E-TAX FILLING

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Unit -I
DM College of Commerce
Compile by Dr Partakson Romun Chiru

A Comprehensive Guide to Individual Income Tax in India

The Indian income tax system is a multifaceted framework designed to govern the taxation of
various entities, including individuals. Understanding its core components is crucial for
effective compliance and financial planning. This report provides a detailed overview of
individual income taxation in India, encompassing the classification of income, available
deductions, computation of tax liability, essential compliance instruments like PAN, advance
tax provisions, and the nuances of the new tax regime.
I. Introduction to Income Tax in India
The Indian tax system is built upon foundational principles and a structured approach to
revenue collection, particularly concerning individual income.
A. Definition and Fundamental Principles
Income tax in India operates as a direct tax, representing the most prevalent form of direct
taxation levied and collected within the country. The system is inherently progressive,
meaning that tax rates increase in tandem with income levels. This design ensures that
individuals with higher earning capacities contribute a proportionally larger share to the
national exchequer. Defined "slab rates" are established for individuals, which vary
depending on the chosen tax regime—the traditional "Old Tax Regime" or the more recently
introduced "New Tax Regime".
A cornerstone principle of Indian taxation is that an individual's tax liability is profoundly
influenced by their residential status during the relevant tax year. This status, determined
annually based on physical presence in India, dictates the scope of income subject to Indian
tax. For instance, a "Resident and Ordinarily Resident" (ROR) individual is taxed on their
global income, while a "Non-Resident" (NR) is taxed only on income that accrues, arises, or
is received in India. A "Resident but Not Ordinarily Resident" (RNOR) faces taxation on
India-sourced income and income from a business controlled in India or a profession set up in
India. This emphasis on residential status is not merely a classification; it is a fundamental
determinant of an individual's tax obligations, particularly for those with international income
streams or non-resident status.
The authority to levy taxes in India is explicitly derived from the Constitution of India, which
meticulously allocates taxation powers between the Union (Central) Government and the
State Governments. A critical constitutional safeguard, Article 265, unequivocally states that
"No tax shall be levied or collected except by the authority of law". This provision
underscores that every tax must be backed by specific legislation passed either by the
Parliament or a State Legislature. The primary legislation governing direct taxes for
individuals is the Income Tax Act, 1961. This constitutional and legislative foundation
ensures that the tax system operates within a robust legal framework, demanding strict
adherence to statutory provisions for both tax imposition and compliance. Any changes to tax
liabilities or benefits must, therefore, originate from legislative action, reinforcing the
importance of legal interpretation and compliance.
B. Overview of the Indian Income Tax System for Individuals
The Indian income tax system for individuals is characterized by a slab-based structure,
where different income segments are taxed at varying rates. A significant structural
development is the introduction of two distinct tax regimes: the "Old Tax Regime" and the
"New Tax Regime" under Section 115BAC. As per the Finance Act 2024, the New Tax
Regime has been designated as the default system, although eligible taxpayers retain the
option to choose the Old Tax Regime. This dual regime necessitates a strategic decision-
making process for individuals, who must evaluate their potential tax liability under both
systems to determine the most advantageous option. The shift to a default new regime
indicates a policy inclination towards simplification and potentially lower rates, but at the
cost of various deductions and exemptions available under the old regime.
For taxation purposes, an individual's total income is systematically categorized under five
main heads: Income from Salary, Income from House Property, Profits and Gains from
Business or Profession (PGBP), Income from Capital Gains, and Income from Other Sources.
This classification provides a structured and uniform approach to income assessment,
ensuring consistency in the bifurcation and treatment of diverse income types.
C. Financial Year vs. Assessment Year
In Indian taxation, a clear and fundamental distinction exists between the Financial Year (FY)
and the Assessment Year (AY). The Financial Year is the period during which income is
earned, commencing on April 1st and concluding on March 31st of the subsequent calendar
year. Conversely, the Assessment Year is the year immediately following the Financial Year,
during which the income earned in the preceding Financial Year is assessed and taxed.
This temporal distinction is more than a mere definition; it is a critical operational principle.
For instance, income earned during Financial Year 2024-25 will be assessed and taxed
according to the rules applicable for Assessment Year 2025-26. This means that any
legislative changes, such as those introduced in the Union Budget 2024 or Finance Act 2024,
which affect Assessment Year 2025-26, will impact the income earned in the preceding
Financial Year. This necessitates continuous awareness of tax law updates throughout the year
for effective tax planning, as policy changes can directly influence the tax liability for income
already earned.
II. Incomes Taxable Under Different Heads
The Income Tax Act, 1961, meticulously categorizes an individual's earnings into five distinct
heads, each with specific rules for computation and tax treatment.
A. Income from Salary
This head encompasses any remuneration paid by an employer to an employee under a
contract of employment, covering both monetary benefits (such as basic salary, wages, bonus,
commission, gratuity, pension, and leave encashment) and non-monetary benefits (like free
accommodation, free cab services, free food, or free education). Sections 15 to 17 of the
Income Tax Act specifically govern salary income.
Key components of salary and their tax treatment include:
 House Rent Allowance (HRA): This allowance is partially taxable. An exemption is
available for the least of three amounts: 50% of basic salary (for those residing in
metro cities) or 40% (for non-metro cities), the actual HRA received, or the rent paid
minus 10% of the basic salary. This exemption serves as a targeted relief for housing
expenses.
 Leave Travel Allowance (LTA): LTA is fully exempt, provided the taxpayer
furnishes proof of travel within India. The exemption is limited to the amount spent
on the shortest and cheapest route and covers travel expenses for the taxpayer and
dependent family members (spouse, children, parents, siblings) once in a block of two
calendar years.
 Standard Deduction: A flat deduction of ₹50,000 is allowed from gross salary for all
salaried employees. This deduction simplifies tax computation by replacing earlier,
more granular deductions for transport allowance and medical reimbursement. The
introduction of a standard deduction reflects a policy move towards streamlining
compliance and providing a universal benefit, reducing the administrative burden for
both taxpayers and employers.
 Other Allowances: The tax treatment of various other allowances (e.g., children's
education allowance, hostel expenses, uniform allowance) depends on their specific
nature and purpose. Some are fully taxable, while others are partly or fully exempt up
to certain limits and conditions, as detailed in Section 10 of the Income Tax Act.
Certain amounts are also deducted directly from salary before arriving at the final taxable
income, such as professional tax (deducted by the employer), Tax Deducted at Source (TDS),
and the employee's contribution to the Provident Fund (PPF). These deductions further
reduce the taxable salary component.
B. Income from House Property
This head pertains to income derived from a house property or land appurtenant thereto,
primarily focusing on how rental income is taxed. It encompasses income from both
residential and commercial properties. For taxation purposes, properties are classified into:
 Self-Occupied Property: A property used for one's own residence.
 Let-Out Property: A property rented out to tenants.
 Deemed Let-Out Property: If an individual owns more than two self-occupied
houses, only two are treated as self-occupied, and the remaining are deemed to be let
out, with a notional rent considered as income. The concept of "deemed" income or
ownership addresses situations where tax liability can arise even without actual rental
income or legal title, serving as an anti-avoidance measure to prevent individuals
from holding multiple properties without generating taxable income.
The computation of income under this head involves key concepts:
  Gross Annual Value (GAV): This represents the expected annual rent of a property. It
is determined by considering factors such as actual rent received, municipal valuation,
fair rent, and standard rent as per the Rent Control Act.
 Net Annual Value (NAV): The taxable income from the property is calculated by
deducting municipal taxes paid and any loss due to vacancy from the GAV (NAV =
GAV - Municipal taxes - Vacancy loss).
The Income Tax Act provides several tax benefits under this head:
 Section 24: Allows two types of deductions from NAV: a standard deduction of 30%
of the NAV (irrespective of actual expenses) and deduction for interest paid on
borrowed capital for acquisition, construction, repair, renewal, or reconstruction of the
property. For self-occupied property, the interest deduction is capped at ₹2 lakh if the
loan was taken on or after April 1, 1999, for construction/purchase completed within
five years; otherwise, it is limited to ₹30,000. For let-out property, the actual interest
paid is deductible without any upper limit, though the maximum loss that can be set
off against other income heads is ₹2 lakh. Pre-construction interest can also be
claimed in five equal installments from the year of completion.
 Section 80EE: Provides an additional deduction of up to ₹50,000 for interest paid on
home loans sanctioned between April 1, 2016, and March 31, 2017, subject to specific
property and loan value limits.
 Section 80EEA: Offers a deduction of up to ₹1.5 lakh for interest paid on home loans
for the acquisition of residential house property for the first time, sanctioned between
April 1, 2019, and March 31, 2022, provided no claim is made under Section 80EE.
The existence of multiple sections providing deductions for home loan interest clearly
indicates a government policy to incentivize home ownership and stimulate the real estate
sector, particularly affordable housing. The varying limits and sanction periods for Sections
80EE and 80EEA suggest targeted, time-bound incentives rather than permanent, blanket
benefits, reflecting dynamic economic policy aimed at specific market segments.
C. Profits and Gains from Business or Profession (PGBP)
This comprehensive head includes all earnings derived from any trade, business, or
professional activity carried out by individuals, partnerships, or corporations during the
previous year. "Business" is broadly defined to include any trade, commerce, manufacture,
adventure, or concern (Section 2(13)), while "Profession" refers to vocations such as law,
medicine, engineering, architecture, or accountancy (Section 2(36)).
Income under this head is computed by subtracting all legitimate business-related expenses
(e.g., salaries, rent, depreciation, utilities) from the total revenue generated. The extensive list
of income sources under Section 28 demonstrates the comprehensive nature of this head,
designed to capture virtually all income derived from active economic engagement and
prevent income from escaping taxation. Key income sources include:
 Profits or gains directly from any business or profession.
 Payments received for the termination or modification of contracts or agency terms.
  Sums received from a keyman insurance policy taken for critical employees or
partners.
 Profits from government export schemes, such as the Duty Drawback or Duty-Free
Replenishment Certificate.
 Income from selling capital assets that are held as stock-in-trade (e.g., works of art or
historical collections).
 Interest, salary, or bonuses earned by an individual as a partner in a firm.
 Payments for the use of intellectual property, technical knowledge, trademarks, or
franchises.
 Earnings from providing industrial, scientific, or commercial rights or services.
Individuals with income under this head typically file ITR-3. However, for those with income
from business or profession computed on a "presumptive basis" (under Sections 44AD,
44ADA, or 44AE) and total income up to ₹50 lakh, ITR-4 (SUGAM) is applicable and
optional. The provision for presumptive taxation is a policy aimed at simplifying compliance
for small businesses and professionals, allowing a fixed percentage of turnover or gross
receipts to be deemed as profit, thereby reducing the need for detailed accounting and audits.
This approach balances revenue collection with ease of doing business for smaller
enterprises.
D. Income from Capital Gains
This head taxes the profit or gain arising from the transfer of a "capital asset." A capital asset
is broadly defined as any property or right owned or held by a taxpayer, regardless of its
connection to a business or profession. Common capital assets include stocks, real estate,
gold, bonds, and mutual funds.
Certain items are specifically excluded from the definition of a capital asset (Section 2(14)),
such as stock-in-trade (goods held for business), personal movable goods (with exceptions
like jewelry, archaeological collections, drawings, paintings, sculptures, and works of art),
certain agricultural land in India (outside specified urban limits), and specific government
bonds. These exclusions are crucial for proper classification, preventing taxpayers from
mischaracterizing business income as capital gains or vice-versa, ensuring income is taxed
under the appropriate head.
Capital gains are categorized based on the holding period of the asset:
 Short-term Capital Gains (STCG): Arise from selling assets held for less than a
specified period (e.g., less than 12 months for shares and securities, or less than 36
months for most other assets).
 Long-term Capital Gains (LTCG): Arise from selling assets held for more than the
specified period.
The computation of capital gain is generally: Full value of consideration - (Expenditure on
transfer + Cost of acquisition + Cost of improvement). For LTCG, the cost of acquisition and
improvement can be adjusted for inflation using the Cost Inflation Index (CII), a process
known as indexation, which helps reduce the taxable gain by accounting for inflation over the
holding period. Tax rates for capital gains vary significantly depending on the type of asset
and its holding period (e.g., LTCG from listed equity shares may be taxed at 10% over ₹1
lakh, while STCG from equity shares may be taxed at 15%). Capital gains are typically
reported in Schedule CG of the Income Tax Return.
The Income Tax Act provides various exemptions to reduce capital gains tax liability,
particularly encouraging reinvestment:
 Section 54: Exemption on LTCG from the sale of a residential property if the capital
gain is reinvested in another residential property within specified timelines.
 Section 54B: Exemption on capital gains from the sale of agricultural land if
reinvested in new agricultural land.
 Section 54EC: Exemption on LTCG if invested in specified bonds (e.g., NHAI, REC)
within six months of transfer, with a maximum investment limit of ₹50 lakh in a
financial year.
The differentiated taxation of STCG and LTCG, coupled with indexation benefits for LTCG,
reflects a policy objective to encourage long-term investment over short-term speculation.
These exemptions further reinforce the government's aim to channel capital into specific
sectors like housing, agriculture, and infrastructure, aligning individual financial decisions
with broader economic goals.
E. Income from Other Sources
This is a residual or "catch-all" category, governed by Section 56(2) of the Income Tax Act. It
includes any income that is not specifically taxable under the other four heads (Salary, House
Property, Business/Profession, or Capital Gains). The existence of this category ensures that
no income, regardless of its unusual nature, escapes taxation, thereby reinforcing the
principle of universality of taxation.
Common types of income falling under this head include:
 Dividends received from domestic or foreign companies.
 Interest income from savings accounts, fixed deposits, bonds, and debentures.
 Winnings from lotteries, crossword puzzles, races, gambling, and betting.
 Gifts received in cash or kind from any person, exceeding a specified exemption limit.
 Income from subletting house property.
 Income from royalties, patents, or copyrights.
 Income from undisclosed sources or unexplained investments.
 Any other income not covered by the preceding heads.
The explicit inclusion of "income from undisclosed sources or unexplained investments"
under this head highlights the tax department's vigilance against black money and undeclared
wealth. This category provides a legal basis for taxing such income if discovered,
underscoring the anti-evasion stance of the tax law and serving as a powerful deterrent
against tax evasion.
III. Deductions Available from Gross Total Income
This section explores the various deductions permitted under Chapter VI-A of the Income Tax
Act, which allow individuals to reduce their Gross Total Income (GTI) and, consequently,
their tax liability. It also highlights the differing applicability of these deductions across the
old and new tax regimes.
A. Overview of Chapter VI-A Deductions
Chapter VI-A deductions are provisions within the Income Tax Act that allow individuals to
reduce their Gross Total Income by specified investments or expenditures, thereby lowering
their overall tax liability. These deductions are broadly available under Sections 80C to 80U.
The most widely utilized deduction by individuals is typically under Section 80C, which
encompasses various tax-saving investments and expenses. Chapter VI-A also provides
deductions for interest earnings, life insurance premiums, medical expenses, house rent
payments, and housing loan principal repayments, among others.
The applicability of these deductions varies significantly between the two tax regimes:
 Old Tax Regime: Under this regime, individuals have the option to claim a
comprehensive range of deductions available under Sections 80C to 80U, subject to
their respective conditions and limits. This regime uses tax deductions as a means to
achieve broader economic and social objectives, such as promoting long-term savings,
encouraging health insurance, and supporting education and housing.
 New Tax Regime (Section 115BAC): In stark contrast, the new tax regime offers
significantly fewer deductions. Only a limited set of deductions are permitted,
including:
o Deduction from Income from House Property on interest paid on housing loan
for let-out property (actual value without limit).
o Deduction towards employer's contribution to the Pension Scheme of Central
Government (Section 80CCD(2)).
o Deduction for contributions to the Agnipath Scheme and Agniveer Corpus
Fund (Section 80CCH).
This stark difference signifies a major policy shift, where the new regime prioritizes lower tax
rates and simplification, moving away from using the tax code as a primary tool for
behavioral nudges through specific deductions.
It is important to note that while the Income Tax Department does not typically require proof
of these deductions at the time of filing the income tax return, taxpayers are legally obligated
to maintain all supporting documents. These proofs must be produced before the department
if any query arises regarding the claimed deductions. Failure to provide legitimate proof can
lead to notices, heavy penalties, and late fees. This implies a system of trust-based
compliance with retrospective verification, placing the onus of maintaining accurate records
squarely on the taxpayer.
B. Key Chapter VI-A Deductions for Individuals (Old Tax Regime Focus)
For individuals opting for the Old Tax Regime, a wide array of deductions are available to
reduce their taxable income. Some of the most common and impactful sections include:
 Section 80C, 80CCC, and 80CCD(1): These sections collectively allow a combined
deduction limit of ₹1.5 lakh for various investments and expenditures. Eligible
investments include contributions to Employee Provident Fund (EPF), Public
Provident Fund (PPF), Life Insurance Policy Premiums, Equity Linked Savings
Schemes (ELSS), Unit Linked Insurance Plans (ULIP), National Savings Certificates
(NSC), payment of tuition fees for children, and principal repayment of housing
loans. Section 80CCC specifically covers contributions to certain pension schemes,
and 80CCD(1) covers contributions to the Central Government's pension funds.
 Section 80CCD(1B): This section allows an additional deduction of up to ₹50,000
for contributions made to the National Pension System (NPS), NPS Swavalamban,
and Atal Pension Yojana (APY), independent of the ₹1.5 lakh limit under Section
80C/CCC/CCD(1).
 Section 80CCD(2): This deduction is for the employer's contribution to the
employee's Pension Scheme of the Central Government. The deduction is limited to
10% of the salary for public sector undertakings/other employees and 14% for
Central/State Government employees.
 Section 80D: This section permits deductions for health insurance premiums and
preventive health check-ups. A deduction of up to ₹25,000 is available for premiums
paid for self, spouse, and dependent children. An additional ₹25,000 (or ₹50,000 if
parents are senior citizens) can be claimed for premiums paid for parents. A sub-limit
of ₹5,000 is for preventive health check-ups. Additionally, medical expenditure
incurred on a senior citizen can be claimed up to ₹50,000 if no health insurance
premium is paid for them.
 Section 80DD: A flat deduction of ₹75,000 is allowed for expenses incurred on the
maintenance or medical treatment of a dependent with a disability. For severe
disability, the deduction increases to ₹1,25,000.
 Section 80DDB: This section provides a deduction for medical treatment of specified
diseases for self or dependents. The deduction limit is ₹40,000, which increases to
₹1,00,000 for senior citizens.
 Section 80E: This deduction is available for the interest paid on a loan taken for
higher education of self or a relative. There is no upper limit on the amount of interest
that can be claimed, and the deduction can be claimed for a maximum of eight years.
 Section 80EE, 80EEA, and 80EEB: These sections provide specific deductions for
interest paid on home loans (80EE and 80EEA, with varying conditions and limits for
affordable housing) and for loans taken to purchase electric vehicles (80EEB). These
deductions reflect targeted government incentives for specific economic activities.
 Section 80G: Allows deductions for donations made to prescribed funds, charitable
institutions, etc. The deduction amount can be 100% or 50% of the donation, with or
 without a qualifying limit, depending on the recipient institution. Cash donations
exceeding ₹2,000 are not eligible for deduction.
 Section 80GG: This deduction is for rent paid for a house, applicable to self-
employed individuals or those not receiving House Rent Allowance (HRA). The
deduction is limited to the least of: rent paid reduced by 10% of total income, ₹5,000
per month, or 25% of total income. Form 10BA is mandatory for claiming this
deduction.
 Section 80TTA and 80TTB: Section 80TTA allows a deduction of up to ₹10,000 for
interest received on savings bank accounts for non-senior citizens. Section 80TTB,
specifically for resident senior citizens, allows a higher deduction of up to ₹50,000
for interest received on deposits (including savings accounts, fixed deposits, etc.).
 Section 80U: A flat deduction of ₹75,000 is available for a resident individual
taxpayer with a disability. For severe disability, the deduction increases to ₹1,25,000.
These deductions under the Old Tax Regime significantly influence investment behavior and
financial planning, as they incentivize taxpayers to channel their savings into specific
avenues that offer tax benefits.
IV. Computation of Total Income and Tax Liability of Individuals
The computation of an individual's total income and subsequent tax liability involves a
structured, step-by-step process that considers various income sources, deductions, and
applicable tax rates.
A. Steps for Computation
The calculation of an individual's tax liability in India follows a systematic approach:
1. Determine Residential Status: The first step is to ascertain the individual's
residential status (Resident and Ordinarily Resident, Resident but Not Ordinarily
Resident, or Non-Resident) for the relevant financial year, as this determines the
scope of income taxable in India.
2. Calculate Income under Each Head: Income is then computed separately under
each of the five heads: Salary, House Property, Profits and Gains from Business or
Profession (PGBP), Capital Gains, and Other Sources. This involves applying specific
rules, exemptions, and deductions pertinent to each income category.
3. Aggregate Gross Total Income (GTI): The incomes computed under all five heads
are then aggregated to arrive at the Gross Total Income.
4. Deduct Chapter VI-A Deductions: From the Gross Total Income, eligible
deductions under Chapter VI-A (Sections 80C to 80U) are subtracted. The choice of
tax regime (Old or New) significantly impacts the availability and quantum of these
deductions. This step yields the Net Taxable Income.
5. Apply Applicable Tax Slab Rates: The Net Taxable Income is then subjected to the
income tax slab rates, which vary based on the individual's age (for the Old Tax
Regime) and the chosen tax regime (Old or New).
 6. Apply Rebates, Surcharge, and Cess:
o Rebate under Section 87A: Resident individuals are eligible for a rebate,
which reduces their income tax liability. Under the Old Tax Regime, the rebate
is 100% of income tax or ₹12,500, whichever is less, for total income up to ₹5
lakh. Under the New Tax Regime, the rebate is 100% of income tax or
₹20,000, whichever is less, for total income up to ₹7 lakh.
o Surcharge: A surcharge is levied on the income tax if the total income
exceeds certain thresholds (e.g., ₹50 lakh, ₹1 crore, ₹2 crore, ₹5 crore). The
rates of surcharge vary based on income levels and the chosen tax regime.
Marginal relief can be claimed from surcharge if income slightly exceeds these
thresholds, preventing a disproportionate increase in tax liability.
o Health & Education Cess: A 4% cess is levied on the income tax plus
surcharge (if applicable) in both tax regimes.
7. Adjust for TDS/TCS and Advance Tax: Finally, any Tax Deducted at Source (TDS),
Tax Collected at Source (TCS), or advance tax already paid during the financial year
is subtracted from the computed tax liability to arrive at the net tax payable or
refundable.
This systematic computation ensures that all income sources are accounted for, eligible
deductions are applied, and the correct tax rates, including any additional levies, are imposed.
The iterative nature of tax planning often involves estimating income and deductions to
optimize the final tax liability.
B. Tax Regimes and Slab Rates (AY 2025-26)
The Finance Act 2024 made the new tax regime the default option, but eligible taxpayers can
opt out and choose the old tax regime. For non-business cases, the option to change the
default tax regime can be exercised every year directly in the ITR before the due date under
Section 139(1). For business and profession cases, to opt out of the default tax regime, Form-
10-IEA must be furnished before the due date under Section 139(1). Withdrawal of this
option (re-entering the new tax regime) is available only once in a lifetime in a subsequent
Assessment Year by furnishing Form No.10-IEA. This policy provides flexibility for
taxpayers to choose the regime that best suits their financial situation, depending on their
income structure and potential deductions.
Tax rates vary significantly based on age and the chosen regime (Old vs. New u/s 115BAC)
for Assessment Year 2025-26.
i. Old Tax Regime (AY 2025-26)

This regime allows for a wide range of deductions and exemptions, making it beneficial for
individuals with substantial eligible investments and expenses. Age-based slab benefits are available
under this regime.

For Individuals below 60 years of age and HUF:

Income Tax Slab Income Tax Rate Surcharge

Up to ₹2,50,000 Nil Nil

₹2,50,001 - ₹5,00,000 5% above ₹2,50,000 Nil

₹5,00,001 - ₹10,00,000 ₹12,500 + 20% above ₹5,00,000 Nil

₹10,00,001 - ₹50,00,000 ₹1,12,500 + 30% above ₹10,00,000 Nil

₹50,00,001 - ₹1,00,00,000 ₹1,12,500 + 30% above ₹10,00,000 10%

₹1,00,00,001 - ₹2,00,00,000 ₹1,12,500 + 30% above ₹10,00,000 15%

Above ₹2,00,00,000 ₹1,12,500 + 30% above ₹10,00,000 25%

Above ₹5,00,00,000 ₹1,12,500 + 30% above ₹10,00,000 37%

For Senior Citizens (60 years or more but less than 80 years of age):

Income Tax Slab Income Tax Rate Surcharge

Up to ₹3,00,000 Nil Nil

₹3,00,001 - ₹5,00,000 5% above ₹3,00,000 Nil

₹5,00,001 - ₹10,00,000 ₹10,000 + 20% above ₹5,00,000 Nil

₹10,00,001 - ₹50,00,000 ₹1,10,000 + 30% above ₹10,00,000 Nil

₹50,00,001 - ₹1,00,00,000 ₹1,10,000 + 30% above ₹10,00,000 10%

₹1,00,00,001 - ₹2,00,00,000 ₹1,10,000 + 30% above ₹10,00,000 15%

Above ₹2,00,00,000 ₹1,10,000 + 30% above ₹10,00,000 25%

Above ₹5,00,00,000 ₹1,10,000 + 30% above ₹10,00,000 37%

For Super Senior Citizens (80 years of age or more):

Income Tax Slab Income Tax Rate Surcharge

Up to ₹5,00,000 Nil Nil

₹5,00,001 - ₹10,00,000 20% above ₹5,00,000 Nil

₹10,00,001 - ₹50,00,000 ₹1,00,000 + 30% above ₹10,00,000 Nil

₹50,00,001 - ₹1,00,00,000 ₹1,00,000 + 30% above ₹10,00,000 10%

₹1,00,00,001 - ₹2,00,00,000 ₹1,00,000 + 30% above ₹10,00,000 15%

Above ₹2,00,00,000 ₹1,00,000 + 30% above ₹10,00,000 25%

Above ₹5,00,00,000 ₹1,00,000 + 30% above ₹10,00,000 37%

ii. New Tax Regime (u/s 115BAC) (AY 2025-26)

This regime features lower tax rates but offers significantly fewer exemptions and deductions. It is
the default regime for AY 2025-26 onwards. Age-based slab benefits are not available under this
regime.

For All Individuals (irrespective of age):

Income Tax Slab Income Tax Rate Surcharge

Up to ₹3,00,000 Nil Nil

₹3,00,001 - ₹7,00,000 5% above ₹3,00,000 Nil

₹7,00,001 - ₹10,00,000 ₹20,000 + 10% above ₹7,00,000 Nil

₹10,00,001 - ₹12,00,000 ₹50,000 + 15% above ₹10,00,000 Nil

₹12,00,001 - ₹15,00,000 ₹80,000 + 20% above ₹12,00,000 Nil

Above ₹15,00,000 ₹1,40,000 + 30% above ₹15,00,000 Nil

₹50,00,001 - ₹1,00,00,000 (Income Tax as above) 10%

₹1,00,00,001 - ₹2,00,00,000 (Income Tax as above) 15%

Above ₹2,00,00,000 (Income Tax as above) 25%

Above ₹5,00,00,000 (Income Tax as above) 37%

V. Permanent Account Number (PAN) and Due Date of Filing Income Tax Return
Compliance with income tax regulations necessitates the use of specific identification tools
and adherence to prescribed timelines for filing returns.
A. Permanent Account Number (PAN)
Permanent Account Number (PAN) is a ten-digit unique alphanumeric number issued by the
Income Tax Department, typically in the form of a laminated plastic card. PAN serves as a
crucial identifier, enabling the department to link all financial transactions of an individual
with their tax records. These transactions include tax payments, Tax Deducted at Source
(TDS)/Tax Collected at Source (TCS) credits, income tax returns, specified financial
transactions, and all correspondence with the Income Tax Department.
The necessity of PAN extends beyond direct tax interactions. It has been made compulsory
for numerous other financial transactions, such as opening bank accounts, depositing cash
exceeding ₹50,000 in a bank account, opening Demat accounts, transacting in immovable
properties (exceeding ₹10 lakh), dealing in securities (exceeding ₹1 lakh per transaction),
and making payments exceeding ₹50,000 to hotels or for foreign travel. This comprehensive
requirement positions PAN as a central identifier for tracking an individual's financial
activities across various sectors, significantly enhancing transparency and facilitating the
detection of undeclared income or assets. It is mandatory to quote PAN on the return of
income, all challans for tax payments, and all correspondence with any income tax authority.
Since September 1, 2019, individuals who have linked their Aadhaar number with PAN can
furnish their Aadhaar number in lieu of PAN for transactions where quoting PAN is
mandatory.
B. Due Dates for Filing Income Tax Return (ITR)
The deadline for filing Income Tax Returns (ITR) varies depending on the category of
taxpayer and the nature of their income. For Assessment Year 2025-26 (Financial Year 2024-
25), the due date for filing ITRs for individuals, Hindu Undivided Families (HUFs), and other
taxpayers whose accounts are not subject to tax audit was originally July 31, 2025. However,
this deadline has been extended to September 15, 2025, due to modifications made to the
Income Tax Act in the Union Budget 2024 and to allow sufficient time for TDS statements to
reflect.
Other key due dates include:
 Taxpayers whose accounts are required to be audited: The last date to file ITR is
October 31, 2025. This typically includes companies, proprietorship firms, and
working partners of a firm, who are required to submit their audit report by September
30.
 Taxpayers with international transactions: The deadline for filing ITR is
November 30, 2025, for taxpayers who need to furnish a report under Section 92E,
which is necessary for those engaged in international transactions.
In addition to the original due dates, the Income Tax Act provides provisions for filing returns
after the expiry of the due date:
 Belated ITR: Taxpayers can file a belated ITR after the original due date, but before
December 31 of the assessment year. For FY 2024-25 (AY 2025-26), the last date to
file a belated ITR is December 31, 2025.
 Updated ITR (ITR-U): Effective April 1, 2025, taxpayers have an extended period
of up to 48 months (previously 24 months) from the end of the relevant assessment
year to file an updated return. For AY 2025-26, the last date to file ITR-U is March
31, 2030. However, filing an updated return incurs an additional tax penalty, which
varies based on the year of filing.
Missing the original deadline for filing ITR can lead to penalties and interest charges.
Penalties for late filing can be up to ₹5,000, and interest is charged on the unpaid tax amount.
Timely filing is crucial to avoid these financial repercussions and ensure compliance.
VI. Provisions Related to Advance Payment of Tax
Advance tax is a system designed to ensure that taxpayers pay their income tax liability
throughout the financial year, rather than as a lump sum at the end. This "pay-as-you-earn"
system is crucial for government revenue management and for taxpayers to manage their cash
flow.
A. Applicability and Threshold
Advance tax payments are required under the Income Tax Act, 1961, when a taxpayer's
estimated tax liability for the financial year exceeds ₹10,000 after accounting for Tax
Deducted at Source (TDS). This requirement applies to individuals, businesses, and
professionals who anticipate such a tax liability. This includes salaried individuals with
additional income streams (e.g., rental income, interest income), freelancers, and self-
employed professionals.
A notable exemption exists for resident senior citizens (individuals 60 years or older) who do
not have income from business or profession. These individuals are not required to pay
advance tax.
B. Installment Due Dates (AY 2025-26)
Advance tax is payable in four installments throughout the financial year, based on a
percentage of the estimated total tax liability. For Assessment Year 2025-26 (Financial Year
2024-25), the due dates and required percentages are:
 1st Installment: 15% of the total tax liability, due by June 15, 2025.
 2nd Installment: 45% of the total tax liability, due by September 15, 2025.
 3rd Installment: 75% of the total tax liability, due by December 15, 2025.
 4th Installment: 100% of the total tax liability, due by March 15, 2026.
Timely payment of these installments is essential not only for government revenue collection
but also for taxpayers to avoid a large tax bill at the time of filing their annual return, which
can otherwise impact their financial planning and cash flow.
C. Consequences of Non-Compliance
Failing to pay advance tax or underpaying any installment can lead to significant penalties
and interest charges under the Income Tax Act:
 Interest under Section 234B: If a taxpayer fails to pay advance tax or if the advance
tax paid is less than 90% of the assessed tax, interest is levied under Section 234B.
This interest is calculated at 1% per month or part of a month on the shortfall amount
from April 1st of the assessment year until the date of actual payment.
 Interest under Section 234C: This section applies when a taxpayer fails to pay the
required installments of advance tax by their respective due dates or underpays them.
Interest is charged at 1% per month for the period of delay on the shortfall amount in
each installment. This interest can accumulate quickly if multiple installments are
missed or underpaid.
 Late Payment Penalty: In addition to interest, a penalty of up to ₹5,000 can be
levied if advance tax payments are not made on time, depending on the
circumstances.
Beyond monetary penalties, non-payment or late payment of advance tax can have other legal
consequences :
 Impact on Income Tax Return (ITR) Filing: Insufficient advance tax payments lead
to higher tax liabilities at the time of ITR filing, as the remaining dues and
accumulated penalties must be paid.
  Potential Scrutiny by the Income Tax Department: Non-compliance can trigger
scrutiny by the Income Tax Department, leading to a more detailed review of tax
filings and potential audits.
 Loss of Interest on Refunds: If a taxpayer is due for a refund, failure to make timely
advance tax payments can result in the loss of interest on that refund, and may also
delay the refund process.
 Damage to Financial Credibility: Frequent late tax payments or penalties can
impact an individual's financial credibility, as tax compliance is a factor considered by
financial institutions and lenders.
To avoid these financial and legal repercussions, it is crucial for taxpayers to accurately
estimate their income and tax liability and ensure timely payment of advance tax installments,
potentially by consulting a tax professional.
VII. New Tax Regime for Individuals (Section 115BAC)
The New Tax Regime, introduced under Section 115BAC of the Income Tax Act, represents a
significant shift in India's individual taxation policy, offering an alternative to the traditional
tax structure.
A. Key Features and Default Status
The Finance Act 2024 made the new tax regime the default system for individuals from
Assessment Year 2025-26 onwards. This means that unless an individual explicitly opts for
the Old Tax Regime, their income will automatically be taxed under the provisions of Section
115BAC. The primary appeal of this regime lies in its lower tax rates compared to the Old
Tax Regime, particularly for certain income brackets. However, this benefit comes with a
fundamental trade-off: taxpayers choosing the new regime forgo the vast majority of
exemptions and deductions available under the old regime. This policy aims to simplify the
tax structure and compliance process by reducing the need for detailed record-keeping related
to various deductions.
B. Opting In/Out
The process for choosing between the two regimes depends on the nature of the individual's
income:
 For individuals without business or profession income: These taxpayers have the
flexibility to opt out of the default new tax regime and choose the old tax regime on a
year-by-year basis. This choice can be exercised directly in their Income Tax Return
(ITR) before the due date for filing.
 For individuals with business or profession income: To opt out of the default new
tax regime, these taxpayers must furnish Form 10-IEA before the due date for filing
their ITR under Section 139(1). Once this option is exercised, re-entering the new tax
regime (i.e., withdrawing the option to be taxed under the old regime) is available
only once in a lifetime in a subsequent Assessment Year by furnishing Form No.10-
IEA. This stricter condition for business/profession income cases reflects the
complexity and potential for frequent changes in income and expenses in such
scenarios. The strategic choice between regimes requires careful consideration of an
 individual's specific income structure, eligible investments, and expenses, as it
directly impacts their overall tax liability.
C. Deductions and Exemptions Allowed
A defining characteristic of the new tax regime is the significant reduction in available
deductions and exemptions compared to the Old Tax Regime. Only a limited set of
deductions are permitted under Section 115BAC :
 Section 24(b): Deduction from Income from House Property on interest paid on
housing loan for let-out property. The actual value of interest paid is deductible
without any upper limit.
 Section 80CCD(2): Deduction towards employer's contribution to the Pension
Scheme of the Central Government (limited to 14% of salary).
 Section 80CCH: Deduction for contributions made to the Agnipath Scheme and
Agniveer Corpus Fund.
This contrasts sharply with the extensive list of deductions available under Chapter VI-A in
the Old Tax Regime (e.g., Sections 80C, 80D, 80G, HRA, LTA). The simplified structure of
the new regime aims to reduce the compliance burden for many taxpayers who may not have
significant investments or expenses eligible for deductions under the old regime.
D. Tax Slabs (AY 2025-26)
The tax slabs under the new tax regime (Section 115BAC) are uniform for all individuals,
irrespective of their age. This means that the higher basic exemption limits and differentiated
slab rates for senior and super senior citizens, which are features of the Old Tax Regime, are
not available under the new regime. The tax slabs for Assessment Year 2025-26 are as
follows:
Income Tax Slab Income Tax Rate Surcharge

Up to ₹3,00,000 Nil Nil

₹3,00,001 - ₹7,00,000 5% above ₹3,00,000 Nil

₹7,00,001 - ₹10,00,000 ₹20,000 + 10% above ₹7,00,000 Nil

₹10,00,001 - ₹12,00,000 ₹50,000 + 15% above ₹10,00,000 Nil

₹12,00,001 - ₹15,00,000 ₹80,000 + 20% above ₹12,00,000 Nil

Above ₹15,00,000 ₹1,40,000 + 30% above ₹15,00,000 Nil

₹50,00,001 - ₹1,00,00,000 (Income Tax as above) 10%

₹1,00,00,001 - ₹2,00,00,000 (Income Tax as above) 15%

Above ₹2,00,00,000 (Income Tax as above) 25%

Above ₹5,00,00,000 (Income Tax as above) 37%

A rebate under Section 87A is available for resident individuals with total income up to ₹7
lakh, allowing a 100% tax rebate up to a maximum of ₹20,000. This effectively means that
individuals with taxable income up to ₹7 lakh under the new regime pay no income tax. The
simplified structure and lower rates are designed to reduce the overall tax burden for a
significant segment of taxpayers, particularly those who do not utilize many deductions.
VIII. Conclusion
The Indian income tax system for individuals is a dynamic and meticulously structured
framework. Its foundation rests on constitutional authority and the comprehensive Income
Tax Act, 1961, which defines taxable income, permissible deductions, and the process of tax
liability computation. A key principle governing individual taxation is residential status,
which dictates the scope of income subject to tax in India.
The introduction of the New Tax Regime as the default option marks a significant policy
evolution, aiming for simplification through lower tax rates and fewer deductions, in contrast
to the Old Tax Regime which incentivizes specific savings and expenditures through a
broader array of tax benefits. This dual regime necessitates a strategic decision by
individuals, weighing the benefits of lower rates against the advantages of various deductions
for their specific financial circumstances.
Compliance instruments like the Permanent Account Number (PAN) serve as vital identifiers,
linking all financial transactions to an individual's tax profile, thereby enhancing transparency
and preventing evasion. Adherence to prescribed due dates for filing Income Tax Returns and
making advance tax payments is paramount to avoid penalties, interest charges, and potential
scrutiny from the tax authorities. The provisions for advance tax underscore a "pay-as-you-
earn" approach, crucial for both government revenue management and individual financial
discipline.
In essence, navigating individual income tax in India requires a thorough understanding of its
five heads of income, the nuances of available deductions under different regimes, the step-
by-step computation process, and strict adherence to compliance mandates. The continuous
evolution of tax laws, as evidenced by the changes in tax regimes and due dates, emphasizes
the necessity for individuals to remain informed and proactive in their tax planning and
compliance efforts.