Every breath we take is what is keeping us alive, right?
Same way every rebate and relief we get with the new income tax slab rates will help all our businesses grow; one way or another.
 

This year’s Union Budget has introduced essential changes to the income tax slab rates under the new regime, which has been in effect since April 1, 2025. The new slabs designed come with simplified tax structure and offer relief to a broad range of taxpayers. The slab rates this year especially benefit small businesses, MSMEs, textile enterprises, etc.

Key Updates and Features

Higher Rebate Limit:

• Salaried individuals can breathe a little easier with the standard deduction limit being increased from ₹50,000 to ₹75,000, making their effective tax-free income up to 12.75 lakhs.
• The rebate under Section 87A has been increased to ₹60,000 from ₹25,000; due to which individuals and HUFs with net taxable income upto 12 lakhs pay absolutely zero tax.

Default New Regime:

• The new tax regime is now the default. Taxpayers who wish to continue with the old regime for claiming the deductions and exemptions available under it, must choose it actively. Also opting for the old regime requires formal declaration.

Tax Savings:

• Savings are always welcome to any and everyone. With the restructured slabs and increase in rebates, the tax burden has reduced for some taxpayers; hence them being able to save up to ₹ 1.14 lakh.
• Small business accounting software can automate return filing reminders and ITC reconciliation, save time and reduce errors.

No Major Changes in Old Regime:

• The old tax regime slabs remain unchanged, but to avail various deductions and exemptions, taxpayers must opt out of the new regime.

Presumptive taxation eligibility:

• The new regime has updated the presumptive taxation scheme which is applicable for resident individuals, HUFs, and firms (excluding LLPs) with turnover up to ₹2 crore.
• However, if the business of resident individuals, HUFs and other firms (excluding LLPs) has cash receipts of less than 5% of total turnover than the limit becomes ₹3 crore.
• Professionals with receipts up to ₹75 lakh showing 50% of receipts as income, can opt for this scheme for a five-year lock-in period.

GST Compliance updates:

• GST compliance is stricter in 2025, with a few new requirements such as: Compulsory Multi-Factor Authentication (MFA) and ISD registration requirement if there is distribution of (ITC) input tax credit across multiple branches.
• Additionally, e-way bills now require air-tight validity and documentation checks.
• Adoption of a sequential, year-specific numbering system for all invoices is essential.
• Textile accounting software can simplify record-keeping and generate invoices that are in compliance with GST for your business.

Summary Table: New vs. Previous Slabs

Implications for Businesses

• The higher exemption and rebate limits of the new regime are specially designed to benefit small businesses and professionals by reducing tax outgo and compliance.
• Updating their accounting and payroll systems to assist the new slabs and ensure correct TDS, advance tax and return filings has become important for the businesses.

Conversion from old to new tax regime:

Here’s a simplified list to get your small business accounting ready for the conversion from old regime to new regime:

1. Make sure you understand the new tax slab rates and their impact on your small business. You can also use accounting software to calculate your tax liability under new income tax slabs and compare it with the old slabs for better planning.
2. Textile businesses and small traders can benefit from presumptive tax scheme changes for simplified compliance and use accounting software to keep track of receipts.
3. Ensure your business is registered for GST if your turnover is more than ₹20 lakh (₹10 lakh in special category states).
4. Note all the new GST rules for better compliance and timely filing of GST to avoid penalties.
5. File returns and reconcile ITC timely to make sure you claim all eligible credits and avoid mismatches.
6. Review Reverse Charge Mechanism (RCM) Transactions are an essential part of this conversion.
7. Adopt e-invoicing and digital documentation to make auditing easy and reduce paperwork.
8. Assess Composition Scheme Eligibility: Small businesses with turnover up to ₹1.5 crore (₹75 lakh for services) can opt for the GST Composition Scheme for lower tax rates and reduced compliance.
9. With Multi-Factor Authentication (MFA) and stricter compliance, make sure your accounting systems are up to date; hence focusing on newer technology & security requirements.
10. Maintain and retain an audit trail of all transactions, especially if you opt for presumptive taxation or composition schemes.

Conclusion:

There are both positive and negative aspects to every situation. However, the new tax regime has opportunities and challenges for Indian businesses. To stay compliant, one has to stay updated with the regular notifications and the right technology.

Even accounting for small businesses and textiles can be automated by using accounting software to ensure tax compliance and complex calculations are done in seconds. So, all you have to focus on is your business growth!