Income Tax in India — Complete Overview of the Direct Tax Regime
Pillar guide to India's income tax — ITR forms, old vs new regime, slabs, deductions, capital gains, 44AD/ADA presumptive, advance tax, 44AB audit.
What income tax is
The Income Tax Act, 1961 is the foundational statute for direct taxation in India. It levies tax on the income of individuals, HUFs (Hindu Undivided Families), partnership firms, LLPs (Limited Liability Partnerships), companies, trusts, AOPs (Associations of Persons), BOIs (Bodies of Individuals), and other juridical entities.
Income tax is administered by the Central Board of Direct Taxes (CBDT) under the Department of Revenue, Ministry of Finance. The operational arm is the Income Tax Department, with assessing officers, range commissioners, and the appellate hierarchy (Commissioner Appeals → ITAT → High Court → Supreme Court).
This guide is the pillar reference for the operational mechanics — slabs, regimes, ITR forms, deductions, tax audit, presumptive schemes, and the assessment cycle.
Who must file an ITR
Filing an Income Tax Return is mandatory in the following circumstances per Section 139 of the Income Tax Act:
- Individuals with total income above the basic exemption limit:
- ₹3 lakh under the new regime (default from FY 2023-24)
- ₹2.5 lakh / ₹3 lakh / ₹5 lakh (below 60 / 60-80 / 80+) under the old regime
- Companies and LLPs — regardless of income (loss returns also mandatory)
- Partnership firms — regardless of income (loss returns also mandatory)
- Trusts, charitable institutions, political parties — per Section 139(4A) / (4B) / (4C)
- Businesses subject to tax audit under Section 44AB
- Residents holding foreign assets / having foreign-source income — Schedule FA disclosure
- Persons claiming refund of TDS / advance tax / self-assessment tax
- Persons with deposits ≥ ₹1 crore in current accounts during the year
- Persons with foreign travel expenditure ≥ ₹2 lakh during the year
- Persons with electricity consumption ≥ ₹1 lakh during the year
- Persons whose TDS / TCS aggregates ₹25,000 or more (₹50,000 for senior citizens) during the year — Section 139(1) Seventh Proviso
Voluntary filing below the exemption limit is permitted and commonly done to claim TDS refunds or to maintain a return-filing history.
For service execution, see the ITR Filing service.
Tax slabs — old vs new regime
New tax regime (Section 115BAC, default from FY 2023-24 onwards)
For individuals (residents and HUFs), regardless of age:
| Total income | Tax rate |
|---|---|
| Up to ₹3,00,000 | NIL |
| ₹3,00,001 to ₹6,00,000 | 5% |
| ₹6,00,001 to ₹9,00,000 | 10% |
| ₹9,00,001 to ₹12,00,000 | 15% |
| ₹12,00,001 to ₹15,00,000 | 20% |
| Above ₹15,00,000 | 30% |
Plus surcharge (10% / 15% / 25% on income above ₹50 lakh / ₹1 cr / ₹2 cr respectively — surcharge cap of 25% under new regime versus 37% under old) and Health & Education Cess at 4% of (tax + surcharge).
Standard deduction: ₹75,000 (FY 2024-25 onwards) — the only major deduction available under the new regime for salaried taxpayers.
Section 87A rebate: full rebate up to ₹25,000 for taxpayers with total income up to ₹7 lakh — meaning effectively zero tax up to ₹7 lakh + standard deduction.
Old tax regime (rates applicable when opting out of new regime)
For individuals below 60:
| Total income | Tax rate |
|---|---|
| Up to ₹2,50,000 | NIL |
| ₹2,50,001 to ₹5,00,000 | 5% |
| ₹5,00,001 to ₹10,00,000 | 20% |
| Above ₹10,00,000 | 30% |
Senior citizens (60-80) get exemption up to ₹3 lakh; super-senior citizens (80+) get exemption up to ₹5 lakh.
Plus surcharge (10% / 15% / 25% / 37% on income above ₹50 lakh / ₹1 cr / ₹2 cr / ₹5 cr respectively) and Health & Education Cess at 4%.
Standard deduction ₹50,000 (salaried), Section 87A rebate up to ₹12,500 for income up to ₹5 lakh, plus full deductions under Sections 80C / 80D / HRA / home loan interest / etc.
For decision support, see Old vs New Tax Regime Comparison (coming soon).
ITR form selection
| Form | For whom |
|---|---|
| ITR-1 (Sahaj) | Resident individuals with income up to ₹50 lakh from salary + one house property + interest income (no capital gains, no business income, no foreign assets) |
| ITR-2 | Individuals + HUFs with capital gains, multiple properties, foreign income, or income > ITR-1 threshold (no business income) |
| ITR-3 | Individuals + HUFs with business or professional income (non-presumptive) |
| ITR-4 (Sugam) | Individuals + HUFs + partnerships with presumptive income under Section 44AD / 44ADA / 44AE within prescribed turnover thresholds |
| ITR-5 | Partnerships + LLPs (non-presumptive), AOPs, BOIs, business trusts |
| ITR-6 | Companies (other than those claiming Section 11 exemption — i.e., not non-profit companies) |
| ITR-7 | Trusts, charitable institutions, political parties, scientific research associations, news agencies, etc. (Sections 139(4A) / (4B) / (4C) / (4D)) |
For the engagement to file an ITR, see ITR Filing service.
Major deductions (old regime only)
| Section | Deduction | Annual limit |
|---|---|---|
| 80C | EPF, PPF, NSC, ELSS, life insurance, home loan principal, children’s tuition, SSY, SCSS, 5-yr FD, etc. | ₹1,50,000 (combined) |
| 80CCD(1B) | NPS additional deduction over and above 80C | ₹50,000 |
| 80D | Medical insurance premium | ₹25,000 (self + family below 60); ₹50,000 (parents above 60); +₹50,000 senior-citizen self |
| 80DD | Maintenance of disabled dependant | ₹75,000 (40-80% disability) / ₹1,25,000 (>80%) |
| 80E | Interest on education loan | No upper limit; deductible for 8 years |
| 80EE / 80EEA | Interest on housing loan (additional) | ₹50,000 / ₹1,50,000 (subject to conditions) |
| 80G | Donations to specified charitable institutions | 50% / 100% with or without cap |
| 80TTA / 80TTB | Interest on savings account (TTA) / interest on FDs for senior citizens (TTB) | ₹10,000 / ₹50,000 |
| 80U | Self-disability deduction | ₹75,000 (40-80%) / ₹1,25,000 (>80%) |
| 24(b) | Interest on housing loan (self-occupied) | ₹2,00,000 |
| HRA exemption (Section 10(13A)) | House Rent Allowance | Lower of: actual HRA / 50% (40% non-metro) of basic / actual rent − 10% basic |
| LTA exemption (Section 10(5)) | Leave Travel Allowance | Twice in 4-year block, actual travel cost (domestic only) |
Standard deduction available under both regimes — ₹50,000 (old) / ₹75,000 (new).
Capital gains taxation
Capital gains arise on transfer of capital assets — equity shares, mutual funds, real estate, gold, bonds, etc. Classified into:
Equity shares + equity mutual funds (listed)
| Holding period | Classification | Tax rate |
|---|---|---|
| ≤ 12 months | Short-term capital gain (STCG) | 20% (Section 111A — increased from 15% in 2024) |
| > 12 months | Long-term capital gain (LTCG) | 12.5% on gains > ₹1.25 lakh per FY (Section 112A — increased from 10% on gains > ₹1 lakh in 2024) |
Debt mutual funds + bonds (acquired post 1 April 2023)
All gains taxed at slab rates — no LTCG benefit (per Finance Act 2023 amendment).
Property (immovable)
| Holding period | Classification | Tax rate |
|---|---|---|
| ≤ 24 months | STCG | Slab rate |
| > 24 months | LTCG | 12.5% (without indexation, post-July 2024 changes) — option for grandfathered assets to compute tax under indexation method and pick lower |
Gold + jewellery
| Holding period | Classification | Tax rate |
|---|---|---|
| ≤ 24 months | STCG | Slab rate |
| > 24 months | LTCG | 12.5% (post-July 2024) |
Section 54 / 54F exemptions — LTCG on residential property reinvested in another residential property within 2 years (purchase) or 3 years (construction) is exempt up to specified limits. Section 54EC allows up to ₹50 lakh investment in NHAI / REC bonds within 6 months for capital gains exemption.
Presumptive taxation — Sections 44AD / 44ADA / 44AE
For small businesses and professionals, the presumptive scheme simplifies compliance by deeming a fixed percentage of turnover / receipts as presumptive income.
| Section | Eligible | Turnover / receipts limit | Presumptive income |
|---|---|---|---|
| 44AD | Resident individual, HUF, or partnership firm engaged in eligible business (excludes specified businesses + commission / brokerage) | ₹3 cr (effective FY 2023-24+; was ₹2 cr earlier) | 8% of turnover (6% for digital receipts received during the year or by the due date for filing return) |
| 44ADA | Resident individual or partnership firm engaged in specified profession — CA, doctor, lawyer, architect, engineer, accountant, technical consultant, interior decorator, authorized representative, film artist, company secretary, information technology consultant | ₹75 lakh (effective FY 2023-24+; was ₹50 lakh earlier) | 50% of gross receipts |
| 44AE | Persons in business of plying / hiring / leasing of goods carriages (≤ 10 vehicles owned at any time during FY) | No turnover limit; based on number of vehicles | ₹1,000 per ton per month (heavy goods vehicles >12T) or ₹7,500 per vehicle per month (other goods vehicles) |
Taxpayers under presumptive scheme:
- File ITR-4 (Sugam) instead of ITR-3
- Are not required to maintain books of account under Section 44AA(2) (unless income claimed is lower than presumptive — then full books needed)
- Are not subject to tax audit under Section 44AB
Lock-in rule (Section 44AD(4)): If a taxpayer opts out of presumptive scheme after having availed it, they cannot opt back in for 5 consecutive FYs from the year of opt-out — and during this lock-in period, books must be maintained and tax audit conducted if income exceeds the basic exemption limit.
Tax audit (Section 44AB)
Tax audit by a Chartered Accountant is mandatory for:
| Category | Threshold |
|---|---|
| Business — total turnover / gross receipts | > ₹1 crore (₹10 crore if cash receipts AND payments are each ≤ 5% of total) |
| Profession — gross receipts | > ₹50 lakh |
| Presumptive opt-out (44AD) | When opting out within the 5-year lock-in AND income > basic exemption |
| Presumptive opt-out (44ADA) | When claiming income lower than 50% of gross receipts AND total income > basic exemption |
| Presumptive opt-out (44AE) | When claiming income lower than presumptive AND total income > basic exemption |
Audit deliverables: Form 3CA + Form 3CD (for businesses subject to other audit) OR Form 3CB + Form 3CD (for businesses not subject to other audit). Filing deadline: 31 October of the next FY.
For book preparation prior to tax audit, see Year-End Book Finalisation.
TDS, advance tax, self-assessment tax
TDS (Tax Deducted at Source)
Tax deducted by the payer at the time of credit / payment under Sections 192 to 196D. Common sections:
| Section | Payment type | Rate |
|---|---|---|
| 192 | Salary | Per slab (regime-aware) |
| 194A | Interest other than on securities | 10% |
| 194C | Contractor payments | 1% (individual / HUF) / 2% (others) |
| 194H | Commission, brokerage | 5% |
| 194I | Rent on land + building | 10% |
| 194J | Professional fees | 10% (general) / 2% (technical services) |
| 194Q | Purchase of goods (turnover-based) | 0.1% of value > ₹50 lakh |
For TDS return filing, see TDS Return Filing service and the TDS Knowledge Hub.
Advance tax
Per Section 208, advance tax is payable in 4 instalments during the FY when total tax liability for the year exceeds ₹10,000:
| Due date | Cumulative % of tax payable |
|---|---|
| 15 June | 15% |
| 15 September | 45% |
| 15 December | 75% |
| 15 March | 100% |
Interest under Section 234B (1% per month) for non-payment of 90% of tax liability by 31 March. Interest under Section 234C (1% per month) for shortfall in any of the 4 instalments.
Senior citizens (60+) without business / professional income are exempt from advance tax obligation.
Self-assessment tax
Tax payable at the time of filing the ITR after deducting TDS, advance tax, and other prepayments. Self-assessment tax + interest (under Section 234A for late filing + Section 234B / 234C for advance tax shortfalls) must be paid before submitting the return.
Form 26AS, AIS, TIS — your tax summary
Three documents downloadable from the Income Tax e-filing portal that consolidate your tax history:
- Form 26AS — TDS / TCS deducted on your behalf, advance tax + self-assessment tax paid by you, and other tax-related transactions
- AIS (Annual Information Statement) — broader information including dividend income, interest income, mutual fund transactions, securities transactions, real estate transactions, foreign remittances, etc., aggregated from various reporters (banks, mutual funds, registrars, etc.)
- TIS (Taxpayer Information Summary) — aggregated and processed view of AIS for easier review
These three documents are essential for ITR preparation — material discrepancies (income reported in AIS but not in your ITR) trigger automated scrutiny.
ITR filing deadlines + late filing
Standard deadlines per Section 139(1):
| Category | Deadline |
|---|---|
| Non-audit cases | 31 July of next FY |
| Tax audit cases (Section 44AB) | 31 October of next FY |
| Transfer pricing cases (Section 92E) | 30 November of next FY |
| Belated return (Section 139(4)) | 31 December of next FY (with late fee + interest) |
| Revised return (Section 139(5)) | 31 December of next FY |
Late fee under Section 234F:
- ₹1,000 if total income ≤ ₹5 lakh
- ₹5,000 if total income > ₹5 lakh
Plus interest under Section 234A (1% per month) on outstanding tax + Sections 234B / 234C interest.
The deadlines are routinely extended by CBDT notification (especially when the e-filing portal experiences technical issues or after major statutory changes).
Where Batchwise fits
Batchwise coordinates ITR engagements through its vetted partner network. Available SME services:
| Service | Price | Description |
|---|---|---|
| ITR Filing | ₹999 onwards | ITR-1 to ITR-4 filing for individuals, freelancers, proprietors |
| TDS Return Filing | ₹1,499 / quarter | Form 24Q / 26Q / 27Q / 27EQ filing for employers + B2B payers |
| Book Finalisation | ₹3,499 onwards | Year-end book finalisation prior to ITR filing |
| Bookkeeping | ₹4,999 onwards | Ongoing books + finalisation engagement |
| Finance & Business Advisory | ₹9,999 discovery | Virtual CFO scope including tax planning |
Engagement is routed to a vetted partner — typically a Chartered Accountant or registered tax practitioner — who prepares the return and files it under their own credentials on the Income Tax e-filing portal.
Authoritative sources
- Income Tax Department of India — official portal for e-filing, Form 26AS, AIS, TIS
- Income Tax Act, 1961 — full text via India Code
- Income Tax Rules, 1962
- CBDT — Central Board of Direct Taxes — notifications and circulars
- TRACES — TDS reconciliation portal
- E-filing portal — return filing infrastructure
Frequently asked questions
What is income tax and who must file an ITR?
Income tax is a direct tax levied by the Central Government on the income of individuals, HUFs, partnerships, LLPs, companies, and other entities under the Income Tax Act, 1961. Filing an Income Tax Return (ITR) is mandatory for: individuals with total income above the basic exemption limit (₹2.5 lakh / ₹3 lakh / ₹5 lakh depending on age + regime); businesses and professionals subject to tax audit under Section 44AB; companies and LLPs (regardless of income); residents holding foreign assets or having foreign income; persons claiming refund of TDS or other taxes; and several other categories per Section 139. Filing is also commonly done voluntarily by salaried individuals below the exemption limit to claim TDS refunds or to maintain a return-filing history (useful for visa applications, loan sanctions, etc.).
What is the difference between the old and new tax regime?
The new tax regime (Section 115BAC, made the default from FY 2023-24 onwards) offers lower tax rates with wider slab thresholds but disallows most exemptions and deductions. The old regime offers higher tax rates with narrower slabs but preserves all exemptions and deductions (Section 80C / 80D / HRA / home loan interest / etc.). For taxpayers with low deductions (typically those without housing loans, large 80C investments, or HRA-eligible rent), the new regime is often more efficient. For taxpayers with substantial deductions (HRA + home loan + 80C maxed out + 80D etc.), the old regime is typically more efficient. The choice can be made afresh each FY for non-business-income taxpayers; business-income taxpayers face restrictions on switching between regimes.
Which ITR form should I file?
Form selection depends on income sources and entity type. ITR-1 (Sahaj) for resident individuals with income up to ₹50 lakh from salary + one house property + interest income (no capital gains, no business income). ITR-2 for individuals + HUFs with capital gains, multiple properties, foreign income, or income above ITR-1's threshold (no business income). ITR-3 for individuals + HUFs with business or professional income (non-presumptive). ITR-4 (Sugam) for individuals + HUFs + partnerships with presumptive income under Section 44AD / 44ADA / 44AE up to prescribed turnover thresholds. ITR-5 for partnerships + LLPs (non-presumptive). ITR-6 for companies (other than companies claiming exemption under Section 11). ITR-7 for trusts, charitable institutions, political parties, etc.
What is the basic tax exemption limit in India?
Under the new tax regime (default from FY 2023-24), the basic exemption limit is ₹3 lakh for all individuals regardless of age. Under the old tax regime, the exemption limit varies by age: ₹2.5 lakh for individuals below 60, ₹3 lakh for senior citizens (60-80), and ₹5 lakh for super-senior citizens (80+). Income up to ₹7 lakh under the new regime + standard deduction of ₹75,000 (FY 2024-25 onwards) effectively pays zero tax due to the rebate under Section 87A — increased from ₹5 lakh + ₹25,000 in earlier FYs.
What is Section 80C and what investments qualify?
Section 80C of the Income Tax Act allows a deduction of up to ₹1.5 lakh per FY (under the old regime only) for specified investments and expenses. Eligible items include: Employee Provident Fund (EPF) contribution by employee, Public Provident Fund (PPF), National Savings Certificate (NSC), tax-saving fixed deposits (5-year lock-in), Equity-Linked Savings Schemes (ELSS mutual funds — 3-year lock-in), life insurance premium (subject to conditions), home loan principal repayment, children's tuition fees (up to 2 children), Sukanya Samriddhi Yojana (SSY) for girl child, Senior Citizens' Savings Scheme (SCSS), 5-year post office time deposit, and several others. The ₹1.5 lakh limit is shared across all 80C items combined.
What is presumptive taxation under Section 44AD / 44ADA?
Presumptive taxation simplifies tax compliance for small businesses and professionals by deeming a fixed percentage of turnover / receipts as presumptive income — eliminating the need to maintain detailed books or undergo tax audit. Section 44AD applies to businesses (eligible) with turnover up to ₹3 crore (₹2 crore until FY 2022-23; verify current threshold) — presumptive profit is 8% of turnover (6% for digital receipts). Section 44ADA applies to specified professions (CA, doctor, lawyer, architect, engineer, accountant, technical consultant, interior decorator, etc.) with gross receipts up to ₹75 lakh — presumptive profit is 50% of gross receipts. Section 44AE applies to persons in goods carriage business with up to 10 vehicles. Taxpayers under presumptive scheme file ITR-4 (Sugam).
When does Section 44AB tax audit become applicable?
Tax audit under Section 44AB becomes applicable for: (1) Businesses with total turnover / gross receipts exceeding ₹1 crore in the FY (₹10 crore if cash receipts AND cash payments are each ≤5% of total receipts and payments respectively — i.e., businesses with 95%+ digital receipts and payments). (2) Professionals with gross receipts exceeding ₹50 lakh in the FY. (3) Businesses opting out of presumptive scheme under Section 44AD after having opted in for the immediately preceding 5 years (one-way street within the lock-in period). The audit must be conducted by a Chartered Accountant, with Form 3CA / 3CB + Form 3CD filed by 31 October of the next FY.
What are the standard ITR filing deadlines?
Standard deadlines per Section 139(1) of the Income Tax Act: 31 July of the next FY for non-audit cases (salaried, freelancer presumptive, individuals without tax audit). 31 October for audit cases (businesses with tax audit under Section 44AB). 31 October for transfer pricing report cases (Section 92E). 30 November for cases involving international transactions. Belated returns under Section 139(4) can be filed up to 31 December of the next FY (with late fee under Section 234F — ₹1,000 if income ≤ ₹5 lakh, ₹5,000 if higher). Revised returns under Section 139(5) can be filed up to 31 December of the next FY. The deadlines are routinely extended by CBDT notification — verify current applicable date.