Taxes in India

style
black-bg, text-center-align, yellow-black-title

Taxes in India form the backbone of government revenue, covering direct and indirect taxes like income tax, corporate tax, and GST. From income tax slabs in India to tax saving investments under section 80C deductions, understanding these helps with tax compliance via the income tax e-filing portal. This guide covers old vs new tax regime, TDS and TCS, capital gains tax in India, and tips for salaried employees, freelancers, and SMEs on tax planning amid digital tax administration in India.

style
text-center-align

Overview of Direct and Indirect Taxes in India

Direct taxes like income tax and corporate tax are paid directly to the government based on income. Indirect taxes such as GST and customs duties are passed on through goods and services.

style
text-center-align, light-gray-bg, pt-80, pb-24
direct taxes logo

Direct taxes

On income/wealth—income tax, capital gains tax, corporate tax.

Ruppe-1

Indirect taxes

Consumption-based—GST (5-40%), customs and excise duties, professional tax and local levies.

style
text-center-align, light-gray-bg, pb-80, pt-0

Types of Direct Taxes

The following are the different types of direct taxes in India:

Income Tax:

Levied on individuals' and HUFs' total income from salary, business, house property, capital gains under income tax slabs in India.

Corporate Tax:

Tax on companies' profits at flat rates (22-30% base), plus surcharge and cess on income tax.

Capital Gains Tax:

Profits from selling assets like property, shares taxed as short-term or long-term gains.

Securities Transaction Tax (STT):

Direct charge on stock market trades.

Gift Tax:

Included under income tax for gifts above ₹50,000 (non-relatives).

style
text-center-align, py-80

Income Tax Basics: Slabs, New vs Old Regime

Income tax slabs in India for FY 2025-26 under the new regime start tax-free up to ₹4 lakh, rising to 30% above ₹24 lakh, with ₹75,000 standard deduction, making ₹12.75 lakh nearly tax-free for salaried individuals.

style
text-center-align, pt-0, pb-24

  1. Income Slab (New Regime)

    1. Up to ₹4L
    2. ₹4-8L
    3. ₹8-12L
    4. ₹12-16L
    5. ₹20-24L
    6. Above ₹24L

  2. Rate

    1. Nil
    2. 5%
    3. 10%
    4. 15%
    5. 25%
    6. 30%

The old regime offers section 80C deductions but higher rates from ₹5L at 20%.

style
text-center-align, pt-0, pb-0

How to File Income Tax Returns Online, TDS, TCS and Advance Tax Explained

Use the income tax e-filing portal for tax filing online—link PAN Aadhaar first, select ITR form, claim deductions, verify via Aadhaar OTP.

style
text-center-align, pt-80, pb-24
TDS and TCS: TDS deducted at source (10-30% on salary/rent); TCS on high-value buys (1% on cars).
Advance tax payment: Due 15% in June, 45% in September, 75% in December, and 100% in March if the liability is more than ₹10,000.
style
pb-0, pt-0

What is Corporate Tax?

Corporate tax India is a direct tax levied on the net profits or income of companies registered under the Companies Act. Domestic companies pay on global income at 22-30% slabs (plus 4% cess), while foreign companies pay on India-sourced income. It funds infrastructure and welfare, with deductions for R&D, SEZ units.

style
text-center-align, py-80

How to File Corporate Tax?

Corporate tax in India is 22% for existing firms (25.17% with cess), 15% for new manufacturing. MAT at 15% applies if book profits exceed normal tax, ensuring minimum payment. File ITR-6 by October 31 via income tax e filing portal, with audited accounts, tax audit report (Form 3CA/3CB), and transfer pricing certificates if applicable.

style
text-center-align, pt-0, pb-0

What is Minimum Alternate Tax (MAT)?

Minimum Alternate Tax in India is a direct tax that ensures companies pay a minimum tax of 15% on book profits (as per financial statements) when normal tax liability is lower due to exemptions/depreciation. Credits can be carried forward for 15 years against future taxes.

style
text-center-align, b-bottom-gray, py-80

How to File Minimum Alternate Tax (MAT)?

Filing MAT is straightforward for companies. Here's the step-by-step process:

style
text-center-align, pt-80, pb-24
Start by preparing your Profit & Loss account as per Schedule III of Companies Act.
Adjust book profits by adding back items like depreciation differences, exempt income, and losses under Section 115JB.
Apply 15% MAT rate on adjusted book profits, plus applicable surcharge and 4% health & education cess.
File the computation along with the ITR-6 form by October 31 (or November 30 with audit extension).
Attach Form 3CD tax audit report and MAT credit reconciliation statement.
Pay any MAT liability through Challan 280 and track credits in the MAT credit ledger on the e-filing portal for future set-off.

This ensures companies contribute minimum tax even with tax planning strategies.

style
text-center-align, pb-80, pt-0

What is Capital Gains Tax?

Capital gains tax in India is a type of direct tax levied on profits from selling capital assets like property, shares, and gold. Short-term Capital Gains (STCG) are taxed at income tax slab rates, while Long-term Capital Gains (LTCG) are taxed at 12.5% with exemptions/indexation benefits.

style
text-center-align, pt-0, py-0

How to File Consumption-based GST?

GST filing is monthly/quarterly via GST portal under new simplified structure:

style
text-center-align, pt-80, pb-24
Gather the sale deed, purchase agreement, improvement receipts, and transfer expenses.
Calculate gains: Sale consideration minus (indexed cost of acquisition, indexed improvement cost and transfer expenses).
Choose ITR-2 (capital gains only) or ITR-3 (business + gains); use Schedule CG.
Claim exemptions under Sections 54, 54F, 54EC if reinvesting proceeds.
Pay advance tax on estimated gains by quarterly deadlines if liability exceeds ₹10,000.
File by July 31; deposit unutilized funds in Capital Gains Account Scheme by same date.
Verify return via Aadhaar OTP or DSC for processing.
style
pb-80, pt-0

Types of Capital Gains Tax

Capital gains tax applies differently based on holding period and asset type. Here's the breakdown:

style
text-center-align, pt-0, pb-24

  1. Type

    1. Short-Term Capital Gains (STCG)
    2. Long-Term Capital Gains (LTCG) - Property
    3. Long-Term Capital Gains (LTCG) - Shares/Equity
    4. Long-Term Capital Gains (LTCG) - Debt Funds

  2. Holding Period

    1. <24 months (property), <12 months (shares)
    2. >24 months
    3. >12 months
    4. >24 months

  3. Tax Rate

    1. Your income tax slab rates
    2. 12.5% (no indexation post-July 2024)
    3. 12.5% above ₹1.25 lakh exemption
    4. 12.5% without indexation

  4. Key Features

    1. No indexation benefit; full profit taxable
    2. Exemption u/s 54 if reinvest in house
    3. STT paid; no indexation needed
    4. Earlier 20% with indexation removed

Choose exemption routes wisely to minimize capital gains tax India liability.

style
text-center-align, pb-80, pt-0

Shares and Mutual Funds

borderless-white-bg
short-term
Short-term gains on shares (1 year hold) at 20%
long-term
Long-term at 12.5% above ₹1.25 lakh exemption.
eduity logo
Equity mutual funds follow the STT route.
style
benefit-cards, pt-0, pb-80

Types of Indirect Taxes

Indirect taxes are collected through goods, services, and transactions rather than direct income assessment. Key types include:

style
light-gray-bg, text-center-align, pt-80, pb-0, pb-24
CIBL score logo

GST

New two-tier structure post Sept 22, 2025: 5% essentials, 18% standard, 40% luxury (sin goods).

money logo

Customs Duty

Levied on imports/exports to protect domestic industry.

business loan logo

Excise Duty

On specific manufactured goods like tobacco and petroleum.

doc logo

Professional Tax

State tax on employment/professions.

paper logo

Local Levies

Municipal taxes on property, services.

style
text-center-align, light-gray-bg, pt-0, pb-80

Consumption-based GST

GST (Goods and Services Tax) is a comprehensive indirect tax that replaces multiple cascading taxes like VAT, service tax, and excise.

GST now follows GST 2.0 reforms effective Sept 22, 2025: 5% on essentials (food, medicine), 18% standard rate (most goods/services), 40% on luxury/SUVs, replacing the old 28% and cess structure. Input Tax Credit (ITC) continues; simplifies compliance.

style
text-center-align, py-80

How to File Consumption-based GST?

GST filing is monthly/quarterly via GST portal under new simplified structure:

style
text-center-align, pt-0, pb-24
Register for GSTIN if turnover is more than ₹20 lakh (₹10 lakh in some states).
File GSTR-1 (outward supplies) by the 11th/quarterly for the QRMP scheme.
File GSTR-3B (summary + payment) by 20th/22nd with new 5-18-40% rates.
Auto-reconcile ITC via GSTR-2A/2B; luxury goods (40%) need higher compliance.
Annual GSTR-9 by Dec 31 for turnover of more than ₹2 crore.
Use GST app/SMS alerts; late fees reduced to ₹20/day max ₹5,000.
style
pb-80, pt-0

Customs and Excise Duties

Customs and excise duties protect domestic manufacturers and generate revenue. Customs duty (Basic + IGST 5-40%) applies on imported goods based on CIF value; excise duty targets select domestic products like cigarettes (up to 200%), aerated drinks, and petroleum, now largely subsumed under GST except specified items.

style
text-center-align, pt-0, pb-80

How to File Customs and Excise Duties?

Reporting capital gains in your income tax return follows these clear steps:

style
text-center-align, light-gray-bg, pt-80, pb-24
Imports: File Bill of Entry on ICEGATE, auto-populate 18% IGST post-reforms.
Self-assessment: HSN classification, valuation rules; AI risk management.
Excise (sin goods): Monthly ER-1 on ACES 2.0, RT-12 quarterly.
Payment: e-Payment gateway (NEFT/UPI), duty drawback for exports.
Compliance: Transfer pricing rules in India for related imports and the I CEGATE dashboard for tracking purposes.
style
text-center-align, light-gray-bg, pb-80, pt-0

Professional Tax

Professional tax is a state-level tax on all professions, trades, and employment, ranging from ₹200 to ₹2,500 annually based on income slabs. Employers deduct it from salary like TDS; self-employed pay it directly.

style
text-center-align, py-80

How to File Professional Tax?

Professional tax filing is employer-handled for salaried, simple for others:

style
text-center-align, pt-0, pb-24
Salaried: Employer deducts monthly (e.g., ₹200/month Maharashtra), deposits via state portal, issues certificate.
Self-employed: Enroll with the state PT authority, pay slabs (₹0-₹2,500/year), and file annual return.
style
text-center-align, pb-80, pt-0

Local Levies

Local levies are taxes imposed by municipal bodies, panchayats on property (house tax), water, sanitation, fire services, and street lighting. Property tax based on annual rental value (ARV), unit area, or capital value (Delhi Circle Rate); rates 10-30% of ARV, with rebates for seniors.

style
text-center-align, pb-0, pt-0

How to File Local Tax?

Local tax payment is digital and self-assessed

style
text-center-align, pt-80, pb-24
Property Tax: Log in to the municipal portal, enter the property ID, view the demand based on the area/zone.
Self-assessment: Declare carpet area, construction year, and amenities for ARV calculation.
Payment: Quarterly/annually via online (UPI/cards).
New properties: File within 60 days of completion certificate.
Appeals: Challenge assessments at the local ward office; exemptions for vacant land, religious sites.
style
text-center-align, pb-80, pt-0

Tax-saving investments unlock benefits under the old regime:

style
text-center-align, pt-0, pb-24

  1. Section

    1. Section 80C
    2. Section 80D
    3. 80TTA/80TTB

  2. Limit

    1. ₹1.5 lakh
    2. ₹25000 (health insurance)
    3. ₹10000/₹50000

  3. Examples

    1. PPF, ELSS, EPF, home loan principal
    2. Family policy; ₹50K seniors
    3. Savings interest; senior FDs
style
text-center-align, pt-0, pb-80

Tax Planning Tips for Salaried Individuals and Businesses

Here are some tips for tax planning for salaried individuals and businesses:

style
light-gray-bg, text-center-align, pt-80
loan repayment logo

Salaried Employee

Choose the new regime if deductions under ₹3.75 lakh for zero tax up to ₹12 lakh; stick to the old regime for heavy section 80C deductions like EPF, ELSS, tuition fees. Maximise NPS under 80CCD(1B) for extra ₹50,000 limit. Structure salary with HRA, LTA exemptions.

TOI logo

Freelancers

Opt presumptive taxation scheme if turnover is less than ₹75 lakh (₹50 lakh for professionals)—declare 6% of receipts as income. Track expenses meticulously for actual taxation if beneficial

audit logo

SMEs/businesses

Leverage 15% corporate tax in India for new manufacturing units. Use the transfer pricing rules in India for inter-company deals. Plan dividend tax rules payouts wisely to minimise shareholder tax at 10% above ₹10 lakh.

style
text-center-align, light-gray-bg, pb-80, pt-0

Tax Compliance

Tax compliance requires PAN Aadhaar linking by June 30 to avoid penalties, timely tax filing online (July 31 for salaried individuals and Oct 31 for businesses), and paying surcharge and cess on income tax (4% health cess + 10-37% surcharge for high incomes). Track TDS and TCS credits via Form 26AS.

style
text-center-align, py-80

Audits and Litigation Management

Tax audit requirements kick in for businesses with a turnover of more than ₹10 crore (95% digital receipts) or more than ₹1 crore if cash is more than 5%. Freelancers need an audit if their income is more than ₹75 lakh under the presumptive scheme.

style
benefit-cards, pt-0, pb-24
borderless-white-bg
audit svg
Maintain books digitally for tax data hub solutions
audit2 svg
Use a faceless assessment scheme for appeals—reduces physical visits, speeds resolutions.
doc svg
Manage tax compliance and litigation via e-advance rulings to avoid disputes on double taxation avoidance agreement issues.
style
text-center-align, pt-24, pb-80, benefit-cards

Role of Technology and Tax Hubs in Modern Tax Compliance

Digital tax administration in India transforms filing through income tax e-filing portal with pre-filled ITRs from AIS/TRIS, AI-driven faceless assessment scheme, and tax refunds
in 10-40 days.

style
text-center-align, pt-0, pb-24
Tax data hub solutions integrate GSTN, customs data for seamless tracking.
Regional tax hubs handle high-volume queries, virtual hearings.
Tools like TRACES, e-verification cut tax compliance and litigation by 50%, aiding tax planning for salaried employees and SMEs.
style
text-center-align, pb-80, pt-0

FAQs

What are the main types of taxes applicable in India?
The main taxes in India are divided into direct and indirect taxes. Direct taxes include income tax on salaries and profits, corporate tax for companies, and capital gains tax on asset sales—these are paid directly by earners based on income levels. Indirect taxes cover GST on goods/services, customs and excise duties on imports, and professional tax and local levies collected through consumption, ensuring broad revenue coverage for salaried individuals and businesses alike.
What is the difference between direct tax and indirect tax?
Direct tax, such as income tax, is paid directly by the person or entity earning the income, making it progressive with slabs that rise with earnings. In contrast, indirect tax like GST is charged on goods and services, passed from seller to buyer through prices, remaining flat regardless of income, which affects everyone proportionally through daily spending.
How are income tax slabs structured for individuals in the current year?
For FY 2025-26, income tax slabs in India under the new regime offer zero tax up to ₹4 lakh, then 5% on ₹4-8 lakh, 10% on ₹8-12 lakh, 15% on ₹12-16 lakh, 20% on ₹16-20 lakh, 25% on ₹20-24 lakh, and 30% above ₹24 lakh, plus a ₹75,000 standard deduction. The old regime starts taxing at 5% from ₹2.5-5 lakh with higher exemptions for seniors, allowing choice based on deductions.
Should a taxpayer choose the old tax regime or the new regime?
Taxpayers should pick the new regime if deductions are low (under ₹3.75 lakh), enjoying tax-free income up to nearly ₹12 lakh including standard deduction—ideal for simple salaried cases. Choose the old regime if you have substantial section 80C deductions, HRA, or medical expenses exceeding benefits, as it offers deeper savings; use the official calculator on the income tax e-filing portal to compare your exact liability.
What is TDS and when is it deducted from payments?
TDS (Tax Deducted at Source) is a mechanism where the payer deducts tax before making payments like salary (at slab rates), professional fees (10%), rent (10% above ₹2.4 lakh annually), or interest (10% on FDs above ₹40,000). It's deducted monthly or quarterly, deposited with the government, and credited to your PAN, reducing your final tax outgo when filing returns.
How is advance tax calculated and what are its due dates?
Advance tax payment applies if your total tax liability exceeds ₹10,000 after TDS. Calculate it on estimated annual income minus deductions/TDS, then pay in instalments: 15% by June 15, 45% cumulative by September 15, 75% by December 15, and the balance 100% by March 15. Use the income tax e-filing portal calculator for accuracy to avoid interest penalties.
How is capital gains tax calculated on the sale of property or shares?
Capital gains tax in India treats short-term gains (under 24 months for property, 12 months for shares) at your slab rates on profit (sale price minus cost). Long-term gains are taxed at 12.5% without indexation for property sold after July 2024, or above ₹1.25 lakh exemption for shares; subtract indexed acquisition cost from sale value, and reinvest under Section 54/54F to defer tax.
Which investments help in saving tax under Section 80C and other sections?
Under Section 80C, invest up to ₹1.5 lakh in PPF, ELSS mutual funds, EPF contributions, tuition fees, or home loan principal. Section 80D covers health insurance premiums (₹25,000 for family, ₹50,000 for senior citizens), while Section 80G aids donations to charities. Additional options include NPS under 80CCD(1B) for ₹50,000 extra and section D80TTA tax benefits on savings interest, all exclusive to the old regime.
What happens if income tax returns are filed after the due date?
Filing income tax returns late (after July 31 for salaried, October 31 for businesses) attracts a late fee of ₹1,000 (₹5,000 if income is more than ₹5 lakh), plus 1% monthly interest under Section 234A/B/C on unpaid tax. You lose - loss carry-forward rights, face scrutiny risks, and can't claim refunds timely, but can still file updated returns with extra charges up to two years later.
How are new digital tax hubs and e-filing portals making compliance easier?
The income tax e filing portal and regional digital tax hubs simplify tax compliance with pre-filled ITRs from AIS (Annual Information Statement), instant tax refunds in 10-40 days, and faceless assessment scheme using AI for notices and appeals without office visits. Features like e-verification, TRACES for TDS tracking, and integrated tax data hub solutions reduce errors, speed processing, and cut tax compliance and litigation significantly for all taxpayers.
style
text-center-align, pt-0, pb-80

Disclaimer

With regards to deposit taking activity of Shriram Finance Limited (’SFL’), Viewers may refer to detailed information and T&C provided in our application form available at  FD form download. The Company is having a valid Certificate of Registration dated 31st January 2023 issued by the Bank under section 45-IA of the RBI Act. Rated "[ICRA]AA+ (Stable)" by ICRA and "IND AA+/Stable" by India Ratings and Research. However, the Reserve Bank of India does not accept any responsibility or guarantee about the present position as to the financial soundness of the company or for the correctness of any of the statements or representations made or opinions expressed by the company and for repayment of deposits/discharge of the liabilities by the company.

style
disclaimer, heading-left-align, pt-0, pb-80