Income Tax
A direct tax on total income earned during a Financial Year. Computed head‑wise, aggregated, adjusted for set‑off, and charged at slab or special rates. Cess and applicable surcharge are added thereafter.
Income Tax Basics
Core terms used throughout the return and computation
Financial Year (FY)
12‑month period from 1 April to 31 March in which income is earned and tax is paid by instalments where applicable.
Assessment Year (AY)
The year following the FY in which income is assessed and the return for that FY is filed.
Previous Year
The Financial Year in which the income is earned. The return for this period is filed and assessed in the subsequent Assessment Year.
Gross Total Income (GTI)
Aggregate of income under all heads after clubbing and set‑offs but before Chapter VI‑A deductions.
Total Income
Income computed after reducing Chapter VI‑A deductions from GTI; this is rounded and used for computing tax at applicable rates.
Taxable Income
GTI minus eligible deductions; the figure on which tax is computed. Rounded to the nearest multiple of ₹10 for tax purposes.
Basic Exemption Limit
Threshold up to which the slab rate is nil in a regime. In the new regime, slabs start at ₹4,00,000.
Slab Rate
Tax rates apply band‑wise. Only the portion of income within a band is taxed at that band’s rate.
Progressive Taxation
As income rises, higher rates apply only on the incremental slabs, not retroactively on the entire income.
Old Tax Regime
Allows multiple exemptions and deductions (e.g., 80C, HRA) with comparatively higher slab rates. Opt‑in subject to conditions.
New Tax Regime
Default regime with relaxed slabs and limited deductions. Salary standard deduction is available; many traditional deductions are not.
New Regime Slabs (FY 2025–26)
Up to ₹4,00,000 – 0%; ₹4,00,001–₹8,00,000 – 5%; ₹8,00,001–₹12,00,000 – 10%; ₹12,00,001–₹16,00,000 – 15%; ₹16,00,001–₹20,00,000 – 20%; ₹20,00,001–₹24,00,000 – 25%; above ₹24,00,000 – 30%.
Rebate u/s 87A
New regime: rebate up to ₹60,000 for resident individuals with taxable income up to ₹12,00,000. Old regime: rebate up to ₹12,500 for income up to ₹5,00,000.
Health & Education Cess
Charged at 4% on the total of income‑tax plus surcharge.
Surcharge
An additional levy over income‑tax at higher income levels, with rate bands prescribed by law. Cess applies over tax plus surcharge.
Marginal Relief
Ensures that additional tax, including surcharge, does not exceed the income increase when crossing a surcharge threshold.
Advance Tax
Tax paid in instalments within the FY once estimated liability crosses the prescribed limit. Helps avoid interest for shortfall.
Self‑Assessment Tax
Balance tax paid after considering TDS/TCS and advance tax before filing the ITR to reduce further interest.
TDS (Tax Deducted at Source)
Tax withheld by the payer on specified payments (salary, interest, contractor fees, etc.) and deposited to the government; credit appears in Form 26AS/AIS.
TCS (Tax Collected at Source)
Tax collected by a seller on specified transactions (such as certain remittances/goods) when receipts cross limits; credit appears in Form 26AS/AIS.
Form 16
TDS certificate issued by employer for salary detailing income, exemptions and tax deducted and deposited.
Form 16A
TDS certificate for non‑salary payments such as interest, contractor fees, commission, etc.
Form 26AS
A consolidated tax passbook reflecting TDS/TCS, advance and self‑assessment taxes and refunds processed for the PAN.
AIS (Annual Information Statement)
Statement showing financial transactions reported to the department (e.g., interest, dividends, securities trades) for cross‑verification.
ITR Forms (ITR‑1 to ITR‑4)
Choose the return form based on income sources and category. ITR‑1 for eligible salary cases, ITR‑2 for capital gains/house property, ITR‑3 for business/profession, ITR‑4 for presumptive cases.
E‑Verification
Confirm your ITR electronically using Aadhaar OTP, net‑banking, DSC or other approved modes to complete filing.
Refund
Excess tax paid over final liability is credited to your validated bank account after processing and any adjustments.
Revised Return
Allows correction of an earlier filed ITR within the permitted window if errors or omissions are discovered.
Belated Return
ITR filed after the due date with applicable late fee and interest as per rules.
Defective Return
Return treated as defective if essential information is missing; rectify within the specified period to avoid invalidation.
Intimation u/s 143(1)
System‑generated summary after processing showing computed income, tax/refund and any adjustments with reasons.