Income Tax Services
Income tax in India is governed by the Income-tax Act, 1961, and is subject to annual amendments through the Finance Act presented in the Union Budget. For the current period (Financial Year 2024-25, Assessment Year 2025-26, and upcoming FY 2025-26, AY 2026-27), there have been significant changes, especially regarding the new tax regime.
1. Income Tax for Individuals (FY 2024-25 / AY 2025-26 and FY 2025-26 / AY 2026-27)
India offers two tax regimes for individuals: the Old Tax Regime and the New Tax Regime (default).
A. New Tax Regime (Default Regime - Section 115BAC)
The new tax regime has become the default option for individuals, HUFs, AOPs (not co-operative societies), BOIs, and Artificial Juridical Persons. Taxpayers have the option to opt out and choose the old regime.
Key Features of the New Tax Regime
Lower Tax Rates
It offers lower tax rates compared to the old regime.
Limited Deductions/Exemptions
Most common deductions and exemptions (like HRA, LTC, Section 80C, 80D, etc.) are not allowed under this regime.
Standard Deduction (for salaried individuals/pensioners)
A standard deduction of ₹50,000 (for FY 2024-25) and ₹75,000 (effective from April 1, 2025, for FY 2025-26 onwards) is allowed under this regime.
Rebate under Section 87A
- For FY 2024-25: A full tax rebate is available for total income up to ₹7 lakh.
- For FY 2025-26 onwards: The rebate under Section 87A is increased to ₹60,000, meaning taxpayers with income up to ₹12 lakh (considering the standard deduction for salaried individuals, this can go up to ₹12.75 lakh) may have zero tax liability.
Income Tax Slab Rates for Individuals (New Tax Regime)
For Financial Year 2024-25 (Assessment Year 2025-26)
| Income Tax Slabs | Tax Rates |
|---|---|
| Up to ₹3,00,000 | NIL |
| ₹3,00,001 – ₹7,00,000 | 5% |
| ₹7,00,001 – ₹10,00,000 | 10% |
| ₹10,00,001 – ₹12,00,000 | 15% |
| ₹12,00,001 – ₹15,00,000 | 20% |
| Above ₹15,00,000 | 30% |
For Financial Year 2025-26 (Assessment Year 2026-27)
| Income Tax Slabs | Income Tax Rates |
|---|---|
| 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% |
B. Old Tax Regime (with Deductions and Exemptions)
The old tax regime allows taxpayers to claim various deductions and exemptions available under different sections of the Income-tax Act (e.g., Section 80C, 80D, HRA, LTA, etc.).
Income Tax Slab Rates for Individuals (Old Tax Regime)
For FY 2024-25 (AY 2025-26) & FY 2025-26 (AY 2026-27)
For Individuals below 60 years of age and HUF
For Senior Citizens (60 years to less than 80 years)
For Super Senior Citizens (80 years and above)
Surcharge and Health & Education Cess (Applicable to both regimes)
- Surcharge:
- Total income > ₹50 lakh but ≤ ₹1 crore: 10% of income tax
- Total income > ₹1 crore but ≤ ₹2 crore: 15% of income tax
- Total income > ₹2 crore but ≤ ₹5 crore: 25% of income tax
- Total income > ₹5 crore: 37% of income tax
(Note: The enhanced surcharge of 25% and 37% is generally not levied on income chargeable to tax under sections 111A, 112, 112A, and Dividend Income. Maximum surcharge on such incomes is 15%).
- Health and Education Cess: 4% on the income tax (including surcharge, if any).
2. Income Tax for Businesses (Corporate Tax)
Corporate tax is levied on the income or profits earned by companies.
Corporate Tax Rates in India (for Domestic Companies)
Standard Rate
Generally, domestic companies are taxed at 30%.
Concessional Rates
- 25%: For domestic companies whose total turnover or gross receipts in FY 2022-23 (relevant previous year for AY 2024-25) does not exceed ₹400 crore.
- 22% (Section 115BAA): For domestic companies that opt for this regime and do not claim certain deductions/incentives. The effective tax rate with surcharge and cess is approx. 25.17%.
- 15% (Section 115BAB): For new domestic manufacturing companies incorporated on or after October 1, 2019, that commence manufacturing on or before March 31, 2024, and do not claim certain deductions/incentives. The effective tax rate with surcharge and cess is approx. 17.16%.
Minimum Alternate Tax (MAT)
If the tax payable by a company under the normal provisions of the Income-tax Act is less than 15% of its book profit, then MAT is levied at 15% of the book profit (plus surcharge and cess). Companies opting for the concessional rates under Section 115BAA or 115BAB are exempt from MAT.
Corporate Tax Rates for Foreign Companies
- 40% on income accruing or arising in India.
- Certain specific incomes (like royalty or fees for technical services) may be taxed at different rates.
- Surcharge:
- Total income > ₹1 crore but ≤ ₹10 crore: 2% of income tax.
- Total income > ₹10 crore: 5% of income tax.
- Health and Education Cess: 4% on income tax (including surcharge).
3. Income Tax for Hindu Undivided Families (HUF)
A HUF is treated as a separate tax entity, distinct from its individual members.
Tax Slabs
HUFs are generally taxed at the same slab rates as individuals (non-senior citizen category) under both the old and new tax regimes.
Deductions
HUFs can also claim various deductions and exemptions, similar to individuals, such as under Section 80C, 80D, etc.
Separate PAN and ITR
HUFs have their own PAN and file separate income tax returns (ITR-2 or ITR-3, or ITR-4 if under presumptive taxation).
Income Sources
Income for HUF can arise from ancestral property, businesses carried on by the HUF, or investments made from HUF funds.
Tax Benefit
A key benefit of an HUF is the ability to split income and claim separate basic exemptions and deductions, potentially reducing the overall family tax burden.
HUF Tax Slabs
New Regime Tax Slabs (FY 2025-26)
Same as individuals (up to ₹4 lakh nil, then 5%, 10% etc.).
Old Tax Regime Slabs (FY 2025-26)
Same as individuals below 60 years of age (up to ₹2.5 lakh nil, then 5%, 20% etc.).
Surcharge and Cess
Same as for individuals.
4. Income Tax for Trusts
Taxation of trusts in India depends on their nature:
Charitable or Religious Trusts (Non-profit trusts)
- These trusts are generally exempt from income tax if they are registered under Section 12A/12AB and comply with various conditions, including application of income for charitable/religious purposes.
- They are required to file Income Tax Returns in Form ITR-7.
- Income applied for charitable/religious purposes is exempt. However, if the income is not applied for the specified purposes or certain conditions are violated, it may be taxed.
- Donations received by these trusts are generally exempt.
Private Trusts (Specific and Discretionary Trusts)
Private Specific Trust
Where the shares of the beneficiaries are clearly defined and ascertainable. The income is taxed either in the hands of the trustee as a representative assessee or directly in the hands of the beneficiary. The tax rate applicable is usually the rate applicable to the total income of each beneficiary.
Private Discretionary Trust
Where the shares of the beneficiaries are not known or ascertainable. The income is generally taxed at the Maximum Marginal Rate (MMR), which is the highest rate of tax applicable to individuals (currently 30% plus surcharge and cess).
Business Income of Trusts
If a trust (even a charitable one) has business income, that income is generally charged at the Maximum Marginal Rate (MMR), unless specific exemptions apply (e.g., if the trust is created by will solely for the benefit of dependent relatives and it’s the only trust so declared).
Recent Key Changes and Updates (Applicable from April 1, 2025 - FY 2025-26 onwards, based on Budget 2025 proposals)
New Tax Regime Default
The new tax regime (Section 115BAC) remains the default, with updated slabs for FY 2025-26.
Increased Rebate under Section 87A (New Regime)
For the new tax regime, the rebate limit has been increased to ₹60,000, effectively making income up to ₹12 lakh tax-free (or ₹12.75 lakh for salaried individuals with standard deduction).
Standard Deduction under New Tax Regime
Salaried employees and pensioners can claim a standard deduction of ₹75,000 under the new tax regime (up from ₹50,000).
Extension of Updated Tax Return (ITRU) Deadline
The deadline for filing an Updated Tax Return has been extended from 12 months to 48 months (4 years) from the end of the relevant assessment year.
TDS/TCS Threshold Enhancements
Threshold limits for various TDS sections have been increased (e.g., interest received by senior citizens, rent, commissions).
Removal of Section 206AB and 206CCA
These sections, which required tax deductors/collectors to determine if a recipient had filed tax returns, will be omitted to reduce compliance burden.
Removal of Equalisation Levy
The 6% equalization levy on digital advertisements paid to non-resident service providers (exceeding ₹1 lakh) will be removed.
Simplification of Income Tax Act
A new Income Tax Bill 2025 was presented, aiming to simplify the existing Income Tax Act, 1961, by reducing complexity, obsolete provisions, and introducing a unified ‘Tax Year’ instead of separate financial year and assessment year.
ITR Filing Deadline for Individuals
The due date for ITR filing for non-audit cases has been extended to September 15, 2025 (from July 31, 2025) for AY 2025-26.
It’s always recommended to consult the Our tax experts for the most accurate and up-to-date information specific to your situation.