Income tax is a tax charged on the annual income of an individual or business earned in a financial year.
The Income Tax system in India is governed by the Income Tax Act, 1961, which lays out the rules for calculation, assessment, and collection.
All taxpayers must submit an Income Tax Return (ITR) every year by the respective due dates to report their income and claim a tax refund if applicable.
Income tax in India is a direct tax levied on individuals and entities based on their income. Here’s a quick overview:
Purpose: Major source of government revenue to fund public services and infrastructure.
Residential Status: Tax liability depends on whether the taxpayer is resident, non-resident, or not ordinarily resident.
Income Categories: Salary, house property, business/profession, capital gains, and other sources.
Tax Slabs: Different rates based on income slabs; higher income = higher tax rates.
Filing: Filing the ITR annually is mandatory to avoid penalties.
Income Tax Forms List
There are different ITR forms to pay income tax in India that taxpayers can choose from, based on the type of income and nature of employment.
Fixed Deposit
Tax-saving fixed deposits are a low-risk savings tool with a guaranteed# return. Fixed deposits are time deposits that have a lock-in period of five years. The rate of interest can also differ from bank to bank. Five-year fixed deposits are the only type of savings deposit that is covered under Section 80C for tax* deductions.
Public Provident Fund
The Public Provident Fund is a government-backed savings scheme. It has a maturity period of 15 years. However, account owners are allowed to make withdrawals every year from the seventh financial year onward. It is suitable for long-term goals because of the lock-in periods. Moreover, it offers low risk and can be ideal for conservative investors. It also offers tax* deductions under Section 80C.
Unit Linked Insurance Plan (ULIP)
A Unit Linked Insurance Plan is a type of insurance product. However, apart from life insurance, it also allows investors to invest their money in the funds of their choice. This unique product secures the life insured financially while enabling them to fulfil various financial goals by investing in equity, debt, and hybrid funds. ULIPs have a five-year lock-in period, and their returns can vary based on the choice of funds and prevailing market conditions. However, they can be the most suitable for long-term goals like your child’s higher education, your retirement, and more. ULIPs offer tax* deductions under Section 80C and proceeds are exempt subject to conditions under Section 10(10D).
National Savings Certificate
The National Savings Certificate is another one of the Government of India-backed savings schemes. However, it can only be opened in a post office. It is primarily aimed at encouraging small to mid-income investors to save for their future needs. It is a low-risk plan with a guaranteed# return and tax* deductions under Section 80C.
Senior Citizen Savings Scheme
The Senior Citizen Savings Scheme is a special savings scheme for senior citizens. Only people over the age of 60 can use it to save for their retirement needs. Since it is aimed at senior citizens, it contains low risk. It also offers deductions subject to conditions prescribed under Section 80C*.
Life Insurance
Life insurance is a financial tool that offers financial protection against loss of life during the policy tenure. Life insurance offers guaranteed# payouts to the insured’s beneficiary in the case of an unfortunate event. There are several types of life insurance plans, such as term insurance, endowment insurance, annuity insurance, ULIPs, and more. All of these offer tax* benefits subject to conditions prescribed under Section 80C* and Section 10(10D)*.
Pension plans
Pension plans are a type of life insurance tool that offers dual benefits. These plans offer financial protection against loss of life during the policy term while allowing investors to build a retirement nest egg for their future needs. Pension plans also offer a guaranteed# return and can be used to create an assured stream of income after retirement. Additionally, they offer deductions subject to conditions prescribed under Section 80C* & 80CCC.
Health Insurance or Mediclaim
Health insurance is a type of insurance that offers financial protection against the treatment of illnesses and injuries. It can also be used to cover supplementary costs like ambulance expenses, pre- and post-hospitalisation care, preventative health check-ups, medicines, room rent at the hospital, and more. The premiums paid towards a life insurance plan qualify for deductions subject to conditions prescribed under Section 80D*. These deductions can be made for a policy for self, spouse, dependent children, and parents.
New Pension Scheme
The New Pension Scheme is a voluntary defined pension plan. The scheme has two accounts- Tier 1 and Tier 2. Tier 1 is mandatory for all government servants who joined the service on or after January 1, 2004. Tier 2 is an optional account. The scheme qualifies for deductions subject to conditions prescribed under Section 80C* and Section 80CCD*.
Tax-Saving Mutual Funds
Some mutual funds, like the Equity-Linked Savings Scheme (ELSS), also qualify for deductions subject to conditions prescribed under Section 80C*. ELSS funds invest in equity and equity-related securities and have lock-in period of three years. They can be ideal for high-risk investors with a long investment horizon as they are subject to market volatility. There is no guarantee of a return. However, they have delivered high gains over the long term.
| Up to 60 Years | 60-80 Years | Above 80 Years | |||
|---|---|---|---|---|---|
| Income Tax Slab | Rate | Income Tax Slab | Rate | Income Tax Slab | Rate |
| Up to ₹2.5L | NIL | Up to ₹3L | NIL | Up to ₹5L | NIL |
| ₹2.5L – ₹5L | 5% | ₹3L – ₹5L | 5% | ₹5L – ₹10L | 20% |
| ₹5L – ₹10L | 20% | ₹5L – ₹10L | 20% | Above ₹10L | 30% |
| Above ₹10L | 30% | Above ₹10L | 30% | ||
| Income Tax Slab | Rate |
|---|---|
| Up to ₹3L | NIL |
| ₹3L – ₹7L | 5% |
| ₹7L – ₹10L | 10% |
| ₹10L – ₹12L | 15% |
| ₹12L – ₹15L | 20% |
| Above ₹15L | 30% |
| Up to 60 Years | 60–80 Years | Above 80 Years | |||
|---|---|---|---|---|---|
| Income Tax Slab | Rate | Income Tax Slab | Rate | Income Tax Slab | Rate |
| Up to ₹2.5L | NIL | Up to ₹3L | NIL | Up to ₹5L | NIL |
| ₹2.5L – ₹5L | 5% | ₹3L – ₹5L | 5% | ₹5L – ₹10L | 20% |
| ₹5L – ₹10L | 20% | ₹5L – ₹10L | 20% | Above ₹10L | 30% |
| Above ₹10L | 30% | Above ₹10L | 30% | ||
| Income Tax Slab | Rate |
|---|---|
| Up to ₹4L | NIL |
| ₹4L – ₹8L | 5% |
| ₹8L – ₹12L | 10% |
| ₹12L – ₹16L | 15% |
| ₹16L – ₹20L | 20% |
| ₹20L – ₹24L | 25% |
| Above ₹24L | 30% |
What is advance tax?
Advance tax is the tax you pay on income accumulated from various sources. In India, earnings like salary, rent, business profits, capital gains, dividends, royalties, interest, and income from other sources classify as ‘income. Advance tax comes into play when your tax liability goes over Rs. 10.000 for a given financial year. However, if you are a salaried individual, then you need not worry about advance tax payments. It is because your employer typically deducts tax at source (TDS) from your monthly salary and pays it to the government on your behalf.
| Due Date | Advance Tax Payable |
|---|---|
| 15th June | 15% of total advance tax liability |
| 15th September | 45% of total advance tax liability (cumulative) |
| 15th December | 75% of total advance tax liability (cumulative) |
| 15th March | 100% of total advance tax liability (cumulative) |
| Category of Taxpayer | Due Date for Filing ITR |
|---|---|
| Individual / HUF / AOP / BOI (not liable for audit) | 31st July 2025 |
| Businesses (liable for audit) | 31st October 2025 |
| Assessees required to furnish report under Section 92E (transfer pricing) | 30th November 2025 |
| Revised or Belated Return for AY 2025–26 | 31st December 2025 |
| Updated Returns | 31st March 2028 (With in two years from the end of the relevant Assessment year) |
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