What is Income Tax
Income tax,taxes,taxable income
Income Tax in India: Slabs, Rules & Who Should Pay
What is Income Tax?
Income tax is a duty charged on the yearly income earned by a person. How much tax paid depends on how much money you earn as income over a financial year. One can complete income tax payments, TDS/TCS payments, and Non-TDS/TCS payments online. All taxpayers must fill in the necessary details to make these payments. The whole process becomes straightforward and quick.
Income tax for FY 2022-23 applies to all residents whose yearly income exceeds Rs.2.5 lakh p.a. The highest amount of tax an individual could pay is 30% of their income, plus cess at 4%, if their income is more than Rs.10 lakh p.a. (See the updated FY 2025-26 slabs further below, which have since replaced these figures.)
Who Should Pay Income Tax?
It is required to file an ITR for individuals if the gross total income is over Rs.2,50,000 in a financial year. This limit exceeds Rs.3,00,000 for senior citizens and Rs.5,00,000 for very senior citizens. The entities listed below are required to pay tax and file their income tax returns:
1. Artificial Judicial Persons
2. Corporate firms
3. Association of Persons (AOPs)
4. Hindu Undivided Families (HUFs)
5. Companies
6. Local Authorities
7. Body of Individuals (BOIs)
Income Tax Slab (FY 2022-23, for reference)
| Income Tax Slab | Tax Rate |
|---|---|
| Up to Rs.2,50,000 | Nil |
| Rs.2,50,001 to Rs.5,00,000 | 5% |
| Rs.5,00,001 to Rs.7,50,000 | 10% |
| Rs.7,50,001 to Rs.10,00,000 | 15% |
| Rs.10,00,001 to Rs.12,50,000 | 20% |
| Rs.12,50,001 to Rs.15,00,000 | 25% |
| Above Rs.15,00,000 | 30% |
Taxpayers and Income Tax Slab Rates
In the Union Budget 2020, the Finance Minister of India announced a new income tax regime. However, the new income tax regime was optional, and individuals could either opt for the new regime or file their taxes according to the old regime.
Depending on the age of the individual, resident individual taxpayers were traditionally divided into three categories:
Individuals who are less than 60 years of age.
Senior citizens who are over 60 years of age and under 80 years old.
Very senior citizens who are over 80 years of age.
Income Tax Slab for Individuals Under 60 (Old Regime Reference)
| Income Tax Slab | Tax Rate |
|---|---|
| Up to Rs.2,50,000 | Nil |
| Rs.2,50,001 to Rs.5,00,000 | 5% |
| Rs.5,00,001 to Rs.10,00,000 | 20% of the amount exceeding Rs.5 lakh |
| Above Rs.10,00,000 | 30% of the amount exceeding Rs.10 lakh |
*An additional cess of 4% is applicable on the tax amount calculated above.
Advance Tax
The calculation of tax liability in advance and paying the tax to the government accordingly is called advance tax. There are certain deadlines for advance tax payments, which taxpayers should track through each financial year.
Updated Income Tax Slabs for FY 2025-26 (AY 2026-27)
The Union Budget 2025 introduced a major overhaul of the new tax regime, effective from 1st April 2025. These are the current slabs that have replaced the older figures referenced above:
| Income Tax Slab (New Regime) | Tax Rate |
|---|---|
| Up to Rs.4,00,000 | Nil |
| Rs.4,00,000 – Rs.8,00,000 | 5% |
| Rs.8,00,000 – Rs.12,00,000 | 10% |
| Rs.12,00,000 – Rs.16,00,000 | 15% |
| Rs.16,00,000 – Rs.20,00,000 | 20% |
| Rs.20,00,000 – Rs.24,00,000 | 25% |
| Above Rs.24,00,000 | 30% |
Rebate increased to βΉ60,000: Under Section 87A, the rebate has been raised from βΉ25,000 to βΉ60,000. This means individuals with a net taxable income of up to βΉ12 lakh pay zero income tax under the new regime.
Effectively tax-free up to βΉ12.75 lakh for salaried individuals: Combined with the βΉ75,000 standard deduction (up from βΉ50,000), salaried taxpayers earning up to βΉ12.75 lakh have no tax liability.
Basic exemption limit raised: The basic exemption limit under the new regime has increased from βΉ3 lakh to βΉ4 lakh, offering relief to lower-income earners and reducing the number of people required to file returns.
New regime remains the default: The new tax regime continues to be the default option; individuals without business income can still opt for the old regime if it works out more favourably for them.
Old regime largely unchanged: Under the old regime, the basic exemption remains βΉ2.5 lakh, with the βΉ12,500 rebate under Section 87A still applicable for incomes up to βΉ5 lakh, and various deductions (like 80C, 80D, HRA) continuing to be available.
Note: Budget 2026 made no further changes to these slabs, rates, standard deduction, rebate, surcharge, or cess — so the FY 2025-26 figures above continue to apply for FY 2026-27 (AY 2027-28) as well.