Income Tax

Income tax is a direct tax the Government of India levies on the annual income of persons — individuals, Hindu Undivided Families (HUFs), firms, LLPs, companies and other entities. Income is classified under five heads (salaries, house property, profits and gains of business or profession, capital gains, and other sources), aggregated, reduced by permitted deductions, and taxed at rates fixed each year by the Finance Act. The tax is administered by the Central Board of Direct Taxes (CBDT) under the Department of Revenue, Ministry of Finance.

Legal basis

Income tax is now governed by the Income-tax Act, 2025, which came into force on 1 April 2026 and repealed the six-decade-old Income-tax Act, 1961. The rewrite keeps rates, deductions and exemptions substantively unchanged but replaces the twin "previous year" and "assessment year" concepts with a single unified "tax year". Income earned up to 31 March 2026 stays governed by the 1961 Act.

Rates for companies

Company	Rate
Domestic, turnover ≤ ₹400 crore	25%
Other domestic companies	30%
Concessional regime, no exemptions (formerly Sec 115BAA)	22%
New manufacturing companies (formerly Sec 115BAB)	15%
Foreign companies	35%

Minimum Alternate Tax (MAT) applies at 15% of book profit where normal tax is lower, but not to companies under the 22% or 15% concessional regimes. Surcharge and a 4% health and education cess are added on top.

Individuals

The new tax regime is the default. Under FY 2025-26 slabs, income up to ₹4 lakh is nil-rated, and a Section 87A rebate of up to ₹60,000 makes total income up to ₹12 lakh effectively tax-free. Taxpayers may still opt for the old regime to claim deductions such as 80C and HRA.