Taxation is an important part of any economy and India, with its growing diversity across sectors, is no exception. Every income-earning individual should know about the country’s income tax system, how and which income is taxed, at what rate, and other nuances related to the process.
If you are new to understanding the Income Tax process, it is quite easy to find it overwhelming or complex in the beginning. So, to help you and other taxpayers, we have compiled and answered a list of Income Tax FAQs (frequently answered questions).
FAQs on Income Tax in India
From the dual tax regimes in India to the various forms of ITR and the multiple deductions and exemptions available, here are your key Income Tax FAQs answered.
What is income tax in India?
Income tax refers to the tax charged on the income of a citizen in one financial year. The Government of India charges income tax on the eligible citizens of the country as per rules laid down in the Income Tax Act of India of 1961.
What are the different categories of income which are taxed?
The Indian government has classified incomes into the following for a more organised income tax collection:
i. Salary
ii. Profit from business or profession
iii. Income from other sources (e.g., dividends on stocks, interest on securities, etc.)
iv. Income from house property
v. Income from capital gains
Does India have two tax regimes?
Presently, the tax structure in India has two tax regimes - the old and the new regime. The new tax regime, introduced in the Union Budget 2020, is a more simplified approach. The key differences between these regimes are as follows:
i. The old regime has higher tax slab rates; however, it offers a higher list of deductions and exemptions.
ii. The new regime has comparatively lower rates; however, one can claim a limited number of tax deductions and exemptions under it.
What are the different tax slabs under both regimes?
The slab rates for Financial Year (FY) 2024-25 and Assessment Year (AY) 2025-26 under both the regimes are as follows:
Tax Slabs
| Rates under the Old Tax Regime (FY 2024-25)
| Rates under the New Tax Regime (FY 2024-25)
|
Up to ₹2.5 lakh
| -
| -
|
From ₹2.5 lakh to ₹3 lakh
| 5%
| -
|
From ₹3 lakh to ₹5 lakh
| 5%
| 5%
|
From ₹5 lakh to ₹6 lakh
| 20%
| 5%
|
From ₹6 lakh to ₹7 lakh
| 20%
| 5%
|
From ₹7 lakh to ₹9 lakh
| 20%
| 10%
|
From ₹9 lakh to ₹10 lakh
| 20%
| 10%
|
From ₹10 lakh to ₹12 lakh
| 30%
| 15%
|
From ₹12 lakh to ₹15 lakh
| 30%
| 20%
|
₹15 lakh and above
| 30%
| 30%
|
Under the old regime, there are concessional tax rates for senior citizens (those over the age of 60 years) and super senior citizens (those over the age of 80 years).
What changes were made in the tax slabs in the Union Budget 2025?
The New Income-tax Bill 2025 was tabled during the Budget 2025. As per the new Finance Act 2025 rules, the revised rates effective from 1st April 2025 and relevant from FY 2025-26 are as follows:
Income Tax Slabs
| Rates under the New Tax Regime (FY 2025-26)
|
Up to ₹4 lakh
| -
|
From₹ 4 lakh to ₹8 lakh
| 5%
|
From ₹8 lakh to ₹12 lakh
| 10%
|
From ₹12 lakh to ₹16 lakh
| 15%
|
From ₹16 lakh to ₹20 lakh
| 20%
|
From ₹20 lakh to ₹24 lakh
| 25%
|
Above ₹24 lakh
| 30%
|
You can calculate your tax liability under both regimes with the help of an income tax calculator.
How can one save taxes in India?**
There are various ways to save taxes in India, depending on the tax regime you have chosen.
Some ways to save tax under the new regime include:
i. Standard deduction of up to ₹75,000 (along with the increased rebate of ₹60,000); this means that salaried individuals earning up to ₹12,75,000 have zero tax liability.
ii. Contribution to the Agniveer Corpus Fund, under Section 80CCH (2).
iii. Deduction on interest on home loan for a let-out property, under Section 24.
iv. Exemption on maturity amount of certain life insurance plans under Section 10 (10D), and more.
Some ways to save tax under the old regime include:
i. Standard deduction of up to ₹50,000.
ii. Deduction of up to ₹1.5 lakhs under Section 80C, via investments in PPF, ELSS, life insurance plans, NPS, tax-saver FDs, and more.
iii. Deduction of up to ₹25,000 (for those under 60 years) and ₹50,000 (for those over 60 years) against health insurance premiums under Section 80D, and more.
How to file an income tax return (ITR)?
You can file your ITR based on the following steps:
i. Visit the official Income Tax portal and log in.
ii. Click on ‘e-File’ > ‘Income Tax Return’ and select the correct assessment year, status, and ITR form (like ITR-1 for salaried individuals).
iii. Enter any required information that is not pre-filled, such as income, deductions (like 80C for life insurance plans), and taxes paid.
iv. Check all your details, verify them, and make the payment of the balance taxes (if required).
v. Submit and verify your return using Aadhaar OTP, net banking, or other available methods.
Make sure to calculate your taxes beforehand using the income tax calculator.
What happens if you do not file ITR on time?
If you do not file ITR on time, you could incur penalties in the form of interest on the outstanding amount. If you have missed filing ITR the first time or made any errors in the process, you can file an updated income tax return or ITR U.
Are there any special income tax slabs for women?
The existing tax structure in India does not allow any specific income tax slabs for women. The income slabs and their respective tax rates are uniform across all genders.
Understanding income tax regulations and processes can be challenging sometimes. However, these income tax FAQs can offer clarity on the taxation process in India. As each individual’s financial situation is different, their tax liability and other aspects will also vary. Hence, it is advisable to reach out to a tax expert for personalised guidance.
** Tax exemptions are as per applicable tax laws from time to time.
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