Income Tax for FY 2025-26

Income tax is a direct tax that a government imposes on the annual income and profits earned by individuals and entities. It is calculated on the net taxable income of a person or entity for the applicable financial/fiscal year, which starts from 1^st April of a year and ends on 31^st March of the next calendar year.

Under existing rules of the IT Act, any individual/business with income irrespective of the amount earned is liable to file income tax returns. But, currently tax on income is payable only if the net taxable income for a fiscal exceeds Rs. 2.5 lakh. The following are the key types of individuals and entities who are liable to pay tax provided their net taxable income for the financial year exceeds the prescribed limit:

People Also Search for

Income in India is taxable according to prescribed income tax slab rates that vary based on the net annual income of the tax assesse. The slab rates for taxation of income are progressive in nature i.e. the slab rate increases with the net annual income of the individual. The slab rates for tax on income are liable to be changed periodically and are announced as part of the Union Budget announcement. The income tax slab rates for the financial year 2025-2026 (AY 2026-2027) are as follows:

Note:

Surcharge:

Marginal Relief:

Health and Education Cess:

Income Tax Slab for Foreign Companies

Surcharge, Marginal Relief and Health & Education Cess

Surcharge:

Marginal Relief:

Health and Education Cess:

Filing Returns is Mandatory

Avoiding Penalties

What are the Different Types of Taxable Income

Under existing rules of the Income Tax Act 1961, the following are the key types of income that are subject to taxation as per the applicable rates:

According to the Income Tax Act, it is mandatory to file income tax returns if:

How to File Income Tax Returns – E-filing Income Tax

Read more about step-by-step guide to e-filing income tax

Before you make your income tax payments you should have a working knowledge of how income tax is computed. This will not only give you an idea on how much you have to pay but also find out ways in which you can save tax . If you are aware of the income tax slabs, computing the tax amount is easy. The final tax which is payable is calculated by applying the tax rates which are in force and then by deducting the taxes which have been paid through TDS (tax deduction at source).

To save the maximum amount of tax, it is necessary that you examine the deductions which have been defined under the different sections of IT Act, 1961. Certain investment avenues such as National Savings Certificate and Public Provident Fund are eligible for deduction under section 80C of the IT Act 1961. However, most tax payers tend to ignore a range of investment avenues which are eligible for tax concessions. Here is a quick rundown on investments which qualify for deductions under different sections of the Income Tax Act:Under section 80C, the Income Tax deductions are allowed for the following:

1. Tax Saving Mutual Fund
2. Tax Saving Fixed Deposit
3. National Savings Certificate
4. Repayment of the principal on a housing loan
5. Life insurance policy premium
6. Equity Oriented Mutual Funds
7. Contributions made to Employee Provident Fund
8. Under section 80C, the tax exemption limit is Rs. 1.5 lakh

Advantages of Filing Income Tax Return (ITR)

Tax returns should be filed by an individual who has a taxable income. If you are below 60 years of age and have an income up to Rs. 2.5 lakh, you are exempted from paying income tax. It has been seen that many salaried individuals are under the impression that their employer has deducted tax at source and hence their liability is over. Filing IT returns and income tax payment are two separate obligations. Even if you do not have a tax liability, you should file your income tax returns . There are several advantages of filing tax returns:

A taxpayer can claim for additional deductions under various sections. Some of these are mentioned below:

About Income Tax Rebate

A number of confusions arise when terms like income tax rebate, income tax exemption and income tax deduction are used. Although all these terms are beneficial to the tax payer, they have different meanings.

Difference Between “Deduction” and “Exemption

Useful Income Tax Exemptions for the Salaried

As per the Income Tax Act, salaried employees are eligible for several income tax exemptions. It is necessary that the salaried employees intimate the employer that they are claiming these exemptions. While deducting the TDS , the employer would then compute the tax on the balance income. Let’s take a look at the tax deductions in details:

Read in Detail: How to calculate income tax on your income

Self-employed businessmen, professionals, freelancers and NRIs who have an income of more than Rs. 10,000 in India are liable to pay advance tax. Advance tax is payable on the basis of estimated income during the year, that is, an assessee has to estimate his income for the year and pay the taxes partially or fully in advance.

Read more on Advance Tax

An Insight Into Tax Planning

Tax Planning without the Help of a Consultant

Avoid Tax Evasion

One of the key problems in India is the painfully low numbers of tax payers which indicates that tax evasion takes place at a large scale. Tax evasion is termed as an illegal activity which includes not filing the income tax returns or misrepresenting the tax amount which needs to be paid.

If the Income tax authorities scrutinize and discover that you have deliberately tried to reduce the tax liability, you will be penalized. The penalty can go up to almost three times the amount which has been concealed. Hence, it is best to exercise precaution when filing the income tax return, because if a return is scrutinized for an anomaly, it will have serious financial implications.