Navigating Income Tax for Salaried Individuals: Assessment Year 2025-26

For salaried individuals in India, understanding the provisions for income tax and adhering to the due dates for filing Income Tax Returns (ITR) is crucial for a smooth financial year. This article outlines the key aspects of taxability for the current assessment year, AY 2025-26 (covering income earned during Financial Year 2024-25), and highlights the recently extended due date for filing.

Dual Tax Regimes: Old vs. New

A significant aspect of income tax for salaried individuals in India is the availability of two tax regimes: the Old Tax Regime and the New Tax Regime (default regime). Taxpayers have the option to choose the regime that is more beneficial to them.

1. Old Tax Regime: This regime allows taxpayers to claim various deductions and exemptions under different sections of the Income Tax Act, 1961. These typically include:

• Section 80C: Investments in instruments like PPF, EPF, ELSS, life insurance premiums, home loan principal repayment, and children's tuition fees (up to Rs. 1.5 lakh).

• Section 80D: Medical insurance premiums.

• Section 24(b): Interest paid on housing loan (up to Rs. 2 lakh for self-occupied property).

• Standard Deduction: A flat deduction of Rs. 50,000 from salary income.

• House Rent Allowance (HRA): Exemption for HRA received, subject to certain conditions.

  
  

• Leave Travel Allowance (LTA): Exemption for LTA as per rules.

2. New Tax Regime (Default Regime): Introduced to simplify the tax structure, the new regime offers lower tax rates but at the cost of foregoing most of the common deductions and exemptions available under the old regime. However, it now includes the benefit of a standard deduction of Rs. 50,000.

Key Slab Rates for FY 2024-25 (AY 2025-26) under New Tax Regime:

• Up to Rs. 3,00,000: Nil

  
  

• Rs. 3,00,001 to Rs. 6,00,000: 5% on income exceeding Rs. 3,00,000

  
  

• Rs. 6,00,001 to Rs. 9,00,000: Rs. 15,000 + 10% on income exceeding Rs. 6,00,000

  
  

• Rs. 9,00,001 to Rs. 12,00,000: Rs. 45,000 + 15% on income exceeding Rs. 9,00,000

  
  

• Rs. 12,00,001 to Rs. 15,00,000: Rs. 90,000 + 20% on income exceeding Rs. 12,00,000

  
  

• Above Rs. 15,00,000: Rs. 1,50,000 + 30% on income exceeding Rs. 15,00,000

  
  

Note: A health and education cess of 4% is applicable on the income tax payable in both regimes.

Taxpayers must inform their employer about their chosen tax regime at the beginning of the financial year to ensure correct TDS (Tax Deducted at Source) is applied. If no option is chosen, the new tax regime becomes the default.

Key Changes and Considerations for AY 2025-26:

• Standard Deduction in New Regime: As mentioned, the standard deduction of Rs. 50,000 is now available under both the old and new tax regimes from AY 2024-25 onwards.

• Rebate under Section 87A: For resident individuals, a tax rebate is available under Section 87A.

  
  

  • Under the Old Tax Regime, if total income does not exceed Rs. 5 lakh, the rebate is 100% of the income tax or Rs. 12,500, whichever is lower.

  • Under the New Tax Regime, no income tax is payable up to a total income of Rs. 7 lakh.

    
    

• Increased Threshold for Asset & Liability Reporting: For AY 2025-26, individuals are required to report details of specified Assets & Liabilities in Schedule AL only if their total income for FY 2024-25 (AY 2025-26) exceeds Rs. 1 crore. Previously, this threshold was Rs. 50 lakh.

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• ITR Form Updates: The Income Tax Department has released updated ITR forms (ITR-1, ITR-2, ITR-3, ITR-4) for AY 2025-26. These forms incorporate structural and content revisions, particularly in areas like capital gains reporting. For example, ITR-2 now requires separate reporting for capital gains realized before and after July 23, 2024, due to Finance Act, 2024 amendments.

  
  

Due Date for Filing Income Tax Return (ITR)

For salaried individuals and other taxpayers whose accounts are not required to be audited, the original due date for filing Income Tax Returns for Financial Year 2024-25 (Assessment Year 2025-26) was July 31, 2025.

However, the Income Tax Department has extended this deadline to September 15, 2025. This extension provides taxpayers with additional time, especially given the recent changes and updates to the ITR forms and utilities.

It is advisable to file your ITR well before the due date to avoid last-minute rush and potential technical glitches. Missing the due date can attract penalties and interest on unpaid taxes. A belated return can be filed by December 31, 2025, but it will be subject to a penalty under Section 234F.

In conclusion, salaried individuals should carefully assess their income, choose the most beneficial tax regime, consider all applicable deductions, and ensure they file their Income Tax Returns by the extended due date of September 15, 2025, for Assessment Year 2025-26. Utilizing the online utilities and resources provided by the Income Tax Department can streamline the filing process.