India income tax guide 2026: slabs, deductions and filing

What are the income tax slabs for FY 2025-26?

For FY 2025-26 (AY 2026-27), the new regime — now the default — runs from nil up to ₹4 lakh to 30% above ₹24 lakh across seven slabs, sweetened by a ₹75,000 standard deduction and the 87A rebate making income up to ₹12 lakh effectively tax-free. The old regime keeps its classic slabs with full deductions.

New regime (default, FY 2025-26):

• Up to ₹4,00,000 — nil
• ₹4,00,001 to ₹8,00,000 — 5%
• ₹8,00,001 to ₹12,00,000 — 10%
• ₹12,00,001 to ₹16,00,000 — 15%
• ₹16,00,001 to ₹20,00,000 — 20%
• ₹20,00,001 to ₹24,00,000 — 25%
• Above ₹24,00,000 — 30%

Old regime: nil to ₹2.5 lakh; 5% from ₹2.5–5 lakh; 20% from ₹5–10 lakh; 30% above ₹10 lakh — but with the full menu of deductions (80C, 80D, HRA, etc.). Senior citizens get higher basic exemption limits under the old regime.

Two big new-regime sweeteners for FY 2025-26: the standard deduction of ₹75,000 for salaried taxpayers, and the Section 87A rebate making total income up to ₹12 lakh effectively tax-free (with marginal relief just above). These two provisions are why the new regime now wins for most salaried taxpayers — but 'most' isn't 'all', as the next section shows.

Compute your own liability with the income tax calculator for India — it handles both regimes side by side. Tax provisions change with budgets; treat any guide (including this one) as orientation and verify against current law or a CA before filing.

New regime vs old regime: which should you choose?

Choose the new regime if your deductions are modest — lower rates plus ₹75,000 standard deduction and the ₹12 lakh rebate beat the old regime for most salaried taxpayers. Choose the old regime if you claim large deductions (80C, 80D, HRA, home loan interest) exceeding roughly ₹4–5 lakh. Compute both yearly — the winner changes with your finances.

The decision framework:

• New regime wins when: you claim few deductions beyond the standard deduction — typical for younger salaried employees without big 80C investments, HRA or home loans. Simpler, lower rates, no paperwork chasing.
• Old regime wins when: your deductions are substantial — maxed 80C (₹1.5 lakh), significant 80D health premiums, HRA in metro cities, home loan interest (up to ₹2 lakh on self-occupied). Add them up: if total deductions push old-regime taxable income well below new-regime liability, old wins.
• The crossover: roughly, deductions above ₹4–5 lakh (varies by income level) start favoring the old regime. But never guess — compute both.

Important mechanics: the new regime is now the default — you opt *into* the old regime when filing. Salaried individuals can switch regimes each year; businesses with certain incomes face restrictions on switching back. And regime choice interacts with other decisions: 80C investments, insurance purchases and HRA declarations should follow the regime math, not tradition.

Yearly ritual: every March, compute both regimes with current figures before making last-minute tax-saving investments. Buying an ELSS or insurance policy for 'tax saving' that doesn't change your regime outcome is just spending money — the calculator-first habit prevents it.

What are the most valuable deductions and exemptions?

The heavy hitters (old regime): 80C (₹1.5 lakh — EPF, PPF, ELSS, insurance premiums, home loan principal, tuition), 80D (health insurance for self, family and parents; higher limits for senior-citizen parents), HRA (rent-based formula), standard deduction (₹50,000 old / ₹75,000 new), and home loan interest (up to ₹2 lakh, self-occupied, old regime). NPS adds extra via 80CCD(1B).

80C — ₹1.5 lakh: the classic basket — EPF contributions, PPF deposits, ELSS mutual funds, life insurance premiums, principal on home loan, children's tuition fees, 5-year tax-saver FDs, Sukanya Samriddhi. Note the lock-ins: ELSS 3 years, PPF 15 years, tax-saver FD 5 years. Choose on merit (returns, goals), not just tax — a bad investment with tax benefit is still a bad investment.

80D — health insurance: premiums for self, spouse, children and parents; limits higher when parents are senior citizens. Health cover first, tax benefit second — being insured is the point.

HRA: for salaried rent-payers — the exempt amount is the least of (actual HRA received, 50%/40% of salary for metro/non-metro, rent minus 10% of salary). Keep rent receipts; landlord PAN needed above the threshold rent. No HRA but paying rent? Section 80GG may help.

Standard deduction: ₹75,000 (new regime) / ₹50,000 (old) for salaried — automatic, no proof needed.

Home loan interest: up to ₹2 lakh/year on self-occupied property (old regime). Combined with principal under 80C, home loans carry the biggest single deduction stack — one reason the old regime survives for homeowners.

NPS (80CCD): employer contributions plus an additional ₹50,000 under 80CCD(1B) over and above 80C — the extra deduction almost nobody claims but many qualify for. Model long-term wealth too: the PPF calculator and SIP calculator show what tax-saving investments actually grow into.

How does tax filing work in India?

File your Income Tax Return (ITR) on incometax.gov.in by the due date (typically 31 July for salaried individuals), choosing the correct ITR form (ITR-1 for simple salary income, ITR-2/3 for capital gains/business), reporting all income including interest and capital gains, and e-verifying within 30 days. Gather Form 16, AIS/TIS and investment proofs before starting.

The filing sequence:

• 1. Gather documents. Form 16 from employer, Annual Information Statement (AIS) and Taxpayer Information Summary (TIS) from the portal — cross-check these against your records; mismatches cause notices. Bank statements (interest income is taxable), capital gains statements, rent receipts, 80C/80D proofs.
• 2. Choose the regime. Compute both; opt out of the default new regime explicitly if old wins.
• 3. Pick the right ITR form. ITR-1 (Sahaj) for resident salary/pension income up to ₹50 lakh with simple capital gains; ITR-2 for bigger capital gains/no business income; ITR-3 for business/profession. Wrong form = defective return.
• 4. File and e-verify. Submit on the portal, then e-verify within 30 days (Aadhaar OTP, netbanking, or ITR-V by post). Unverified returns are treated as not filed.
• 5. Track the refund. Refunds arrive by bank account linked on the portal — keep details updated.

Common filing mistakes: not reporting savings interest ('it's small' — it's taxable), forgetting capital gains on mutual funds/shares, mismatching AIS figures, missing the e-verification step, and filing the wrong ITR form. Each generates notices; notices generate stress disproportionate to the fix.

Deadlines matter: belated returns face fees (₹5,000; ₹1,000 under ₹5 lakh income) and lose certain carry-forward benefits. Mark 31 July (individuals) in the calendar and file early — portal traffic in the last week is legendary for the wrong reasons.

What about capital gains, and how do salaried people save more tax?

Capital gains are taxed separately: equity held over a year faces LTCG (10% above the ₹1.25 lakh annual exemption), short-term gains at higher rates; debt and other assets have their own schedules. Salaried tax-saving beyond regime choice: maximize 80C/80D/NPS, use HRA fully, claim LTA, and structure salary (NPS contributions, allowances) tax-efficiently with HR.

Capital gains essentials: holding period decides long vs short term (12 months for listed equity); LTCG on equity above the annual exemption is taxed at the concessional rate; short-term equity gains at the higher rate. Debt funds and property follow different schedules — and indexation rules changed in recent budgets, so verify current provisions rather than relying on old knowledge. Harvest gains strategically: the annual LTCG exemption is use-it-or-lose-it, so booking gains up to the exemption yearly is free tax planning.

Salary structuring: talk to HR about tax-efficient components — employer NPS contribution (deductible), meal/transport allowances within exemption limits, LTA claims with actual travel. Two identical CTCs can have different take-home pay based on structure alone.

Gratuity and EPF: gratuity received on retirement/job change has tax exemptions up to limits (model it with the gratuity calculator); EPF interest and withdrawals have their own tax treatments depending on tenure and conditions — check before withdrawing.

The meta-strategy: tax planning is year-round, not March. Monthly: track 80C investments against the limit. Quarterly: review capital gains harvesting. Yearly: regime comparison in March. One focused hour per quarter beats a panicked March scramble — and usually finds money the scramble misses.

What records should Indian taxpayers maintain?

Maintain: Form 16s and salary slips, AIS/TIS downloads, investment and insurance proofs (80C/80D), rent receipts and landlord PAN, capital gains statements, bank statements, home loan certificates, and filed ITR acknowledgements — for at least 6–8 years. Digital copies in organized folders beat shoeboxes; scrutiny notices arrive years later, and 'I lost it' is not a defense.

The record system that survives scrutiny:

• Per financial year folder: Form 16, AIS/TIS, investment proofs, rent receipts, capital gains statements, donation receipts (80G), home loan certificate, ITR-V acknowledgement.
• Permanent file: PAN, Aadhaar, property purchase documents, long-term investment statements.
• Retention: 6–8 years minimum — assessments and scrutiny can reach back years.
• Format: scanned PDFs in cloud storage plus the originals that matter. Name files consistently: 'FY25-26_Form16.pdf'.

Special attention: AIS mismatches — the tax department's AIS now aggregates securities transactions, high-value deposits and more. Reconcile your return against AIS *before* filing; unexplained mismatches are the top notice trigger. Foreign assets (if applicable) have separate disclosure schedules with stiff penalties for omission — disclose meticulously.

And the standing disclaimer, seriously: tax law changes with every budget and this guide is orientation, not advice. For complex situations — business income, foreign assets, large capital gains, notices — a CA's fee is the cheapest money in the whole process. Use the income tax calculator for estimates; use a professional for decisions.

Frequently asked questions