An individual must identify the income rates before calculating tax, because income is divided into three broad categories with different tax rates:
| Category | Examples | Tax Treatment |
| Normal Rate Income | Salary, pension, rent, business profits, FD interest | Generally slab rates |
| Special-Rate Income | Short-term and long-term capital gains | Rates depend on the asset and holding period |
| Other Special Rate income | Lottery, online gaming winnings, specified virtual digital asset income | Generally 30% under the applicable provisions |
New Tax Regime Slab Rates
| Total taxable income | Tax rate |
| Up to ₹4 lakh | Nil |
| ₹4 lakh–₹8 lakh | 5% |
| ₹8 lakh–₹12 lakh | 10% |
| ₹12 lakh–₹16 lakh | 15% |
| ₹16 lakh–₹20 lakh | 20% |
| ₹20 lakh–₹24 lakh | 25% |
| Above ₹24 lakh | 30% |
Deductions Available under New Tax Regime
There are many deductions available under new tax regime, were taxpayers can reduce tax liability using these below mentioned deductions:
- Tax Free Income - Resident individual with eligible total income up to Rs. 12 lakh can receive a rebate of up to Rs. 60,000.
- Standard deductions - Rs. 75,000/- for salary or Pension.
- Employer contribution in National Pension System (NPS) - Deduction is available under section 124 of the Income-tax Act, 2025, 14% of Basic Salary plus DA.
- Home Loan Interest - Available only on interest on a let-out property, but not for a self-occupied house property.
- Family Pension - Lower of one-third of family pension or Rs. 25,000.
- Transport Allowance - Up to Rs. 3200 per month for disabled person.
- Gratuity - Up to Rs. 20,00,000 for private, fully exempt for government employees.
- Public Provident Fund (PPF) - Maturity fully exempted.
- Employees Provident Fund (EPF) - Maturity amount fully exempted.
- Sukanya Samriddhi Yojana (SSY) - Exempted.
- Agricultural income - Only agricultural income is tax free, agricultural + non agricultural income may be taxable.
- Interest on specified government bonds - Exempt from income tax. Note - Not every government bond or bank deposit is tax-free. The exemption depends on the specific notification and conditions governing the instrument.
- Gifts Received - Gift is generally exempt from income tax, subject to the applicable definition of relative. You can show it ITR under "Receipt not in Nature of Income". If gifts received from non relatives, then tax free limit up to Rs. 50,000.
- Additional Deduction for New Employment - Provide additional deduction under section 146 to businessman to hire new employees in certain conditions.
- Deposits in Agniveer Corpus Fund - Deduction available under section 125.
- Life Insurance Policy on maturity - Exempt under Section 10(10D)
- Long Term Capital Gain - Exempt up to Rs. 1,25,000
- Marginal Relief - Income exceeding Rs. 12 lakh, relief is available. If a resident individual has taxable income of Rs.12,01,000, which is Rs.1,000 above the Rs.12 lakh limit, marginal relief ensures that the tax payable is restricted to Rs.1,000 instead of the higher tax calculated under normal slab rates.
- Voluntary Retirement Scheme - Benefits up to Rs. 5 lakh under section 19.
- Deductions u/s 82 long-term Capital Gain on sale of a House Property and u/s 86 long-term Capital Gain on sale of any asset other than a House Property.
- Rental Income - 30% deduction available.
Before filing your ITR, always verify your AIS, TIS and Form 26AS, maintain proper financial records and check the latest provisions of the Income-tax Act, 2025.
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