2. Income from Salary – what the law treats as “salary”

“Salary” is governed mainly by Sections 15 to 17 of the Act. In simple terms, it covers:

• Basic salary, dearness allowance, and any other allowances.
• Perquisites (rent-free accommodation, company car, ESOPs, etc.).
• Bonus, commission, arrears of salary.
• Certain retirement benefits like pension, and some portions of gratuity, leave encashment, superannuation etc. – some parts are exempt under specific clauses of Section 10 (e.g. 10(10), 10(10AA), 10(13), etc.).

A salaried person typically sees these in Form 16:

• Gross salary (as per Section 17).
• Exempt allowances (HRA, LTA, certain reimbursements).
• Standard deduction.
• Income chargeable under the head “Salaries”.

Standard deduction (current law):

Old regime: ₹50,000.
New regime: ₹75,000 (for FY 2024-25 onward, extended in Budget 2025).
ClearTax
+1

These amounts are auto-factored by your employer for TDS, but you still need to ensure they are correctly reflected in your return.

3. Old vs New Tax Regime – legal framework and slabs

3.1. Section 115BAC – the “new regime”

Section 115BAC introduced an alternate lower-rate slab system with fewer deductions.

From AY 2024-25, the new regime is the default for individuals and certain other taxpayers; you can opt out and use the old regime if you wish.
Income Tax Department

For salaried individuals without business income, you can practically choose your regime each year while filing the ITR (or via employer declaration for TDS) – but once the due date passes, your choice for that year is effectively locked.

3.2. Old regime – age-based slabs (unchanged)

Under the old regime, basic exemption and slabs vary by age:
PNB MetLife

Below 60 years

• Up to ₹2.5L – Nil
• ₹2.5L–5L – 5%
• ₹5L–10L – 20%
• Above ₹10L – 30%

Senior citizen (60–80)

• Up to ₹3L – Nil
• ₹3L–5L – 5%
• ₹5L–10L – 20%
• Above ₹10L – 30%

Super senior (80+)

• Up to ₹5L – Nil
• ₹5L–10L – 20%
• Above ₹10L – 30%

You also get the classic bouquet of deductions: 80C, 80D, 80G, 80TTA, home-loan interest (house property), etc.

3.3. New regime slabs – FY 2024-25 vs 2025-26

New regime – FY 2024-25 (AY 2025-26) (for all ages):
PNB MetLife
+1

• Up to ₹3L – Nil
• ₹3L–7L – 5%
• ₹7L–10L – 10%
• ₹10L–12L – 15%
• ₹12L–15L – 20%
• Above ₹15L – 30%

New regime – FY 2025-26 (AY 2026-27) (post-Budget-2025 change):
ClearTax
+2
www.bajajfinserv.in
+2

• Up to ₹4L – Nil
• ₹4L–8L – 5%
• ₹8L–12L – 10%
• ₹12L–16L – 15%
• ₹16L–20L – 20%
• ₹20L–24L – 25%
• Above ₹24L – 30%

And there is an enhanced rebate under Section 87A in the new regime:

Earlier (FY 2024-25): rebate made income up to ₹7L effectively tax-free (for eligible residents).
ClearTax
+1

From FY 2025-26, a salaried resident opting new regime can effectively have up to ₹12L of total income tax-free, because of an increased rebate of ₹60,000, and with the ₹75,000 standard deduction this makes salary up to ~₹12.75L effectively zero-tax if structured purely under the new regime.
ClearTax
+2
Income Tax India
+2

Practical insight:
For many pure-salary cases with limited deductions, the new regime will often be better from FY 2025-26 onwards. Old regime tends to win when you have substantial deductions (EPF/PPF/ELSS, NPS, home loan, big 80D, etc.).

4. Which ITR form should a salaried person use?

The form is not a “formality”; using the wrong ITR can make the return defective.

4.1. ITR-1 (Sahaj) – most common for salaried

ITR-1 is available to a resident individual (not ordinarily resident excluded in some cases) whose total income does not exceed ₹50 lakh and who has income from:
Income Tax India
+3
Income Tax Department
+3
Income Tax Department
+3

• Salary or pension
• One house property (no brought-forward loss)
• Other sources like interest, family pension, certain dividends
• Small agricultural income (up to specified limits)

But you cannot use ITR-1 if, for example, you:

• Are a director in a company
• Have unlisted shares, capital gains, or business/professional income
• Have foreign assets or signing authority in a foreign account, etc.

4.2. ITR-2 – when salary gets more complex

You use ITR-2 if you are an individual/HUF not eligible for ITR-1 and you do not have business/professional income. Typical salaried people who move to ITR-2:
Income Tax Department
+2
ClearTax
+2

• More than one house property
• Capital gains (shares, mutual funds, property)
• Foreign assets/income
• Income from digital assets under special tax provisions (e.g. crypto)

If you also have business or professional income, you shift to ITR-3.

5. Documents & data a salaried person should collate

Before filing, a salaried professional should assemble:

• Form 16 – issued by employer under Section 192; shows salary, exemptions, deductions considered, and TDS deducted.
  Income Tax India
• Form 26AS & AIS (Annual Information Statement) – from the income-tax portal, capturing TDS/TCS, SFT transactions, interest, dividends, etc.
  Income Tax India
• Salary slips – to cross-check HRA, LTA, perquisites, reimbursements.
• Home loan interest certificate – for self-occupied and/or let-out property.
• Rent receipts & landlord details – for HRA exemption (if using old regime).
• Investment proofs – EPF/PPF, ELSS, insurance, NPS, medical insurance, donations (with 80G proof), etc.
• Details of digital assets – transaction statements to compute net income taxable u/s 115BBH at 30%.

These are not just support documents; they are your defence if the department raises a query, mismatch, or scrutiny.

6. Step-by-step legal/compliance flow for a salaried ITR

6.1. Check your filing obligation and due date

For FY 2024-25 (AY 2025-26), the due date for individuals not requiring audit is currently 15 September 2025 after the CBDT extension.
The Economic Times
+1

Even if your employer has deducted full TDS, you must file if your total income before deductions crosses the basic exemption or you fall in any special category (foreign assets, director, etc.).

6.2. Decide on tax regime (old vs new)

You can estimate tax under both regimes (your calculator feature is perfect for this).

Factors to consider:

• How much deduction you actually have (80C, 80D, home loan, NPS, donations).
• Whether you plan to claim HRA, LTA, housing-loan interest, etc. (only old regime in many cases).
• Long-term consistency: if you’ll buy a house, increase NPS, etc., the old regime might be better over several years.

Legal angle:
Under Section 115BAC(1A) and related rules, new regime is default from AY 2024-25; opting old regime is done by a choice in the ITR (or employer declaration for TDS). Once the due date under Section 139(1) passes, you generally cannot change the regime for that year.

6.3. Log in and choose the correct ITR form

On the official e-filing portal, salaried individuals can file ITR-1 or ITR-2 online using guided utilities.
Income Tax Department
+2
Income Tax Department
+2

You’ll see:

• Personal details (pre-filled from PAN/Aadhaar).
• Salary schedule with data pre-filled from Form 16 and AIS; you must verify and correct if needed.
• TDS schedule with data from Form 26AS/AIS.

6.4. Report income correctly

Key legal/informational points:

Salary

• Cross-check that gross salary, exemptions (HRA, LTA), and standard deduction match Form 16.
• If AIS/26AS shows any other employer TDS, verify you’ve included that salary.

House property

• Self-occupied: you can claim interest deduction (old regime) within prescribed limits; the overall loss from house property is usually restricted to ₹2 lakh per year to be set off against other heads, with balance carried forward.
• Let-out: compute income as rent less municipal taxes, 30% standard deduction, and interest on loan; again the overall loss cap applies.

Other sources

• Savings/FD interest, family pension, some dividends, etc. – ensure they match your AIS.

Digital assets

• Taxed separately at 30% plus surcharge and cess without standard deductions and without 87A rebate relief (for that portion). They are disclosed under the specified schedule in ITR-2/3.

6.5. Apply deductions and rebates properly

Chapter VI-A deductions (old regime):

• 80C (up to ₹1.5L) – PF, PPF, ELSS, life insurance, etc.
• 80D – health insurance.
• 80G – donations to approved funds.
• Others like 80TTA (savings interest), 80E (education loan), 80CCD (NPS).

Income Tax India

New regime – very limited deductions; primarily standard deduction and employer NPS (80CCD(2)), plus a few others specified in 115BAC (not all classic 80C/80D benefits).

Rebate u/s 87A

Old regime: resident individuals with taxable income up to ₹5L get rebate up to ₹12,500, making tax zero.
ClearTax
+1

New regime: rebate was up to ₹25,000 for income up to ₹7L (FY 2024-25) and is now extended so that income up to ₹12L becomes tax-free from FY 2025-26 (for regular slab income, not special-rate income).
ClearTax
+1

6.6. Pay self-assessment tax (if any) and e-verify

If total tax payable (after TDS/TCS/advance tax) is positive, you must pay self-assessment tax online and enter the challan details.

Finally, e-verify the return via Aadhaar OTP, netbanking, DSC, etc. An unverified return is treated as not filed.

7. Deadlines, belated returns, and updated returns – legal insights

Original due date for non-audit individuals for AY 2025-26 is currently 15 September 2025.
The Economic Times
+1

Belated return (Section 139(4)):

Can be filed after the due date but before 31 December 2025 (for AY 2025-26), with late fee and interest. You may lose the right to carry forward certain losses (e.g. capital loss).
The Economic Times
+1

Updated return (Section 139(8A)):

Can be filed up to 24 months from the end of the relevant AY, usually when you discover under-reported income and want to regularise, but it comes with additional tax and is not meant for claiming fresh large refunds.
The Economic Times

Legal risk if you simply don’t file at all despite being liable:

• Interest & late fee.
• Possible notices and, in serious/intentional cases, even prosecution provisions.

8. Common legal/compliance issues for salaried taxpayers

Mismatch between Form 16 and AIS/26AS

The department’s system largely trusts AIS/26AS data; if you rely only on Form 16 and omit other interest/dividend/TDS entries, it can throw up intimations and demands later.

Wrong ITR form

Filing ITR-1 when you actually have capital gains, foreign assets or multiple properties can lead to your return being treated as defective, forcing a corrected filing.

Incorrect regime choice or switching too late

Some employees declare one regime to the employer (for TDS) and try to use another in self-filing. Legally, a salaried person can choose while filing, but once the Section 139(1) due date is over, changing the regime via belated/updated return can be constrained.

Ignoring digital assets/foreign holdings

Non-reporting of VDAs (crypto, NFTs) or foreign bank accounts/equity can invite penalties and prosecution sections, as these are now high-focus areas.

9. Why a detailed ITR matters for salaried people

Even if your affairs look “simple”, a properly prepared ITR:

• Legally documents how your income was computed and what law you relied on (regime, exemptions, deductions).
• Serves as the base for loan applications, visas, investments; banks and embassies often look at 2–3 years of ITRs.
• Protects you if the department later sends an intimation or notice – you have a clean, law-based computation to stand on.