Individual Taxation
India provides two parallel tax computation systems for individuals. Taxpayers may choose the regime that best suits their financial profile and available deductions.
1.1 New Tax Regime
Default from AY 2024-25
The New Tax Regime is the default option under Section 115BAC. It offers simplified, lower slab rates without most deductions and exemptions.
| Income Range | Tax Rate | Effective Benefit |
|---|---|---|
| Up to ₹4,00,000 | NIL | Zero Tax |
| ₹4,00,001 – ₹8,00,000 | 5% | Low entry rate |
| ₹8,00,001 – ₹12,00,000 | 10% | Moderate bracket |
| ₹12,00,001 – ₹16,00,000 | 15% | Mid-income relief |
| ₹16,00,001 – ₹20,00,000 | 20% | Upper-mid bracket |
| ₹20,00,001 – ₹24,00,000 | 25% | High income |
| Above ₹24,00,000 | 30% | Maximum rate |
Section 87A Rebate — Zero Tax for Income up to ₹12 Lakh
Resident individuals with taxable income up to ₹12,00,000 are eligible for a 100% rebate of up to ₹60,000 under Section 87A (enhanced in Budget 2025, continued in Budget 2026). This effectively means ZERO income tax liability for most middle-income earners.
1.2 Old Tax Regime (Optional)
The Old Tax Regime allows taxpayers to claim deductions under Section 80C (up to ₹1.5 lakh), HRA, home loan interest, 80D (medical insurance), and many other exemptions. It is beneficial for those with significant eligible deductions.
| Income Range | 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% |
1.3 Surcharge on Individual Income
A surcharge is levied on income tax (not on income) where total income exceeds specified thresholds:
| Total Income | Surcharge Rate |
|---|---|
| Up to ₹50,00,000 | NIL |
| ₹50,00,001 – ₹1,00,00,000 | 10% |
| ₹1,00,00,001 – ₹2,00,00,000 | 15% |
| ₹2,00,00,001 – ₹5,00,00,000 | 25% |
| Above ₹5,00,00,000 | 37% |
Note: Surcharge on dividend income and capital gains under Sections 111A, 112, and 112A is capped at 15%. Health & Education Cess of 4% is applicable on tax + surcharge in all cases.
1.4 Special Tax Rates for Individuals
| Nature of Income | Tax Rate |
|---|---|
| Short-Term Capital Gains (Sec. 111A) – Equity | 20% |
| Long-Term Capital Gains (Sec. 112A) – Equity > ₹1.25L | 12.5% |
| Long-Term Capital Gains – Other Assets | 20% (with indexation) |
| Lottery / Game Show / Virtual Digital Assets | 30% |
| Alternate Minimum Tax (AMT) – if applicable | 18.5% of Adjusted Income |
Corporate Taxation
India offers a multi-tiered corporate tax framework calibrated to company type, turnover, and chosen tax regime. Domestic companies are taxed on global income; foreign companies only on India-sourced income.
2.1 Domestic Company Tax Rates
| Company Category | Base Rate | Effective Rate (incl. cess) |
|---|---|---|
| Standard Domestic Company (Turnover > ₹400 Cr) | 30% | ~31.2% |
| Turnover ≤ ₹400 Crore (prev. year) | 25% | ~26% |
| Concessional Regime (Sec. 115BAA) | 22% | ~25.17% |
| New Mfg. Company (Sec. 115BAB) | 15% | ~17.01% |
| Electricity Generation Co. (Sec. 115BAB) | 15% | ~17.01% |
2.2 Surcharge (Domestic)
| Total Income | Rate |
|---|---|
| Up to ₹1,00,00,000 | NIL |
| ₹1,00,00,001 – ₹10 Cr | 7% |
| Above ₹10,00,00,000 | 12% |
2.3 Foreign Company
| Income Category | Rate |
|---|---|
| General Income | 35% |
| Royalty / Tech Fees | 50% |
| Surcharge (>₹10 Cr) | 5% |
2.4 Minimum Alternate Tax (MAT)
| Category | MAT Rate |
|---|---|
| Standard Domestic Companies | 15% of Book Profit |
| IFSC Units (income in foreign currency) | 9% of Book Profit |
| Sec. 115BAA / 115BAB Companies | Exempt from MAT |
| Foreign companies (without PE in India) | Generally Not Applicable |
2.5 Concessional Regimes — Key Conditions
Section 115BAA (22%)
- Company must not claim tax holidays or accelerated/additional depreciation
- Cannot claim investment allowances or scientific research expenditure deductions
- MAT and MAT credit provisions do not apply
- Option to be exercised before the due date of filing income return
Section 115BAB (15%)
- Company incorporated on or after 1 October 2019
- Commenced manufacture/production on or before 31 March 2024
- Business not formed by splitting or reconstruction of an existing business
- Cannot use plant/machinery previously used in India
Filing Deadlines (FY 2025-26)
| Taxpayer Category | Due Date |
|---|---|
| Individual (non-audit cases) – ITR-1 / ITR-2 | 31 July 2026 |
| Non-audit Businesses & Trusts | 31 August 2026 |
| Audit Cases & All Companies | 31 October 2026 |
| Transfer Pricing Cases | 30 November 2026 |
| Revised Return (extended from 9 to 12 months) | 31 March 2027 |
| Updated Return (extended to 48 months) | 31 March 2030 |
Quick Comparison
| Parameter | Individual (New Regime) | Domestic Company (Std.) |
|---|---|---|
| Zero / Minimum Tax Threshold | Up to ₹12 Lakh (Sec. 87A) | — |
| Base Tax Rate (Top) | 30% | 22%–30% |
| Concessional Rate Available | N/A | Yes (15%–22%) |
| Surcharge (Max) | 37% | 12% |
| Health & Education Cess | 4% | 4% |
| Minimum Tax (AMT/MAT) | 18.5% of Adj. Income | 15% of Book Profit |
| Default Regime | New Tax Regime (115BAC) | Standard provisions |
Which Regime Should You Choose?
Choose NEW Tax Regime if…
- You have fewer deductions / exemptions
- You want a simplified, hassle-free filing
- Your income is up to ₹12 lakh (zero tax)
- You want predictable, lower rates
Choose OLD Tax Regime if…
- You have significant 80C investments (PPF, LIC, ELSS)
- You claim HRA exemption on rent paid
- You have a home loan with interest deduction
- You have 80D (health insurance premium) deductions
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