Tax Facts
We thought the following information on various tax issues would be useful to you. Personal circumstances always vary, so please ensure you contact us for specific advice.
Income Tax
Income tax is a direct tax that the Government of India levies on the income of individuals and businesses. The tax is used to fund various government operations, including infrastructure development, defense, and social welfare programs. The income tax system in India is governed by the Income Tax Act, 1961.
Income Tax Rates (FY 2024-25)
Taxpayers can choose between two tax regimes: the Old Tax Regime and the New Tax Regime. The New Tax Regime is the default option.
New Tax Regime (Default)
| Income Slab (₹) | Tax Rate |
|---|---|
| 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% |
*Note: A tax rebate under Section 87A makes income up to ₹7 lakhs effectively tax-free. A standard deduction of ₹75,000 is also available.
Old Tax Regime
| Income Slab (₹) | 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% |
*Note: This regime allows for various exemptions and deductions not available in the New Regime.
Capital Gains and Assets
Capital gains are the profits earned from the sale of a capital asset. The tax depends on the holding period.
- Short-Term Capital Gains (STCG): Taxed at 20% for equity shares/funds (with STT paid). Other STCG is added to your income and taxed at your slab rate.
- Long-Term Capital Gains (LTCG): Taxed at a uniform rate of 12.5% for all assets. There's an exemption up to ₹1.25 lakh per year for certain financial assets.
Deductions (Old Tax Regime)
The Old Tax Regime allows for several deductions to reduce taxable income, including:
- Section 80C: Up to ₹1.5 lakh for investments (PPF, EPF, ELSS, etc.).
- Section 80D: For health insurance premiums.
- House Rent Allowance (HRA): Exemption for rent paid.
- Home Loan Interest: Deduction on interest paid for a self-occupied property.
- Section 80TTA/80TTB: Deduction on interest from savings accounts.
Permanent Account Number (PAN)
A PAN is a unique 10-digit alphanumeric identifier from the Income Tax Department, mandatory for tracking financial transactions.
Structure of PAN
- First 3 Chars: Alphabetic series (AAA-ZZZ).
- 4th Char: Status of the holder (e.g., 'P' for Individual).
- 5th Char: First letter of your last name.
- Next 4 Chars: Sequential numbers (0001-9999).
- Last Char: An alphabetic check digit.
Income Tax Act, 1961
This is the primary law governing income tax in India. It categorizes income under five main heads:
- Income from Salaries
- Income from House Property
- Profits and Gains from Business or Profession
- Capital Gains
- Income from Other Sources