Income Tax for Salaried Employees in India: The Complete 2026 Guide (FY 2025-26)

This guide explains how income tax works for salaried employees in India for the financial year 2025-26 (assessment year 2026-27) — the return you file by July 31, 2026. It is educational, not tax-planning advice. The right regime, the right deductions, and the right ITR form depend on your exact salary structure, investments, and personal situation, which only a qualified Chartered Accountant who has seen your numbers can assess. For any decision that turns on your specific figures — a borderline regime choice, capital gains, or a notice from the department — consult a CA.

If you draw a salary, most of your tax is already handled before the money reaches you: your employer deducts TDS each month and hands you a Form 16 at year-end. Filing is mostly a matter of confirming what's already been reported, claiming anything the employer didn't account for, and paying or reclaiming the difference. This guide walks through the whole picture — the two tax regimes and how to choose between them, how the new regime's slabs and the Section 87A rebate produce a zero-tax outcome up to ₹12.75 lakh, how to read your Form 16, when the old regime still wins, how capital gains change the math, which ITR form applies to you, the step-by-step filing flow, and the mistakes that most often trip up salaried filers.

What's new for FY 2025-26

• The new regime remains the default under Section 115BAC — you have to actively opt out to use the old regime.
• The standard deduction stays at ₹75,000 under the new regime (the old regime keeps its ₹50,000).
• The Section 87A rebate is ₹60,000 under the new regime, taking tax to zero up to ₹12,00,000 taxable income — effectively ₹12,75,000 gross salary once the standard deduction is applied.
• Budget 2024 capital gains changes are now in full effect: long-term capital gains on listed equity taxed at 12.5% (up from 10%), short-term at 20% (up from 15%), both effective July 23, 2024.
• Indexation was removed for most non-equity long-term capital gains, with limited grandfathering for property bought before July 23, 2024.

For the broader set of Indian tax concepts beyond filing — capital gains, deductions, and US comparisons — see our tax concepts overview.

The two regimes — overview

The new tax regime is a simplified income tax structure with lower slab rates and a standard deduction but almost no other exemptions, set as the default regime under Section 115BAC of the Income Tax Act, 1961. The old regime is the original structure — higher slab rates, but a long menu of deductions and exemptions (Section 80C, HRA, home loan interest, and more) that can substantially lower taxable income.

Until Budget 2023, the old regime was where almost everyone filed. It rewarded people for parking money in tax-saving instruments and for renting in expensive cities. Budget 2023 (Finance Act 2023, effective FY 2023-24) flipped the default — the new regime became the standard, and you now have to choose the old regime deliberately. Budget 2024 and Budget 2025 then made the new regime steadily more attractive: the standard deduction was raised to ₹75,000, and the Section 87A rebate was widened so that a salaried person earning up to ₹12.75 lakh gross pays no tax at all.

The result is a genuine decision rather than a foregone conclusion. The new regime wins for most salaried filers now, especially anyone below the zero-tax threshold and anyone earning well into the higher slabs. The old regime still wins for a specific profile: high metro rent, a maxed Section 80C, and home loan interest stacked together. The rest of this guide gives you the numbers to tell which group you're in.

For the complete slab structure — including surcharge and cess across both regimes — see our income tax slab structure in India explainer. The regime that's right for any individual depends on their salary structure and deduction profile, and a qualified CA can model both regimes against your actual numbers if the choice is close.

How the new regime works — slabs, rebate, and effective zero-tax

The new regime combines progressive slab rates with a flat standard deduction and the Section 87A rebate. For a salaried person, those three pieces together decide the final number.

FY 2025-26 new regime slabs

Taxable income (₹)	Tax rate
Up to 4,00,000	Nil
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%

Source: Income Tax Department of India — Section 115BAC, as amended by the Finance Act 2025. A Health and Education Cess of 4% applies on the tax after any rebate.

How the Section 87A rebate works

Section 87A is a tax rebate that reduces income tax liability to zero for taxpayers whose total income does not exceed ₹12,00,000 under the new regime for FY 2025-26, with the rebate capped at ₹60,000 and a marginal-relief mechanism that prevents a sudden cliff just above the threshold. In plain terms: if your taxable income lands at or below ₹12 lakh, the tax computed on the slabs is cancelled out by the rebate, and you owe nothing.

The marginal-relief band sits just above ₹12 lakh. The rule, in the department's own words, caps the tax so that it "shall not exceed the total amount payable as income tax on total income of ₹12,00,000 by more than the amount of income that exceeds ₹12,00,000." Practically, that band runs from ₹12,00,001 up to roughly ₹12,70,000 taxable, after which the normal slab tax takes over.

A worked case shows why the band matters. Take a salaried person with ₹13,00,000 gross, leaving ₹12,25,000 taxable after the standard deduction. The slab tax computes to ₹63,750 — and without marginal relief, that full amount (plus cess) would be due the moment income crossed ₹12 lakh, a harsh cliff for ₹25,000 of extra income. Marginal relief caps the tax at the amount by which taxable income exceeds ₹12 lakh — here, ₹12,25,000 − ₹12,00,000 = ₹25,000 — so the tax payable is ₹25,000 plus 4% cess, or ₹26,000, not ₹63,750. The relief shrinks as income rises and disappears around ₹12,70,000 taxable, where the normal slab tax finally falls below the cap.

The standard deduction under the new regime

The standard deduction under the new regime is ₹75,000, claimed under Section 16(ia). It applies automatically to salaried income — no investment or proof is required. Its recent history:

• FY 2023-24: ₹50,000 (standard deduction first extended to the new regime via Finance Act 2023)
• FY 2024-25: raised to ₹75,000 (Finance Act 2024)
• FY 2025-26: ₹75,000 (continues unchanged)

The old regime, by contrast, still offers only the ₹50,000 standard deduction. The ₹25,000 difference is one of several small ways the new regime was nudged ahead.

Worked example — the ₹12,75,000 zero-tax outcome

For a salaried employee earning ₹12,75,000 gross in FY 2025-26 under the new regime:

Step	Amount
Gross salary	₹12,75,000
Less: Standard deduction (Sec 16(ia))	(₹75,000)
Taxable income	₹12,00,000
Tax per slabs (before rebate)	₹60,000
Less: Section 87A rebate	(₹60,000)
Tax after rebate	₹0
Health and Education Cess @ 4%	₹0
Total tax liability	₹0

The ₹60,000 slab tax is exactly ₹20,000 (on the ₹4-8 lakh band at 5%) plus ₹40,000 (on the ₹8-12 lakh band at 10%) — and the ₹60,000 rebate cancels it precisely. This is why ₹12.75 lakh gross is the headline zero-tax figure for salaried filers this year.

Worked examples above the rebate — ₹18L and ₹25L gross

Once taxable income crosses ₹12 lakh, the rebate disappears and tax is paid on the slabs in full:

Item	₹18,00,000 gross	₹25,00,000 gross
Standard deduction	(₹75,000)	(₹75,000)
Taxable income	₹17,25,000	₹24,25,000
Tax on slabs	₹1,45,000	₹3,07,500
Cess @ 4%	₹5,800	₹12,300
Total tax	₹1,50,800	₹3,19,800
Effective rate on gross	8.4%	12.8%

The effective rate — total tax divided by gross salary — stays well below the top slab rate even at ₹25 lakh, because the lower slabs are taxed at lower rates. The difference between the slab rate (marginal) and the effective rate is one of the most misunderstood points in Indian tax; our marginal vs effective tax rate explainer walks through the math in detail.

Your salary structure — reading Form 16, salary heads, and TDS

Before you can file, you need to understand what your employer has already reported. Two documents carry that information: Form 16 and Form 26AS.

What Form 16 actually is

Form 16 is the official TDS certificate an employer issues to a salaried employee under Section 192 of the Income Tax Act, certifying the total salary paid and the tax deducted at source during a financial year. It comes in two parts. Part A is the TDS summary — your PAN, the employer's TAN, and a quarter-by-quarter record of tax deducted and deposited. Part B is the salary breakup — gross salary, exempt allowances, deductions claimed, and the final tax computed.

Most of what goes into your ITR can be read straight off Form 16 Part B. On Part A, the figure to check is the total tax deducted and deposited — it should match what your payslips added up to, and it should match Form 26AS. On Part B, the lines that matter are gross salary, the exempt allowances under Section 10 (HRA, LTA), the standard deduction, any Chapter VI-A deductions (80C, 80D) if the old regime was used, and the final taxable salary the employer arrived at. For a deeper line-by-line walkthrough of every field and what to verify, see Form 16 in detail.

What TDS is and how it interacts with your final tax

TDS (Tax Deducted at Source) is income tax that the payer deducts at the time of making certain payments — including salary under Section 192 — and deposits with the government on the recipient's behalf within statutory timelines. For a salaried person, the employer estimates your annual tax, divides it across twelve months, and deducts that slice from each paycheque. The mechanics of TDS across different payment types — salary, contractor fees, rent, interest — are covered in how TDS works.

TDS is not your final tax; it's an advance against it. At filing, you total your actual liability and compare it with the TDS already deducted. If TDS was more, you get a refund. If less — usually because you had income the employer didn't know about — you pay the balance.

The salary heads on Form 16 Part B

A typical salary breaks into several components, each shown on Part B:

• Basic salary — fully taxable; the base for HRA and EPF calculations.
• House Rent Allowance (HRA) — partly exempt under the old regime (Section 10(13A)); fully taxable under the new regime.
• Leave Travel Allowance (LTA) — exempt for actual travel, old regime only.
• Special allowances — generally fully taxable.
• Bonuses and incentives — fully taxable in the year received.
• Perquisites — the taxable value of employer-provided benefits (car, accommodation, ESOPs).
• Employer EPF contribution — 12% of basic; not taxed at the point of contribution within limits.

The underlying idea of gross pay versus what actually reaches your account is covered in our gross vs net income explainer.

Reconciling Form 16, Form 26AS, and AIS

Form 16 should agree with Form 26AS (the department's consolidated tax-credit statement) and the Annual Information Statement (AIS, which also reports your interest, dividend, and securities transactions). Two scenarios show why reconciliation matters:

Scenario A — TDS exceeds final tax, so a refund is due:

Item	Amount
Gross salary	₹15,00,000
Less: Standard deduction	(₹75,000)
Taxable income	₹14,25,000
Final tax (new regime + 4% cess)	₹97,500
TDS deducted by employer	₹1,05,000
Refund due	₹7,500

Scenario B — extra income the employer didn't know about, so a balance is payable:

Item	Amount
Salary tax + cess (employer's TDS covers this)	₹97,500
Plus: long-term capital gains of ₹2,00,000 on equity	—
Less: LTCG exemption (Section 112A)	(₹1,25,000)
Taxable LTCG ₹75,000 @ 12.5% + 4% cess	₹9,750
Total tax liability	₹1,07,250
TDS already deducted (salary only)	₹97,500
Balance payable at filing	₹9,750

The employer's TDS can only reflect the salary it pays you. Anything outside that — capital gains, FD interest, freelance income — has to be added by you, and the resulting balance paid as self-assessment tax before you file.

When the old regime still wins — deductions, HRA, and the opt-out decision

The old regime keeps the door open to a long list of deductions. For the right profile, those deductions cut taxable income enough to beat the new regime even at its higher slab rates.

FY 2025-26 old regime slabs

Taxable income (₹)	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%

Source: Income Tax Department of India — First Schedule, Finance Act 2025. The Section 87A rebate also applies under the old regime, but only up to ₹5,00,000 taxable income and capped at ₹12,500 — far narrower than the new regime's ₹12 lakh / ₹60,000. The old regime's 30% rate also begins at just ₹10 lakh, against ₹24 lakh in the new regime, which is why the old regime loses ground at higher incomes.

Section 80C — the ₹1.5 lakh deductions cap

Section 80C is a provision of the Income Tax Act that lets old-regime taxpayers deduct up to ₹1,50,000 of specified investments and expenses — including PPF, ELSS, life insurance premiums, EPF, home loan principal, and Sukanya Samriddhi Yojana — from gross total income each financial year. The ₹1.5 lakh cap is shared across all of these combined, not granted per instrument.

80C-eligible instrument	Lock-in	Indicative return (Q1 2026)	Tax on returns
Public Provident Fund (PPF)	15 years	7.1%	Tax-free (EEE)
ELSS mutual funds	3 years	Market-linked	LTCG above ₹1.25L taxed at 12.5%
Life insurance premium	Policy tenure	Varies	Maturity usually tax-free (Sec 10(10D))
Employee Provident Fund (EPF)	Till retirement	8.25% (FY 2023-24)	Tax-free (EEE) on completion
5-year tax-saver FD	5 years	6.5–8.5%	Interest taxable
Sukanya Samriddhi Yojana	21 years	8.2%	Tax-free (EEE)
Home loan principal repayment	—	(within ₹1.5L cap)	—

Among these, PPF offers the highest after-tax yield with full government backing — see why in PPF as a high-value 80C tool. For the full mechanics of how the ₹1.5L cap stacks across instruments, see Section 80C deductions in detail.

House Rent Allowance (HRA) exemption

House Rent Allowance exemption is a tax benefit under Section 10(13A) that excludes the lowest of three calculated values — actual HRA received, rent paid minus 10% of basic salary, or 50% of basic salary in metro cities (40% non-metro) — from a salaried employee's taxable income under the old regime. It is one of the largest deductions available to a renting employee, and it does not exist in the new regime.

HRA exemption — Mumbai metro example:

Component	Monthly amount
Basic salary	₹50,000
HRA received	₹25,000
Actual rent paid	₹30,000

The three-condition calculation under Rule 2A:

1. Actual HRA received: ₹25,000
2. Rent paid minus 10% of basic: ₹30,000 − ₹5,000 = ₹25,000
3. 50% of basic (Mumbai is a metro): ₹25,000

The exemption is the lowest of the three — ₹25,000 a month, or ₹3,00,000 a year — excluded from taxable income under the old regime. If annual rent exceeds ₹1,00,000, the landlord's PAN must be reported to the employer, per CBDT Circular 8/2013. The full Rule 2A formula and metro/non-metro distinction are in our HRA exemption calculation in detail.

Other old-regime deductions, briefly

• Section 80D — health insurance premium: up to ₹25,000 for self and family, plus up to ₹50,000 for senior-citizen parents.
• Section 24(b) — home loan interest: up to ₹2,00,000 a year for a self-occupied property; no cap for a let-out property.
• Section 80TTA / 80TTB — savings account interest: ₹10,000 deduction for non-seniors; ₹50,000 for senior citizens (covering FD interest too).
• Section 80E — education loan interest: no cap, available for up to 8 years.
• Section 80G — donations to specified charities, at 50% or 100% depending on the recipient.

Should you opt out to the old regime?

The honest answer for FY 2025-26 is that the old regime wins less often than people assume. The table below compares both regimes at four income levels, assuming a substantial old-regime deduction stack: ₹50,000 standard deduction + ₹1,50,000 (Section 80C) + ₹2,00,000 (HRA exemption) + ₹2,00,000 (home loan interest) + ₹25,000 (Section 80D) = ₹6,25,000 total deductions. The new regime uses only its ₹75,000 standard deduction.

Gross salary	Old regime tax (₹6.25L deductions)	New regime tax (₹75K only)	Better regime
₹12,00,000	₹28,600	₹0	New
₹16,00,000	₹1,11,800	₹1,13,100	Old (by ₹1,300)
₹20,00,000	₹2,34,000	₹1,92,400	New
₹25,00,000	₹3,90,000	₹3,19,800	New

Even with a large ₹6.25 lakh deduction stack, the old regime wins only in a narrow band around ₹15-16 lakh. Actual breakeven depends on your exact deductions.

To see how the ₹16 lakh row is built, here's the old-regime computation behind it. Gross ₹16,00,000 minus the ₹6,25,000 stack leaves ₹9,75,000 taxable:

Old regime slab	Tax
Up to ₹2,50,000 (Nil)	₹0
₹2,50,001 – ₹5,00,000 @ 5%	₹12,500
₹5,00,001 – ₹9,75,000 @ 20%	₹95,000
Tax before cess	₹1,07,500
Health and Education Cess @ 4%	₹4,300
Total old-regime tax	₹1,11,800

The new regime at the same ₹16 lakh gross computes to ₹1,13,100, so the old regime edges it by ₹1,300. Move income up to ₹20 lakh and the old regime's 30% rate — which begins at just ₹10 lakh taxable, against ₹24 lakh in the new regime — overtakes the deduction advantage, and the new regime pulls ahead again.

The pattern behind the numbers:

The old regime tends to win when the deduction stack is genuinely large — maxed Section 80C, metro HRA above ₹1.5-2 lakh, and ₹2 lakh of home loan interest together — and income sits in the middle band where the old regime's slabs haven't yet jumped to 30%.

The new regime tends to win when deductions are modest (no home loan, little or no rent, partial 80C), when income is below the ₹12.75 lakh zero-tax threshold, or when income is high enough that the new regime's gentler upper slabs outweigh the old regime's deductions.

The regime choice is annual for salaried filers — you can switch year to year as your situation changes. If your deduction stack is borderline, a CA can model your specific salary structure under both regimes against your verified deductions before you opt out.

Capital gains for salaried filers — Budget 2024 changes

Plenty of salaried people also hold shares, mutual funds, or ESOPs. The moment you sell at a profit, capital gains tax enters your return — and the rules changed materially in Budget 2024.

Why salaried filers care about capital gains

Selling listed shares or redeeming equity mutual funds creates a capital gain. So does selling property, gold, or bonds. These gains are taxed separately from salary, at their own rates, and most of them push you from the simple ITR-1 to ITR-2. For a salaried filer, the most common cases are equity shares and equity mutual funds.

LTCG vs STCG — what changed in Budget 2024

Long-Term Capital Gains (LTCG) tax under Section 112A applies to gains above ₹1,25,000 from listed equity shares or equity mutual funds held for more than 12 months, taxed at 12.5% without indexation as of Budget 2024 (effective July 23, 2024). Short-term gains — on holdings of 12 months or less — are taxed under Section 111A at 20%.

Asset class	Holding period	Pre-Budget 2024	Post-Budget 2024 (from Jul 23, 2024)
Listed equity / equity MF — short-term	≤ 12 months	15% (Sec 111A)	20%
Listed equity / equity MF — long-term	> 12 months	10% above ₹1L (Sec 112A)	12.5% above ₹1.25L
Debt mutual funds — long-term	> 36 months	20% with indexation	Slab rate / 12.5% without indexation
Listed bonds, gold ETF — long-term	> 12 months	20% with indexation	12.5% without indexation
Property, unlisted equity — long-term	> 24 months	20% with indexation	12.5% without indexation (grandfathering for property bought before Jul 23, 2024)

Source: Budget 2024 speech and Finance Act 2024, Sections 111A and 112A of the Income Tax Act.

Indexation removed for most non-equity LTCG

Indexation — adjusting the purchase price for inflation before computing the gain — was removed for most non-equity long-term assets. The trade-off is a flat 12.5% rate instead of 20%. For property bought before July 23, 2024, the law allows a choice between 12.5% without indexation and the old 20% with indexation, whichever produces less tax.

When capital gains require ITR-2

For AY 2026-27, a salaried filer with long-term equity gains up to ₹1,25,000 can still use the simpler ITR-1 — a genuine simplification new this year. Any short-term capital gain, or long-term gain above ₹1,25,000, moves you to ITR-2. The full short-term-versus-long-term treatment across asset classes is in our short-term vs long-term capital gains explainer.

ESOPs and RSUs — taxed in two stages

Equity compensation is taxed twice over its life, and salaried filers often miss the second stage. At exercise or vesting, the difference between the fair market value and the price you paid is treated as a perquisite — salary income, taxed at your slab rate, and usually shown in Form 16. When you later sell the shares, any gain over that fair-market-value baseline is a capital gain, long-term or short-term depending on the holding period from the vesting or exercise date. The two stages are computed on different bases, and foreign-listed RSUs add Schedule FA disclosure on top. This is exactly the kind of layering a CA should handle.

ESOP and RSU perquisite layering, property gains under the post-Budget-2024 regime, and unlisted-equity sales involve facts unique to each filer. A CA who handles capital gains computations should be consulted before filing if any of these apply. Among salaried-friendly instruments, Sovereign Gold Bonds carry their own tax treatment — see Sovereign Gold Bond tax treatment.

Advance tax and self-assessment tax for salaried filers

Advance tax is income tax paid in instalments during the financial year itself, rather than in a lump sum at filing, due when a taxpayer's total tax liability after TDS exceeds ₹10,000 in a year. For a pure-salary employee, the employer's monthly TDS usually satisfies this entirely, and advance tax never comes into play. The obligation appears when you earn income the employer's TDS doesn't cover — capital gains, FD or savings interest, dividend, or freelance income on the side.

Advance tax falls due in four instalments: 15% by June 15, 45% by September 15, 75% by December 15, and 100% by March 15. Miss the cumulative target on any instalment and Section 234C charges 1% per month on the shortfall; pay less than 90% of the full liability across the year and Section 234B adds 1% per month from April of the assessment year until you settle up. Capital gains are an exception worth knowing — because they can't be predicted in advance, the advance-tax instalment for a gain is counted from the instalment due-date immediately after the gain arises.

Anything still unpaid when you file is self-assessment tax — the balance you clear on the portal before submitting the return, the same balance that appeared as "balance payable" in the Form 16 reconciliation earlier. Salaried filers with a one-off capital gain most often handle it here, as self-assessment tax at filing, accepting a small 234B/234C interest charge rather than tracking quarterly instalments. Where the side income is large or recurring, a CA can map out the instalment schedule to avoid the interest entirely.

ITR-1 vs ITR-2 — which form do you need?

Picking the right form matters: file the wrong one and the return is treated as defective at processing, delaying any refund.

ITR-1 (Sahaj) is the return form for resident individuals with total income up to ₹50 lakh from salary or pension, one house property, and other sources such as interest and dividend — while ITR-2 is required for taxpayers with capital gains beyond the ITR-1 limit, multiple house properties, foreign income or assets, unlisted shares, or total income above ₹50 lakh.

Your situation	ITR-1 (Sahaj)	ITR-2	ITR-3 / ITR-4
Salary income only, ≤ ₹50L total	✓	✓	—
Salary + one self-occupied house	✓	✓	—
Salary + savings / FD interest	✓	✓	—
Long-term equity gains ≤ ₹1,25,000 (Sec 112A)	✓ (new for AY 2026-27)	✓	—
Short-term capital gains (any amount)	—	✓	—
Long-term capital gains above ₹1,25,000	—	✓	—
Total income above ₹50L	—	✓	—
Multiple house properties / let-out rental	—	✓	—
Foreign income or foreign assets	—	✓	—
Director in a company / unlisted shares held	—	✓	—
Business or professional income	—	—	ITR-3 / ITR-4

Source: Income Tax Department of India — ITR form eligibility for AY 2026-27.

When a situation is genuinely mixed — salary plus freelance plus capital gains plus rent — a CA can confirm the correct form before you file. Using ITR-1 where ITR-2 is required is one of the most common reasons a return gets flagged and a refund delayed.

How to file — step by step

Filing happens entirely online at the e-filing portal. The flow below assumes a salaried filer using the pre-filled return.

Before you start — pre-filing checklist

• PAN, and Aadhaar linked to PAN (linking is mandatory to file)
• Form 16 from your employer (Parts A and B)
• Form 26AS, downloadable from the e-filing portal or TRACES
• Annual Information Statement (AIS) from the portal
• Bank account number and IFSC for any refund
• Investment and rent proofs — only if opting for the old regime
• Capital gains statements from your broker, if any
• Landlord's PAN, if annual rent exceeds ₹1,00,000

The filing flow

1. Log in at the income tax e-filing portal using your PAN and password (or Aadhaar OTP).
2. Start a new return, selecting Assessment Year 2026-27 and the online filing mode.
3. Choose ITR-1 or ITR-2 based on the matrix above — ✓ confirm capital gains and total income before picking, since the wrong form is rejected at processing.
4. Verify the pre-filled data. The portal auto-populates salary, TDS, interest, dividend, and securities transactions from your employer's Form 24Q, Form 26AS, and AIS. ✗ Don't assume the figures are correct — broker reports and bank entries can carry errors. Check each against your own records.
5. Choose your regime. The new regime is pre-selected; opt out to the old regime here if your comparison favours it. Enter deductions (80C, HRA, 80D, home loan interest) only if you've opted for the old regime.
6. Compute and pay. The portal calculates the tax. If a balance is payable — common when you've added capital gains or interest — pay it as self-assessment tax before submitting.
7. E-verify within 30 days using Aadhaar OTP, net banking, a demat account, or a Digital Signature Certificate.

E-verification is the digital authentication step that completes the filing process — without it, the return is incomplete. The deadline for the FY 2025-26 individual return is July 31, 2026. Filing after that incurs a ₹5,000 late fee under Section 234F (₹1,000 if total income is ₹5 lakh or less), plus 1% per month interest under Sections 234A/B/C on any tax payable.

After you submit

Once the return is e-verified, the department processes it under Section 143(1) and issues an intimation — usually within a few weeks to a few months. The intimation either confirms your computation, raises a demand if it finds you underpaid, or sanctions a refund if you overpaid. A refund is credited directly to the pre-validated bank account whose number and IFSC you entered, so a wrong or unvalidated account is the most common reason a refund stalls. If the intimation shows a mismatch, it generally traces back to a TDS or pre-filled-data figure that didn't reconcile — which is why the reconciliation step before filing saves trouble later. You can track both processing status and refund status from the dashboard on the e-filing portal.

If you haven't received your Form 16 or need help reading it before you begin, see Form 16 in detail.

Common mistakes to avoid

1. Opting for the old regime without claiming every available deduction

Choosing the old regime means taking on its higher slab rates. If you then leave 80C, 80D, or home loan interest unclaimed, you've kept the cost without the benefit. Re-run the comparison and make sure the deductions justify the opt-out.

2. Missing the July 31 deadline

Filing after July 31, 2026 triggers a ₹5,000 fee under Section 234F (₹1,000 if total income is ₹5 lakh or less), plus 1% per month interest under Section 234A on any unpaid tax.

3. Forgetting to e-verify within 30 days

A submitted return that isn't e-verified within 30 days is treated as never filed. You lose the filing date entirely and, if the window closes after July 31, incur the late-filing penalty.

4. Not reconciling Form 16 with Form 26AS and AIS

If the TDS in Form 16 doesn't match Form 26AS — often because the employer filed its TDS return late — the department flags the mismatch and may issue an intimation. Confirm all three agree before filing.

5. Reporting HRA without the landlord's PAN when required

Under CBDT Circular 8/2013, annual rent above ₹1,00,000 requires the landlord's PAN. Without it, the HRA exemption can be disallowed at processing.

6. Claiming LTA without actual travel

LTA exemption applies only to journeys actually taken in the block period. Claiming it without travel evidence is a common scrutiny trigger.

7. Forgetting to declare savings and FD interest

Even ₹5,000-₹15,000 of bank interest must be declared. Section 80TTA allows up to ₹10,000 as a deduction under the old regime (₹50,000 under 80TTB for seniors) — but the income has to be reported first.

8. Choosing the wrong ITR form

Using ITR-1 where capital gains, foreign assets, or multiple properties require ITR-2 makes the return defective. The matrix in the ITR-1 vs ITR-2 section above settles most cases.

9. Not declaring foreign assets in Schedule FA

Anyone with foreign bank accounts, securities, or property must complete Schedule FA in ITR-2. Non-disclosure carries penalties under the Black Money Act, regardless of the amounts involved.

10. Trusting pre-filled data without checking it

The portal pre-fills salary, TDS, capital gains, and interest, but these figures aren't guaranteed accurate — the department itself notes that some transactions may be missing. Verify every line against your own records before submitting.

When to consult a CA

Most salaried filers can complete ITR-1 or ITR-2 themselves. Some situations, though, carry enough complexity or risk that a Chartered Accountant's judgment is worth the fee.

Consult a qualified CA when:

• You've received a notice from the department (Section 143(2) scrutiny, 142(1) inquiry, or 148 reassessment).
• You have foreign income, foreign assets, or your residency status changed during the year.
• You traded in derivatives (F&O), did intraday equity, or had high-frequency trading activity.
• You exercised, sold, or received ESOPs or RSUs with vesting-and-sale layering.
• You sold inherited property or other assets that produced capital gains.
• You hold crypto or other virtual digital assets, taxed at a flat 30% under Section 115BBH.
• You need to revise or rectify a past return (Section 139(5) or 154).
• Your old-versus-new regime calculation is borderline and a modelled comparison would settle it.

A CA consultation typically runs ₹2,000-₹15,000 depending on complexity. For cases involving capital gains, notices, or multiple income sources, that's almost always cheaper than the cost of a misfiled return — Section 234F fees, 234A/B/C interest, and scrutiny risk all compound. If your situation matches any of the above, the consultation tends to pay for itself.

Frequently asked questions

Who needs to file ITR in India for FY 2025-26?

Anyone whose total income before deductions exceeds the basic exemption limit must file — ₹2,50,000 under the old regime, ₹4,00,000 under the new regime for FY 2025-26. Salaried employees who've had TDS deducted commonly file even below the limit, to claim a refund. Some must file regardless of income: those with foreign assets or signing authority abroad, those depositing over ₹1 crore in current accounts, and those above specified electricity-bill or foreign-travel thresholds.

What's the income tax filing deadline for FY 2025-26?

The return for FY 2025-26 (AY 2026-27) must be filed by July 31, 2026 for individuals who don't need a tax audit. Filing later incurs a ₹5,000 fee under Section 234F (₹1,000 if total income is ₹5 lakh or less), plus 1% per month interest under Section 234A. A belated return is allowed until December 31, 2026, but it loses certain loss-carryforward rights.

Is the new tax regime better than the old regime for FY 2025-26?

For most salaried filers, the new regime is hard to beat. Gross income up to ₹12,75,000 pays zero tax under it, thanks to the ₹75,000 standard deduction plus the ₹60,000 Section 87A rebate. The old regime wins only in a narrow band — roughly ₹15-16 lakh — and only when the deduction stack is very high. Above ₹20 lakh, the new regime's gentler upper slabs usually win even against large deductions.

What's the difference between AY and FY in Indian taxation?

The Financial Year (FY) is when income is earned, April 1 to March 31. The Assessment Year (AY) is the following year, when that income is assessed and the return filed. Income earned in FY 2025-26 (April 2025 to March 2026) is filed under AY 2026-27, with the standard deadline of July 31, 2026.

How do I know if I should file ITR-1 or ITR-2?

File ITR-1 if your total income is up to ₹50 lakh from salary, one house property, and other sources — including, new this year, long-term equity gains up to ₹1,25,000. File ITR-2 if you have any short-term capital gains, long-term gains above ₹1,25,000, multiple house properties, foreign income or assets, or total income above ₹50 lakh. When in doubt, ITR-2 has broader eligibility.

What is Form 26AS and how is it different from Form 16?

Form 26AS is a consolidated annual tax statement from the department, showing all TDS deducted on your behalf plus any advance or self-assessment tax paid. Form 16 is the certificate your employer issues for salary TDS under Section 192. The TDS in Form 16 Part A should match Form 26AS; if they don't, reconcile both (along with the AIS) before filing.

How much HRA can I claim under the new tax regime?

None — HRA exemption isn't available under the new regime, which forgoes most exemptions in exchange for lower slab rates and the standard deduction. HRA under Section 10(13A) is an old-regime benefit only. For a metro renter whose annual HRA exemption reaches ₹1 lakh or more, that lost benefit is often the strongest reason to consider the old regime.

What is the penalty for filing ITR after July 31?

A ₹5,000 fee under Section 234F (₹1,000 if total income is ₹5 lakh or less), plus 1% per month interest under Section 234A on any unpaid tax. A belated return is allowed until December 31, 2026, but late filing forfeits the right to carry forward certain losses.

Can I switch between the old and new regime every year?

Salaried filers can switch every year, choosing the option when filing each year's return — there's no lock-in for pure-salary income. Taxpayers with business income face restrictions: once they leave the new regime, they can return to it only once. Because a salaried person's deductions change year to year, it's worth re-running the comparison each time.

What happens if I forget to e-verify my return?

A return not e-verified within 30 days is treated as never filed (CBDT Notification 5/2022). If that window closes after July 31, 2026, it becomes a late filing — triggering the Section 234F fee and Section 234A interest. You generally have to file again rather than just re-verify, and the original filing date is lost.

What this guide does not cover

Out of scope by design

This guide is for resident salaried Indian filers for FY 2025-26. It does not cover:

• Freelancers and professionals using Section 44ADA presumptive taxation
• Business-income filers under Section 44AD presumptive
• Non-resident Indians (NRI) — different residency rules apply under Section 6
• ITR-3 through ITR-7 filers, and Hindu Undivided Family (HUF) structures

Covered elsewhere on this site

• GST basics — salaried filers don't pay GST directly, but the indirect-tax context is useful.
• Tax concepts overview — the Pillar 11 synthesis covering capital gains, deductions, and US comparisons.
• Tax deductions vs credits, and standard vs itemized — the underlying concepts behind regime choice.

Beyond the scope of any general guide

These situations need a CA's individual judgment: notice handling (Sections 143(2), 142(1), 148); detailed ESOP and RSU taxation; F&O and intraday computation with turnover and audit tests; crypto and virtual digital asset reporting (Section 115BBH and the 1% TDS under 194S); and inheritance or estate planning with tax implications.

Sources

• Income Tax Department of India, Salaried Individuals for AY 2026-27 — slabs, rebate, standard deduction, ITR eligibility — incometax.gov.in
• Income Tax Department of India, Annual Information Statement (AIS) FAQ — incometax.gov.in
• Income Tax Department of India, Income Tax Returns — deadlines and Section 234F — incometax.gov.in
• Income Tax Department of India, e-Verification FAQ — 30-day window (CBDT Notification 5/2022) — incometax.gov.in
• Central Board of Direct Taxes (CBDT), Circular 8/2013 — landlord PAN requirement above ₹1 lakh rent — incometaxindia.gov.in
• Ministry of Finance, Union Budget 2025-26 Speech and Finance Bill — indiabudget.gov.in
• Ministry of Finance, Union Budget 2024-25 Speech — capital gains restructuring — indiabudget.gov.in
• Income Tax Act, 1961 — Sections 10(13A), 16(ia), 80C, 87A, 111A, 112A, 115BAC, 192, 234A, 234B, 234C, 234F — incometaxindia.gov.in