Top 10 Income Tax Areas to Master for a Common Taxpayer

This document covers the top 10 income tax areas to master

1. Income Tax Rebate
2. New Tax Regime
3. House Rent allowance
4. Home Loan Interest
5. Presumptive Taxation
6. Income Tax Return filing
7. Tax Saving Investments
8. Interest for late payment and filing of taxes
9. Tax Deduction at Source
10. Capital Gains Reinvestment

1. Income Tax Rebate

Meaning: This provides tax rebate to individuals whose taxable income does not exceed specified limit.

1. Income Tax Act 1961: Section 87A deals with income tax rebate
2. Income Tax Act 2025: Section 156 deals with income tax rebate
3. Explanation:
   
   • This is applicable to only resident individuals
   • The rebate is applicable under old and new tax regimes.
   • The rebate is deducted from total tax payable before calculating education cess
   • The rebate for FY 2025-26 is as follows
     
     
     • New Tax regime – Rs 60,000 until the income level of Rs 12 lakhs
     • Old Tax Regime – Rs 12,500 until the income level of Rs 5 lakhs

Refer Rebate u/s 87A and Marginal Tax Relief — Explained for more information

2. New Tax Regime

Meaning: New Tax Regime is the default tax regime, and it allows the taxpayers to pay taxes at lower rates when compared to old tax regime.

1. Income Tax Act 1961: Section 115BAC deals with New Tax Regime
2. Income Tax Act 2025: Section 202 deals with New Tax Regime
3. Explanation:
   
   • The taxpayers cannot claim deductions under new tax regime
   • The taxpayers can opt out of new tax regime and opt for old tax regime
   • New Tax regime provides the taxpayers with increased take home salary
   • Under New tax regime, the taxpayer has reduced compliances and less paperwork

Refer Difference between Old Tax Regime and New Tax Regime for more information

3. House Rent allowance (HRA)

Meaning: House Rent Allowance is a salary component paid by employer to employee to meet the house rental expenses by employee.

1. Income Tax Act 1961: Section 10(13A) deals with House Rent Allowance
2. Income Tax Act 2025: Schedule III (Table S. No.11) deals with House Rent Allowance
3. Explanation:
   
   • The employee can claim the exemption of house rent paid by him and save the taxes
   • HRA exemption can be claimed under only old tax regime
   • The employee should be in receipt of HRA from the employer and the employee should be paying the rent to avail HRA exemption.

Refer House Rent Allowance (HRA) Exemption - Explained for more information

4. Home Loan Interest

Meaning: Home Loan interest is the interest paid by taxpayer on amount borrowed to purchase or construct house property. The Income Tax act allows the deduction of interest paid by the taxpayer in the income tax return.

1. Income Tax Act 1961: Section 24 deals with deduction of Home Loan interest
2. Income Tax Act 2025: Section 22 deals with deduction of Home Loan interest
3. Explanation:
   
   • The taxpayer can claim deduction of home loan interest under only old tax regime
   • The maximum deduction for a self-occupied property under old tax regime is Rs 2 lakhs
   • The taxpayer can offset the entire interest paid against the rental income if the loan is against the same property

Refer A Guide on House Property Income Tax Savings for more information

5. Presumptive Taxation

Meaning: Presumptive taxation gives relief to small taxpayers from the tedious job of maintenance of books of accounts and audit.

1. Income Tax Act 1961: Section 44AD, 44ADA deals with presumptive income taxation.
2. Income Tax Act 2025: Section 58 deals with presumptive taxation.
3. Explanation:
   
   • Section 44AD (58) helps the small business upto 2/3 crores turnover. The small business is required to disclose a minimum profit of 6%- digital payments /8%-cash payments and pay the taxes on the same
   • Section 44ADA (58) helps the professionals upto Rs 50/75 lakhs turnover. Professionals are required to disclose a minimum profit of 50% on total turnover.
   • Presumptive taxation simplifies the compliance and reduces pare work for SME, professionals

Refer Guide on Presumptive Income Tax Scheme for more information

6. Income Tax Return filing

Meaning: Income Tax return filing is the process where the taxpayer reports his income, deductions, taxes paid, capital gains, tax payable, refunds etc.

1. Income Tax Act 1961: Section 139 deals with Income Tax Return filing i.e., 139(1) for original returns, 139(4) for belated returns, 139(5) for revised returns and 139(8A) for updated returns
2. Income Tax Act 2025: Section 263 deals with filing of income tax returns.
3. Explanation:
   
   • The taxpayer is required to file his income tax return every year if his income exceeds basic exemption limit or voluntarily
   • The taxpayers are required to file the income tax returns in ITR- 1, ITR-2, ITR-3 or ITR-4
   • The due dates for filing various income tax returns are as follows
     
     
     • Original Return – 31st July
     • Belated Return – 31st December
     • Revised Returns – 31st December
     • Updated Return – Upto 4 years from the end of relevant assessment year
   • Income Tax return filing is mandatory even if the employer has deducted TDS and he has no liability to pay taxes.

Refer Confused Which Income Tax Return Type to use? for more information

7. Tax Saving Investments

Meaning: Tax Savings Investments are the financial investments like LIC, Health insurance, NPS, home loan principal etc where one can invest to claim deductions from taxable income.

1. Income Tax Act 1961: Section 80C, 80D, 80CCD (2), 80CCD(1B) etc deals with various tax savings investments where one claim deductions from the taxable income
2. Income Tax Act 2025: Sections 123, 126, 124 etc deals with various tax savings where one claim deductions from the taxable income
3. Explanation:
   
   • The taxpayer can claim tax saving investments under Old tax regime.
   • The taxpayer can claim upto Rs 1.5 lakhs u/s 80C(123), 75000 u/s 80D(126) etc
   • The taxpayers can claim a deduction of 80CCD (2) i.e., employer contribution to NPS under Old and New Tax regime.

Refer Best Income Tax Saving Investment Options in India for more information

8. Interest for late payment and filing of taxes

Meaning: Income Tax levies interest on late payment of taxes and late filing of income tax returns.

1. Income Tax Act 1961: 234A, 234B,234C,234F deals with various interests on late payment of taxes and late filing of income tax returns
2. Income Tax Act 2025: Sections 423, 424, 425, 428 deals with various interests on late payment of taxes and late filing of income tax returns.
3. Explanation:
   
   • 234A (423) – It is interest levied 1% per month on tax payable if the income tax return is not filed within due date. It will be levied from the day immediately following the due date to the date of filing income tax return.
   • 234B (424) – It is the interest levied @ 1% per month if the taxpayer fails to pay at least 90% advance tax before 31st March. It will be levied from the 1st April of the following financial year to date of payment of taxes
   • 234C (425) – It is the interest levied @ 1% per month if the taxpayer has not paid advance tax at regular intervals.
   • 234F (428) – It is the late fee for non-filing of income tax returns within due date.
     
     

     Income of Tax Taxpayer	Late fee
     Upto Rs 5 lakhs	Rs 1000
     More than Rs 5 lakhs	Rs 5000

Refer Interest Under Section 234A/B/C - Explained for more information

9. Tax Deduction at Source

Meaning: Tax deduction at source means any person paying any amount to someone will deduct tax at source and remit the same to Government on the payee PAN. The payee will claim the same while filing his income tax return.

1. Income Tax Act 1961: Tax Deduction at Source (TDS) is governed by various sections i.e., 192- TDS on Salaries, 194I- TDS on rent, 194J- TDS on professional services, 194IA- TDS in Sale of immovable property, 194A- TDS on interest etc.
2. Income Tax Act 2025: Section 393 deals with tax deduction at source on various payments.

Refer TDS Rates by Section for more information

10. Capital Gains Reinvestment

Meaning: When the taxpayer sells any property like house, land, shares etc, he incurs capital gains. The income tax act allows the taxpayer to save taxes on the capital gains by investing in certain assets within specified timelines.

1. Income Tax Act 1961: Section 54, 54EC, 54F deals with exemption of capital gains on reinvestment.
2. Income Tax Act 2025: Sections 82, 85, 86 deals with exemption of capital gains on reinvestment.
3. Explanation:
   
   • 54 (82): when the taxpayers sell a house property, he can invest the capital gains in a new house property within 2/3 years from the date of selling house property
   • 54EC (85): when the taxpayers sell any capital assets other than shares or mutual funds, they can invest capital gains in 54EC bonds like REC, PFC, IRFC etc within 6 months from the date of selling assets
   • 54F (86): When the taxpayers sell any capital assets including shares, they can invest the sale proceeds in a house property within 2/3 years from the date of selling assets.

Refer Capital Gains Income Tax Guide for more information