Income Tax in India – A Complete Guide (FY 2024-25)
Income tax is a direct tax levied by the government on an individual's or entity's income. It is governed by the Income Tax Act, 1961 and is applicable to individuals, businesses, and other entities.
1. Income Tax Slabs & Rates (FY 2024-25)
Income tax is calculated based on income slabs under two tax regimes:
1️⃣ Old Tax Regime (with exemptions & deductions).
2️⃣ New Tax Regime (lower rates but fewer deductions).
🔹 New Tax Regime (Default)
Income Slab (₹) Tax Rate Up to 3,00,000 Nil 3,00,001 - 6,00,000 5% 6,00,001 - 9,00,000 10% 9,00,001 - 12,00,000 15% 12,00,001 - 15,00,000 20% Above 15,00,000 30%
✅ Standard Deduction of ₹50,000 is available.
✅ Rebate under Section 87A – No tax if income is up to ₹7 lakh.
🔹 Old Tax Regime (Optional)
Income Slab (₹) Tax Rate Up to 2,50,000 Nil 2,50,001 - 5,00,000 5% 5,00,001 - 10,00,000 20% Above 10,00,000 30%
✅ Allows deductions under Sections 80C, 80D, HRA, etc.
✅ Rebate under Section 87A – No tax if income is up to ₹5 lakh.
2. How to Calculate Income Tax?
Total Taxable Income Formula:
Gross Income – Deductions & Exemptions = Taxable Income
1️⃣ Calculate Total Income – Salary, business income, rental income, interest, etc.
2️⃣ Subtract Exemptions – HRA, LTA, Standard Deduction (₹50,000), etc.
3️⃣ Deduct Tax-Saving Investments – 80C, 80D, 80E, etc.
4️⃣ Apply Tax Rate Slab – Based on chosen tax regime.
3. Deductions Under Income Tax Act
Deductions reduce taxable income and help in tax saving.
🔹 Section 80C – Up to ₹1.5 Lakh
Best tax-saving investments:
PPF (Public Provident Fund)
EPF (Employee Provident Fund)
NSC (National Savings Certificate)
Life Insurance Premium
5-Year Fixed Deposit (FD)
ELSS (Equity Linked Savings Scheme) Mutual Funds
🔹 Section 80D – Health Insurance Deduction
Who is Covered? Deduction (₹) Self, Spouse, Children ₹25,000 Parents (<60 years) ₹25,000 Senior Citizen Parents ₹50,000 Self + Senior Citizen Parents ₹75,000
🔹 Section 80E – Education Loan Interest
Deduction on interest paid on education loans (no upper limit).
🔹 Section 24(b) – Home Loan Interest
Up to ₹2 lakh deduction on home loan interest for a self-occupied house.
🔹 House Rent Allowance (HRA)
Deduction on rent paid if you live in a rented house.
4. Tax Rebate & Exemptions
✅ Rebate Under Section 87A – No tax if income is up to ₹7 lakh (new regime) or ₹5 lakh (old regime).
✅ Agricultural Income – Fully exempt from tax.
✅ Gratuity & Leave Encashment – Exempt up to limits.
5. Advance Tax & TDS (Tax Deducted at Source)
TDS is deducted at source from salary, interest, etc.
If total tax liability exceeds ₹10,000 in a year, you must pay advance tax.
Advance Tax Payment Due Dates:
15% by June 15
45% by September 15
75% by December 15
100% by March 15
6. How to File Income Tax Returns (ITR)?
1️⃣ Choose the Correct ITR Form (ITR-1 for salaried, ITR-3 for business income).
2️⃣ Login to the Income Tax Portal – https://www.incometax.gov.in
3️⃣ Enter Income Details (Salary, rental, business income, etc.).
4️⃣ Claim Deductions & Tax Credits.
5️⃣ Verify Tax Paid (TDS, Advance Tax, etc.).
6️⃣ Submit and E-Verify Using Aadhaar OTP or Net Banking.
7. Penalty for Late Filing
₹5,000 fine if ITR is filed after 31st July (₹1,000 if income is below ₹5 lakh).
Interest @ 1% per month for unpaid taxes.
8. Best Tax-Saving Strategies
✅ Invest in PPF, ELSS, NPS for 80C benefits.
✅ Buy health insurance to claim 80D deduction.
✅ Opt for HRA & home loan interest deduction.
✅ Use tax-free allowances like LTA, food coupons.
✅ File ITR on time to avoid penalties.
📌 Conclusion: Old vs. New Tax Regime – Which is Better?
Factor Old Tax Regime New Tax Regime Tax Rates Higher Lower Deductions & Exemptions ✅ Yes ❌ No Standard Deduction ✅ ₹50,000 ✅ ₹50,000 Best For Those with high deductions (80C, 80D, etc.) Those with low deductions or high salary
Would you like help calculating your income tax or choosing the best tax-saving options? 😊