Complete Guide to Indian Income Tax FY 2024-25 – TaxGV.com
Income tax in India is a direct tax levied on the income or wealth of individuals, businesses, and other entities under the Income Tax Act, 1961. It’s a tax that cannot be shifted to others, meaning the person earning the income is responsible for paying it to the government. This guide by TaxGV.com covers everything you need to know about income tax, including tax slabs, deductions, exemptions, filing returns, set-off and carry forward of losses, capital gains exemptions, and more. Use our Tax Calculator to estimate your tax liability for FY 2024-25.
What is the Income Tax Act, 1961?
The Income Tax Act, 1961, is the primary legislation governing income tax in India. It outlines the rules for levying, collecting, and administering taxes on income earned by individuals, Hindu Undivided Families (HUFs), companies, firms, and other entities. The Act is amended annually through the Finance Act, reflecting changes in tax rates, exemptions, and policies based on the Union Budget.
Heads of Income
The Income Tax Act categorizes income into five heads, each taxed according to specific rules:
- Income from Salary: Includes wages, pensions, bonuses, and allowances earned from employment.
- Income from House Property: Covers rental income from residential or commercial properties.
- Income from Business or Profession: Profits from business activities or professional services like law, medicine, or consultancy.
- Income from Capital Gains: Gains from the sale of capital assets like property, stocks, or mutual funds.
- Income from Other Sources: Includes interest on savings, dividends, lottery winnings, or gifts.
Calculate your taxable income under each head using our Tax Calculator.
Residential Status and Tax Liability
Your tax liability depends on your residential status in India:
- Resident: Taxed on global income (income earned in India and abroad).
- Non-Resident: Taxed only on income earned or received in India.
- Resident but Not Ordinarily Resident (RNOR): Taxed on income earned in India and certain foreign income.
Determining your residential status is crucial for accurate tax calculation. Use our Tax Calculator to understand your tax obligations based on your status.
Budget 2025 Highlights
The Union Budget 2025 introduced significant changes to the tax regime. Income up to ₹12 Lakhs under the new tax regime now has zero tax liability due to an increased rebate. Additionally, salaried individuals can claim a standard deduction of ₹75,000, further reducing their tax burden.
Income Tax Slabs for FY 2024-25
India offers two tax regimes: the old regime (with deductions) and the new regime (simplified rates, fewer deductions). Below are the tax slabs for FY 2024-25 (indicative, to be updated with Budget 2025 rates):
New Tax Regime
The new regime offers lower tax rates but fewer deductions:
| Income Tax Slabs | Tax Rates |
|---|---|
| Up to ₹3,00,000 | Nil |
| ₹3,00,001 - ₹6,00,000 | 5% |
| ₹6,00,001 - ₹9,00,000 | 10% |
| ₹9,00,001 - ₹12,00,000 | 15% |
| ₹12,00,001 - ₹15,00,000 | 20% |
| Above ₹15,00,000 | 30% |
Note: A rebate of ₹25,000 under Section 87A makes tax liability zero for income up to ₹7,00,000 in the new regime.
Old Tax Regime
The old regime allows deductions but has higher rates:
| Income Tax Slabs | Tax Rates |
|---|---|
| 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: Senior citizens (60-80 years) have a basic exemption limit of ₹3,00,000, and super senior citizens (above 80 years) have a limit of ₹5,00,000.
Compare your tax liability under both regimes using our Tax Calculator.
Deductions and Exemptions
The Income Tax Act provides several deductions and exemptions to reduce your taxable income:
- Section 80C: Deduction up to ₹1.5 lakh for investments in PPF, ELSS, life insurance premiums, and home loan principal repayment. If you’ve taken a home loan, calculate your EMI and tax benefits using our EMI Calculator.
- Section 80D: Deduction for health insurance premiums (₹25,000 for self/family, ₹50,000 for senior citizens).
- Section 80CCD(1B): Additional deduction of ₹50,000 for contributions to the National Pension System (NPS).
- House Rent Allowance (HRA): Exemption for salaried individuals paying rent, based on rent paid, HRA received, and city of residence.
- Section 10: Exemptions for allowances like Leave Travel Allowance (LTA) and transport allowance.
- Standard Deduction: ₹75,000 for salaried individuals in the new regime (as per Budget 2024 updates).
Maximize your deductions by calculating your taxable income with our Tax Calculator. If you’re repaying a home loan, use our EMI Calculator to plan your finances.
Set-Off and Carry Forward of Losses
The Income Tax Act allows taxpayers to set off losses against income in the same year or carry them forward to future years, subject to certain conditions. This provision helps reduce your tax liability by offsetting losses against taxable income. Here’s how it works:
1. Set-Off of Losses
Losses from one head of income can be set off against income from another head in the same financial year, except for certain restrictions:
- Loss from House Property: Can be set off against any other head of income (e.g., salary, business) up to ₹2,00,000 in a year.
- Loss from Business or Profession: Can be set off against income from any other head except salary.
- Loss from Capital Gains: Short-term capital losses can be set off against both short-term and long-term capital gains. Long-term capital losses can only be set off against long-term capital gains.
- Loss from Speculative Business: Can only be set off against profits from another speculative business.
- Loss from Other Sources: Cannot be set off against salary income.
2. Carry Forward of Losses
If losses cannot be fully set off in the same year, they can be carried forward to future years, subject to these rules:
- House Property Loss: Can be carried forward for up to 8 years and set off against house property income.
- Business Loss (Non-Speculative): Can be carried forward for 8 years and set off against future business profits.
- Speculative Business Loss: Can be carried forward for 4 years and set off against speculative business profits.
- Capital Losses: Both short-term and long-term capital losses can be carried forward for 8 years and set off against future capital gains.
- Unabsorbed Depreciation: Can be carried forward indefinitely and set off against any income (except salary).
3. Conditions for Carry Forward
To carry forward losses, you must:
- File your ITR on or before the due date (July 31 of the assessment year).
- Ensure the loss is from a source that allows carry forward (e.g., losses from exempt income cannot be carried forward).
Understanding how to set off and carry forward losses can significantly reduce your tax liability. Use our Tax Calculator to estimate your taxable income after accounting for losses.
Filing Income Tax Returns (ITR)
Filing an ITR is mandatory if your taxable income exceeds the basic exemption limit (₹2,50,000 for individuals under 60 in the old regime, ₹3,00,000 in the new regime). The due date for FY 2024-25 is July 31, 2025, though extensions may apply. Key points:
- Choose the correct ITR form (e.g., ITR-1 for salaried individuals, ITR-3 for professionals).
- File online via the Income Tax Department’s e-filing portal.
- Late filing attracts a penalty of ₹5,000 (₹1,000 for small taxpayers).
Ensure accurate filing by estimating your tax liability with our Tax Calculator.
Advance Tax and TDS
Advance Tax: If your tax liability exceeds ₹10,000 in a financial year, you must pay advance tax in installments (due on June 15, September 15, December 15, and March 15).
Tax Deducted at Source (TDS): TDS is deducted by employers, banks, or other payers on salary, interest, or professional fees. Check your TDS deductions in Form 16 or 26AS.
Use our Tax Calculator to estimate your advance tax liability.
Penalties for Non-Compliance
Non-compliance with the Income Tax Act can lead to penalties:
- Late Filing: ₹5,000 penalty (₹1,000 for taxpayers with income below ₹5,00,000).
- Under-Reporting Income: Penalty of 50% of the tax evaded.
- Non-Disclosure of Income: Penalty up to 300% of the tax evaded.
Avoid penalties by calculating your tax accurately with our Tax Calculator.
Tax Planning Tips
Effective tax planning can help you save money:
- Invest in tax-saving instruments under Section 80C (e.g., PPF, ELSS).
- Claim HRA if you live in a rented house.
- Opt for the tax regime that suits your financial situation—use our Tax Calculator to compare.
- If you have a home loan, calculate your EMI and tax benefits with our EMI Calculator.
- Utilize the set-off and carry forward of losses to reduce your taxable income over multiple years.
Capital Gains Exemptions: Sections 54, 54B, 54D, 54F, 54G, and 54H
The Income Tax Act provides various exemptions under Sections 54, 54B, 54D, 54F, 54G, and 54H for capital gains arising from the sale of different types of assets, provided the proceeds are reinvested in specified assets or schemes. Below is a detailed explanation of each section, followed by a summary table.
Section 54: Exemption on Sale of Residential Property
Section 54 offers tax relief for individuals and HUFs selling a residential property, exempting long-term capital gains if reinvested in another residential property in India.
- Eligibility: Individuals and HUFs only.
- Asset Sold: Residential house held for more than 24 months (long-term capital asset).
- Reinvestment: Purchase a new residential property within 1 year before or 2 years after the sale, or construct one within 3 years.
- Location: New property must be in India.
- Exemption Limit: Capped at ₹10 crore from April 2023 (AY 2024-25 onwards).
- Special Provision: From AY 2020-21, can purchase two residential houses if capital gain ≤ ₹2 crore (once in a lifetime).
- Condition: If the new property is sold within 3 years, the exemption is reversed.
- Capital Gains Account Scheme (CGAS): Unutilized gains can be deposited in CGAS, to be used within 2 years for purchase or 3 years for construction, else taxable.
Use our Tax Calculator to estimate your tax liability after claiming this exemption.
Section 54B: Exemption on Sale of Agricultural Land
Section 54B provides relief for individuals and HUFs selling agricultural land used for farming, if the proceeds are reinvested in another agricultural land.
- Eligibility: Individuals and HUFs only.
- Asset Sold: Agricultural land used by the taxpayer or their parents for at least 2 years before the sale.
- Reinvestment: Purchase another agricultural land within 2 years from the date of sale.
- Condition: The new land must be used for agricultural purposes. If sold within 3 years, the exemption is reversed.
- CGAS: Unutilized gains can be deposited in CGAS, to be used within 2 years, else taxable.
Section 54D: Exemption on Compulsory Acquisition of Land and Building
Section 54D offers relief for capital gains from the compulsory acquisition of land and building forming part of an industrial undertaking.
- Eligibility: Any taxpayer (individuals, HUFs, companies, etc.).
- Asset Sold: Land or building used for an industrial undertaking for at least 2 years before acquisition.
- Reinvestment: Purchase or construct another land or building for industrial purposes within 3 years from the date of compensation receipt.
- Condition: If the new asset is sold within 3 years, the exemption is reversed.
- CGAS: Unutilized gains can be deposited in CGAS, to be used within 3 years, else taxable.
Section 54F: Exemption on Sale of Any Long-Term Capital Asset (Not Residential)
Section 54F offers relief for individuals and HUFs selling any long-term capital asset (other than a residential house) if the proceeds are invested in a residential house.
- Eligibility: Individuals and HUFs only.
- Asset Sold: Any long-term capital asset (not a residential house) held for more than 24 months (or 36 months for certain assets).
- Reinvestment: Invest the net sale proceeds in a residential house within 1 year before or 2 years after the sale, or construct one within 3 years.
- Condition: The taxpayer must not own more than one residential house (other than the new one) on the date of sale. If the new house is sold within 3 years, the exemption is reversed.
- Exemption Limit: Proportional to the amount invested; capped at ₹10 crore from April 2023 (similar to Section 54).
- CGAS: Unutilized proceeds can be deposited in CGAS, to be used within timelines, else taxable.
Section 54G: Exemption on Transfer of Assets in Shifting Industrial Undertaking
Section 54G provides relief for capital gains from transferring assets during the shifting of an industrial undertaking from urban to non-urban areas.
- Eligibility: Any taxpayer.
- Asset Sold: Machinery, plant, building, or land used in an industrial undertaking shifted from urban to non-urban areas.
- Reinvestment: Invest in new assets (machinery, plant, building, or land) in the non-urban area within 1 year before or 3 years after the transfer.
- Condition: If the new asset is sold within 3 years, the exemption is reversed.
- CGAS: Unutilized gains can be deposited in CGAS, to be used within 3 years, else taxable.
Section 54H: Extension of Time for Compulsory Acquisition
Section 54H extends the time limit for reinvestment under Sections 54, 54B, 54D, and 54F in cases of compulsory acquisition.
- Applicability: Applies to Sections 54, 54B, 54D, and 54F.
- Provision: The time limit for reinvestment starts from the date of receipt of compensation, not the date of acquisition, providing additional time for compliance.
Table of Capital Gains Exemptions (Sections 54, 54B, 54D, 54F, 54G, 54H)
The following table summarizes the key conditions for each section:
| Section | Eligible Taxpayers | Asset Sold | Reinvestment | Time Limit | Condition | Status/Exemption Limit |
|---|---|---|---|---|---|---|
| Section 54 | Individuals, HUFs | Residential house (>24 months) | Residential house in India | Purchase: 1 year before/2 years after; Construct: 3 years | New house not sold within 3 years | Capped at ₹10 crore (from April 2023); Two houses if gain ≤ ₹2 crore (once in lifetime) |
| Section 54B | Individuals, HUFs | Agricultural land (used 2 years) | Another agricultural land | Within 2 years from sale | New land not sold within 3 years | Active |
| Section 54D | Any taxpayer | Land/building of industrial undertaking (used 2 years) | Land/building for industrial use | Within 3 years from compensation receipt | New asset not sold within 3 years | Active |
| Section 54F | Individuals, HUFs | Any long-term asset (not residential) | Residential house in India | Purchase: 1 year before/2 years after; Construct: 3 years | Not own >1 house; new house not sold within 3 years | Capped at ₹10 crore (from April 2023) |
| Section 54G | Any taxpayer | Assets of industrial undertaking (urban to non-urban) | New assets in non-urban area | 1 year before/3 years after transfer | New asset not sold within 3 years | Active |
| Section 54H | Any taxpayer | Assets under 54, 54B, 54D, 54F | As per respective section | Extended from compensation receipt date | As per respective sectionActive |
These exemptions can significantly reduce your tax liability on capital gains. Use our Tax Calculator to estimate your savings.
