IT Act 2025 — What Changes for Salaried Employees, NRIs, and Senior Citizens

The Income Tax Act 2025 is not just a concern for chartered accountants and tax professionals. Every salaried employee, NRI, senior citizen, freelancer, and business owner in India is directly impacted. While the core taxation principles remain similar, the new Act introduces specific changes for each category of taxpayer that can affect take-home pay, tax liability, and compliance requirements.

In this guide, we break down the key changes by taxpayer category so you can understand exactly what has changed for you.

Changes for Salaried Employees

New Tax Regime Is Now Default

Under the IT Act 2025, the new (simplified) tax regime is the default. If you want to opt for the old regime with deductions, you must explicitly choose it while filing your return. The new regime offers lower slab rates but eliminates most deductions and exemptions.

Tax Slabs Under the New Regime (TY 2026-27)

Standard Deduction Enhanced

The standard deduction for salaried employees under the new regime has been enhanced to ₹75,000 (from ₹50,000 under the old Act). This is automatic and requires no proof or investment. Under the old regime, the standard deduction remains ₹50,000.

Form 130 Replaces Form 16

Employers will now issue Form 130 instead of Form 16. The content is similar (salary details, TDS deducted, employer details) but the format and section references have been updated to align with the new Act.

Changes for Senior Citizens

Higher Exemption Under Old Regime

Under the old regime, the basic exemption limit for senior citizens (60-80 years) remains at ₹3,00,000 and for super senior citizens (80+) at ₹5,00,000. Under the new regime, the universal exemption of ₹4,00,000 applies to all regardless of age.

TDS Threshold on Interest

Senior citizens continue to enjoy a higher TDS threshold on interest income — ₹50,000 compared to ₹40,000 for others. The corresponding section has moved from 194A to Section 395 of the new Act.

Section 80TTB Equivalent

The deduction for interest income up to ₹50,000 for senior citizens (erstwhile Section 80TTB) continues under Schedule VI of the new Act, but only under the old regime.

Changes for NRIs

POEM Rules Continue

Place of Effective Management (POEM) rules remain critical for determining whether a foreign company is treated as resident in India. The provisions have been carried forward with updated section references.

DTAA Provisions

Double Taxation Avoidance Agreement provisions continue to operate. NRIs can claim treaty benefits for income taxed in both India and their country of residence. The relevant provisions are now under the international taxation chapter of the new Act.

TDS on NRI Income

TDS rates on payments to NRIs continue under the new sections (393-416 range). NRIs selling property in India will face TDS under the equivalent of old Section 195. The rates remain tied to the applicable DTAA or domestic law, whichever is more beneficial.

ITR Filing for NRIs

NRIs with Indian income above the basic exemption limit must file returns. The new Act continues this requirement with updated form references. NRIs should pay particular attention to AIS data — Indian banks and investment platforms report their transactions to the department.

Changes for Freelancers and Gig Workers

Presumptive Taxation

The presumptive taxation scheme (erstwhile Section 44ADA for professionals) continues under the new Act. Freelancers with gross receipts up to ₹75 lakh can declare 50% of receipts as taxable income without maintaining detailed books. This threshold was enhanced from ₹50 lakh in Budget 2023 and carries forward under the new Act.

TDS on Professional Fees

Clients paying professional fees are required to deduct TDS under Section 401 (erstwhile 194J). The rate remains 10% for professional services. Freelancers should ensure their PAN is correctly linked with all clients to avoid TDS credit mismatches in AIS.

GST Implications Remain Separate

The IT Act 2025 deals only with income tax. Freelancers earning above ₹20 lakh must continue complying with GST separately. The two are distinct but interconnected — GST returns data is cross-referenced with income tax filings.

How to Choose: Old Regime vs New Regime

This decision depends on your deduction profile. Here is a simplified decision framework:

The exact crossover point depends on your income level and specific deduction mix. RUSOM AI's Tax Comparison Calculator can run both regime calculations instantly for any income profile.

Conclusion

The IT Act 2025 brings meaningful changes for every category of taxpayer. While the transition requires awareness and adjustment, the core principle remains: understand your income, claim your legitimate deductions, and file accurately and on time. The penalty provisions under the new Act are substantial — Section 302 (under-reporting) and Section 303 (misreporting) carry penalties of 50% and 200% respectively of the tax sought to be evaded.

When in doubt, consult a qualified Chartered Accountant. And for quick answers, RUSOM AI's AI Tax Chatbot is available in 11 Indian languages, 24/7.