to rectify errors or omissions in previously filed ITRs, or to file a return if they missed the original and belated/revised deadlines. A significant change from Budget 2025 (Finance Act, 2025) is the extension of the filing window for ITR-U.
- Extended Time Limit: Taxpayers now have up to **48 months (4 years)** from the end of the relevant assessment year to file an ITR-U under Section 139(8A) of the Income Tax Act. For AY 2025-26, the last date to file ITR-U would be March 31, 2030.
- Additional Tax: While this provides a longer window, filing an ITR-U comes with an additional tax liability, which increases with the delay:
- Within 12 months from the end of the relevant AY: 25% additional tax (on tax + interest)
- Between 12 and 24 months: 50% additional tax
- Between 24 and 36 months: 60% additional tax
- Between 36 and 48 months: 70% additional tax
- Purpose: This provision aims to promote voluntary compliance and allow taxpayers to correct genuine mistakes without facing harsher penalties.
Stay Compliant: Key Takeaways for AY 2025-26
The Income Tax Department's recent updates for AY 2025-26 reflect a concerted effort towards simplifying tax compliance and fostering a more taxpayer-friendly environment. The extended deadline, activated ITR-3, and emphasis on empathetic enforcement are all steps in this direction.
Here are some essential tips for taxpayers:
- Utilize the Extended Deadline: Don't wait until the last minute. Use the extended time to gather all necessary documents and accurately file your return.
- Choose the Right ITR Form: Ensure you select the correct ITR form based on your income sources and residential status. For business/professional income, ITR-3 is now fully enabled online.
- Review Capital Gains Carefully: Pay close attention to the revised capital gains reporting requirements, especially for transactions around July 23, 2024.
- Understand Tax Regimes: Compare the old and new tax regimes to determine which one is more beneficial for your financial situation, considering available deductions and exemptions.
- Keep KYC Updated: While banking KYC is separate, maintaining updated personal and financial information across all platforms is always a good practice.
- Leverage Online Resources: The Income Tax Department's e-filing portal and official communications are your best sources for accurate information and utilities.
By staying informed and proactive, taxpayers can ensure a smooth and compliant filing experience for AY 2025-26.
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