Income Tax

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Income Tax - Latest Updates, Basics, Tax Slabs, Rules, Income Tax Guide 2024-25

Income tax is a direct tax levied by the Government of India on the income earned by individuals, Hindu Undivided Families (HUFs), firms, companies, and other entities. Understanding income tax is essential for financial planning and compliance with tax laws.

Budget 2025 Updates

Zero Tax on Income Up to ₹12 Lakhs Under the New Regime – Here's How!

The revised tax slab rates for the new tax regime for FY 2025-26 are as follows:

Income tax slabs	Income Tax Rates
Up-to Rs. 4,00,000	NIL (0)
Rs. 4,00,001 - Rs. 8,00,000	5%
Rs. 8,00,001 - Rs. 12,00,000	10%
Rs. 12,00,001 - Rs. 16,00,000	15%
Rs. 16,00,001 - Rs. 20,00,000	20%
Rs. 20,00,001 - Rs. 24,00,000	25%
Above Rs. 24,00,000	30%

Increased Rebate Under Section 87A

The rebate under Section 87A has been increased to ₹60,000 (from ₹25,000).
This means that individuals earning up to ₹12,00,000 will have zero tax liability under the new regime.
Marginal relief on rebate is still applicable.

Note: The rebate does not apply to income taxed at special rates (e.g., capital gains under Section 112A).

What is Income Tax?

Income tax is a direct tax imposed by the central government on the income earned by individuals and entities during a financial year. It is a key source of government revenue, which is utilized for infrastructure development, healthcare, education, agricultural subsidies, and various welfare schemes.

Taxes in India are broadly classified into two categories:

Direct Taxes -These are levied directly on an individual's or entity's income or wealth. Income tax is a prime example of a direct tax.

Indirect Taxes - are imposed on goods and services and collected by intermediaries (such as sellers) on behalf of the government. The Goods and Services Tax (GST) is a notable indirect tax.

Income tax is crucial to the country's economic growth, ensuring financial stability and funding essential public services.

Direct taxes can be characterized as follows:

Income tax

This is the income tax paid by an individual, a Hindu Undivided Family, or any taxpayer other than a corporation. The legislation specifies the rate at which such income is taxed.

Corporate Tax

This is the tax that corporations pay on their profits. Again, India's income tax rules have imposed a certain tax rate on corporations.

Tax Audit Limit in the New Income Tax Act 2025 - Section 63

Income Tax Bill 2025: A New Era of Taxation in India – Key Updates, History, and Impact

Partnership Firm in India

Who Needs to Pay Income Tax in India? – Types of Taxpayers

Under the Income Tax Act, 1961, any individual or entity earning taxable income in India is required to file income tax returns. The individual or entity whose income is subject to taxation is referred to as an assessee.

Different categories of taxpayers are subject to different tax rules based on their classification.

Categories of Taxpayers who should file ITR are:

1. Individuals
2. Hindu Undivided Family (HUF)
3. Firms
4. Companies
5. Association of Persons (AOP)
6. Body of Individuals (BOI)
7. Local Authority
8. Artificial Juridical Person

Residential Status and Tax Liability

In India, taxation is determined based on a person’s residential status, not just their citizenship. Residential status is classified into:

• Resident
• Resident but Not Ordinarily Resident (RNOR)
• Non-Resident (NR)

A person’s number of days of stay in India within a financial year determines their residential status.

Residents must pay tax on their global income (both income earned in India and income earned abroad).
Non-resident Indians (NRIs) are only liable to pay income tax earned or accrued in India.

The residential status must be determined separately for each financial year.

Types of Income – The 5 Heads of Income

Anyone earning or receiving income in India is liable to pay income tax, whether they are a resident or a non-resident. To streamline taxation, the Income Tax Department categorizes income into five primary heads:

Source of Income	Nature of Income Covered
Other Sources Income	Savings account interest, fixed deposit interest, lottery winnings, etc.
Capital Gains Income	Profits from the sale of assets like shares, property, or mutual funds.
Business or Profession Income	Income earned by self-employed individuals, businesses, freelancers, and contractors, as well as professionals such as life insurance agents, chartered accountants, doctors, lawyers, and private tutors, falls under this taxable category.
House Property Income	Rental income from owned property.
Salary Income	Salary and pension income.

Tax Deductions and Tax-Saving Instruments

Taxpayers can reduce their taxable income by investing in tax-saving instruments under Sections 80C to 80U of the Income Tax Act. These deductions are applicable only under the Old Tax Regime.

Some of the popular Section 80C investments are:

Investment Option	Lock-in Period	Tax Benefit under Section 80C	Maximum Investment Allowed
Tax-Saving Fixed Deposits	5 Years	Yes	₹1.5 lakh per year
National Savings Certificate (NSC)	5 Years	Yes	No Maximum Limit
Public Provident Fund (PPF)	15 Years	Yes	₹1.5 lakh per year
Equity Linked Savings Scheme (ELSS)	3 Years	Yes	No Maximum Limit (Tax benefit up to ₹1.5 lakh)

*ELSS and NSC have no upper investment limit, but tax benefits under Section 80C are capped at ₹1.5 lakh per financial year.

Education Loan Deduction (Section 80E)

Deduction is available for interest paid on an education loan.
There is no upper limit on the amount claimed.

Deduction for Interest Income

Section 80TTA – Deduction up to ₹10,000 for interest from savings accounts.
Section 80TTB – Senior citizens can claim ₹50,000 deduction on interest from fixed deposits and savings accounts.

Home Loan Tax Deductions

Stamp Duty & Principal Repayment (Section 80C) – For both self-occupied and rented properties, you can claim a deduction of up to ₹1.5 lakh under Section 80C. This limit includes other eligible investments under the same section.

Home Loan Interest (Section 24) – If the property is self-occupied, you can claim a deduction of up to ₹2 lakh on interest paid. For rented properties, there is no upper limit on interest deduction, but the rental income must be reported.

First-Time Home Buyer (Section 80EE) – First-time homebuyers meeting specific conditions can claim an additional deduction of ₹50,000 on interest paid. This benefit is not available for rented properties.

Note: Section 80EE deductions apply only under certain conditions for first-time homebuyers.

Income Tax Slabs for FY 2024-25 (AY 2025-26)

Under the old tax regime, income tax is levied at three slab rates—5%, 20%, and 30%—based on different income brackets. Individuals opting for this regime can claim various deductions, including:

Allowances such as Leave Travel Concession (LTC), House Rent Allowance (HRA), and other specified allowances.
Tax-saving investment deductions under Section 80C to 80U, covering contributions to LIC, PPF, NPS, and similar schemes.
A standard deduction of ₹50,000.
Deduction on interest paid for home loans.

The following tax slab rates apply to individual taxpayers below 60 years under the old tax regime:

Income range	Tax Rate	Tax Payable
Up to ₹2,50,000	Nil	No Tax
₹2,50,001 - ₹5,00,000	5%	5% of income above ₹2.5 lakh
₹5,00,001 - ₹10,00,000	20%	₹12,500 + 20% on income above ₹5 lakh
Above ₹10,00,000	30%	₹1,12,500 + 30% on income above ₹10 lakh

What is new Tax Regime?

The new tax regime was introduced to simplify tax compliance for individuals and Hindu Undivided Families (HUFs). It features reduced tax rates along with fewer deductions, eliminating the need for taxpayers to make specific investments solely for tax savings or maintain extensive documentation.

To encourage adoption, Budget 2023 made the new tax regime the default option.

The applicable income tax slabs under this regime for the financial year 2024-25 (assessment year 2025-26) are as follows:

Income Range	Tax Rate
Up to ₹3,00,000	Nil
₹3,00,001 - ₹7,00,000	5%
₹7,00,001 - ₹10,00,000	10%
₹10,00,001 - ₹12,00,000	15%
₹12,00,001 - ₹15,00,000	20%
Above ₹15,00,000	30%

Under the new tax regime, most deductions and exemptions are not available to taxpayers. However, certain benefits are still allowed, including:

Transport allowance for specially-abled individuals.

Conveyance allowance to cover travel expenses incurred for employment purposes.

Compensation for travel related to official tours or transfers.

Daily allowance to cover routine expenses incurred due to absence from the regular place of duty.

Key updates under the new tax regime:

The highest surcharge rate has been reduced from 37% to 25% for individuals earning over ₹5 crore, lowering their effective tax rate from 42.74% to 39%.

The standard deduction for salaried individuals is ₹75,000 (₹50,000 under the old regime).

The employer’s contribution to a pension scheme is deductible up to 14% of salary (10% under the old regime).

The family pension deduction limit is ₹25,000 (₹15,000 under the old regime).

The exemption limit for long-term capital gains (LTCG) on the sale of equity shares, equity-oriented funds, or business trust units has been increased from ₹1 lakh to ₹1.25 lakh per year.

Rebate Under Section 87A and Cess

Section 87A provides a tax rebate to help eligible taxpayers reduce their income tax liability. This rebate applies to resident individuals whose total income (after deductions under Chapter VI-A, such as Sections 80C, 80D, and 80U) does not exceed a specified threshold. The rebate amount varies between the old and new tax regimes.

Rebate Under the Old Tax Regime:

If the total income (after deductions) is up to ₹5 lakh, a rebate of up to ₹12,500 is available.

This means if your tax liability is ₹12,500 or less, you will not have to pay any tax.

Rebate Under the New Tax Regime:

If the total income (after deductions) is up to ₹7 lakh, a rebate of up to ₹25,000 is available.

This means that if your tax liability is ₹25,000 or less, you will not have to pay any tax.

Additional benefits may be available for incomes slightly above ₹7 lakh. (Read further for details.)

Cess Calculation:

In all cases, a 4% health and education cess is applied on the final income tax amount after considering the rebate.

Income Tax Payment & Refunds

Tax Deduction at Source (TDS)

TDS is deducted at the time of payment and can be claimed as a credit while filing tax returns.

Advance Tax

If the total tax liability exceeds ₹10,000, the advance tax must be paid in quarterly installments.

Self-Assessment Tax

Balance tax payable after adjusting TDS and Advance Tax.

E-Payment of Taxes
Taxes can be paid online through the Income Tax e-filing portal.

Tax Refunds

If the TDS deducted exceeds the tax liability, a refund is issued by the Income Tax Department.

Filing Your Income Tax Return (ITR)

The e-filing of income tax returns (ITR) has been made mandatory for most taxpayers, with a few exceptions.

Exemptions from Mandatory E-Filing:

Senior Citizens (75 years and above) who meet the following conditions:

Their total income comprises only pension and interest income (interest should be from accounts held in the same bank as their pension account).

They have submitted a declaration to the bank confirming their eligibility.

The bank deducts TDS under Section 194P.

Individuals with taxable income below the basic exemption limit.

Basic Exemption Limits for both Old and New regime are mentioned below:

Old Tax Regime:

₹2,50,000 for individuals below 60 years.
₹3,00,000 for resident individuals aged between 60-80 years.
₹5,00,000 for resident individuals aged above 80 years.

New Tax Regime:

₹3,00,000 for all individuals.

(Note: Age is considered as of March 31 of the financial year.)

For all others, e-filing is mandatory. It is crucial to adhere to the prescribed deadlines for filing returns. For most individual taxpayers, the due date for filing the income tax return is July 31 of the assessment year.

What are the consequences of Late Filing of ITR in India?

Filing your Income Tax Return (ITR) on time ensures compliance, avoids penalties, and allows you to claim deductions, carry forward losses, and receive refunds without delays. Late filing may result in interest, penalties, and increased scrutiny, affecting financial transactions like loans and visas.

The consequences of Late filing of ITR in India are as follows:

Cannot carry forward losses (except house property loss and previously brought forward losses).

Delayed processing of tax refunds.

Potential difficulties in securing loans.

Late filing fees of up to ₹5,000 (₹1,000 if the total income is below ₹5 lakh) under Section 234F.

Interest under Section 234A if tax payments are outstanding as of July 31.

Once the return is filed, it must be e-verified, or a physical copy of the ITR-V should be sent to CPC, Bengaluru, for processing.

Understanding Income Tax Returns (ITR)

Taxpayers must file an ITR using the appropriate form as prescribed by the Income Tax Department. There are seven types of ITR forms, each applicable to different categories of taxpayers.

Types of ITR Forms:

ITR-1 (Sahaj): For resident individuals earning income from salary, a single house property, and other sources, with total income up to ₹50 lakh (agricultural income up to ₹5,000).

ITR-2: For individuals/HUFs not engaged in business or profession, with multiple house properties.

ITR-3: For individuals/HUFs earning income from a business/profession or as a partner in a firm.

ITR-4 (Sugam): For individuals/HUFs/firms opting for presumptive taxation with business income.

ITR-5: For partnership firms and LLPs.

ITR-6: For companies (except those claiming exemption under Section 11).

ITR-7: For trusts and entities required to file returns under specific sections (e.g., 139(4A), 139(4B)).

Documents Required for ITR Filing

Filing your Income Tax Return (ITR) requires gathering essential documents to ensure accurate reporting and claim eligible deductions.

Below is a list of key documents needed for different income sources:

PAN Card and Aadhaar Card

Bank account details (IFSC, account number)

Form 16 (for salaried individuals)

Business income documents (Profit & Loss statement, Balance Sheet)

Rent receipts (for rental income and HRA claims)

Capital gains statements (shares, mutual funds, property sales)

Bank interest statements (savings, fixed deposits)

Investment proofs (PPF, LIC, ELSS, NSC, etc.)

Insurance premium receipts (health & life insurance)

Education loan interest certificate

Form 26AS, AIS, and TIS (tax credit and income details)

Advance tax/Self-assessment tax payment challans

Keeping these documents handy ensures a smooth and error-free ITR filing process.
The required documents may vary based on the taxpayer’s income sources.

ITR E-Filing Process in India

E-filing can be done through the official Income Tax Department portal (www.incometax.gov.in).

The steps include:

Register/log in to the e-filing portal.

Select the appropriate ITR form based on your income category.

Fill in income details, deductions, and tax payments.

Validate the return and submit it electronically.

E-verify the return to complete the process (using Aadhaar OTP, Net Banking, or other methods).

If not e-verified, send the ITR-V form via post to CPC, Bengaluru.

What is ITR-V?

ITR-V is an acknowledgment form generated after the successful filing of an income tax return.

If not e-verified, it must be sent to: Income Tax Department – CPC, Post Box No – 1, Electronic City Post Office, Bangalore – 560100, Karnataka.

Processing of ITR begins only after verification.

Key Income Tax Dates for 2025

Advance Tax Payment Deadlines

15th March 2025: Last date for paying the fourth installment of advance tax for FY 2024-25.

15th June 2024: Deadline for the first installment of advance tax for FY 2024-25.

15th September 2024: Due date for the second installment of advance tax for FY 2024-25.

15th December 2024: Last date for the third installment of advance tax for FY 2024-25.

Income Tax Return (ITR) Filing Deadlines

31st July 2025: Deadline for filing ITR for individuals and entities not subject to tax audit and without international or specified domestic transactions.

31st October 2025: Last date for ITR filing for taxpayers requiring audit (excluding those with international or specified domestic transactions).

30th November 2025: ITR filing deadline for businesses requiring transfer pricing reports (international/specified domestic transactions).

31st December 2025: Final date for filing a belated or revised ITR for FY 2024-25.

Audit Report Submission Deadlines

30th September 2025: Due date for submitting the tax audit report under Section 44AB for taxpayers subject to audit.

31st October 2025: Deadline for submitting the audit report for taxpayers with transfer pricing and specified domestic transactions.

(Stay updated with our Income Tax Calendar for more key dates.)

Haven't Filed Your Tax Return Yet?

Avoid last-minute hassles and penalties. File ITR today through reliable tax-filing platforms. Even if you are unfamiliar with taxation, guided e-filing services can help you claim applicable deductions and ensure compliance with tax laws.
Start your e-filing ITR now and stay tax-compliant!

Understanding Income Tax Law

Income Tax Act
The Income Tax Act lays down the legal provisions governing taxation in India. Every year, the Union Budget—presented by the Finance Minister in February—introduces amendments to the Income Tax Act, including changes such as revised tax slabs or new tax regimes. The Income Tax Act 1961 is currently applicable, and the New Income Tax Act 2025 has been passed by parliament, which will replace the old Income tax Act 1961.

Other key components supporting the implementation of the Act include:
Income Tax Rules
Circulars and Notifications
Case Laws

Together, these elements regulate tax collection and enforcement in India.

About the Income Tax Department

The Income Tax Department (ITD) is a government body responsible for collecting direct taxes on behalf of the Government of India. It operates under the supervision of the Central Board of Direct Taxes (CBDT), which is a part of the Department of Revenue under the Ministry of Finance. The CBDT ensures proper administration and enforcement of direct tax laws through the ITD.

The Income Tax Department’s role includes:

Collection of income tax.
Implementation of income tax laws.
Monitoring compliance and tax audits.

Frequently Asked Questions (FAQs) on Income Tax in India

Ques: Who is required to file an Income Tax Return (ITR)?

Ans: Any individual, Hindu Undivided Family (HUF), company, or firm whose total income exceeds the basic exemption limit must file an ITR. Even those with income below the exemption limit may file voluntarily.

Ques: What are the different types of ITR forms?

Ans: There are seven ITR forms prescribed by the Income Tax Department:

ITR-1: For salaried individuals with income up to ₹50 lakh.

ITR-2: For individuals and HUFs with capital gains or multiple house properties.

ITR-3: For individuals/HUFs having income from business or profession.

ITR-4: For individuals under the presumptive taxation scheme.

ITR-5: For partnership firms and LLPs.

ITR-6: For companies.

ITR-7: For trusts and NGOs.

Ques: What is the due date for filing an ITR?

Ans: For most individuals, the due date is 31st July of the assessment year. However, businesses requiring audits have a deadline of 31st October, and those requiring transfer pricing reports must file by 30th November.

Ques: What happens if I file my ITR after the due date?

Ans: Late filing may attract penalties:

₹5,000 if filed after the deadline but before 31st December.

₹1,000 if the total income is below ₹5 lakh.

Interest under Section 234A if tax is due.

Losses (except house property loss) cannot be carried forward.

Ques: How can I verify my Income Tax Return?

Ans: You can e-verify your ITR using:

Aadhaar OTP

Net banking

Electronic Verification Code (EVC)

Sending a signed ITR-V form to CPC Bengaluru

Ques: What is Form 16 and Form 26AS?

Ans: Form 16: A TDS certificate issued by an employer showing salary details and tax deducted.

Form 26AS: A consolidated statement of tax credits, including TDS, advance tax, and self-assessment tax paid.

Ques: What is the difference between old and new tax regimes?

Ans: The old tax regime allows various deductions and exemptions (e.g., Section 80C, 80D, HRA, etc.).

The new tax regime offers lower tax rates but disallows most deductions and exemptions.

Ques: Can I revise my ITR after filing?

Ans: Yes, an ITR can be revised until 31st December of the relevant assessment year in case of errors or omissions.

Ques: What is Advance Tax, and who needs to pay it?

Ans: Advance Tax is tax paid in installments during the financial year instead of a lump sum at the end. It applies to individuals and businesses whose total tax liability exceeds ₹10,000 in a financial year.

Ques: What is Tax Deducted at Source (TDS)?

Ans: TDS is the tax deducted by an employer or payer before making a payment. It applies to salaries, interest, rent, and professional fees, among others.

Ques: How can I check my income tax refund status?

Ans: You can check your refund status on the Income Tax Department’s e-filing portal by entering your PAN and assessment year.

Ques: What are the penalties for non-filing of ITR?

Ans: Apart from late fees, non-filing may lead to prosecution, with imprisonment ranging from 3 months to 7 years if tax evasion is involved.

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