Income tax: answers to common questions

Question 1

Which is better for me: the old or the new tax regime?

Accepted Answer

For most individuals with income up to about ₹15 lakh and modest deductions, the new regime gives lower tax: income up to ₹12 lakh is effectively tax-free, and salaried people get ₹12.75 lakh with the standard deduction. The old regime wins only when your deductions and exemptions (sections 80C and 80D of the 1961 Act, now sections 123 and 126 of the 2025 Act, HRA and home-loan interest) are large. Compare both on your own figures every year.

Question 2

Which ITR form should I file?

Accepted Answer

It depends on who you are and what income you have. ITR-1 is for resident individuals with salary, up to two house properties and other income, totalling up to ₹50 lakh. ITR-2 covers capital gains above the ITR-1 limit, foreign income or assets, and directors. ITR-3 is for business or professional income, and ITR-4 for presumptive income up to ₹50 lakh.

Question 3

I missed the ITR due date. Can I still file, and what does it cost?

Accepted Answer

Yes. For FY 2025-26 you can file a belated return until 31 December 2026, with a late fee of ₹5,000 (₹1,000 if total income is up to ₹5 lakh) plus 1% a month interest on unpaid tax. Most losses cannot be carried forward, and the new tax regime applies. After that date, an updated return (ITR-U, called ITR-UN under the 2025 Act) is possible within 48 months, at an extra 25% to 70% of the tax.

Question 4

Is income up to ₹12 lakh really tax-free under the new regime?

Accepted Answer

Yes, for a resident individual. The new-regime rebate (section 87A of the 1961 Act, now section 156 of the 2025 Act) cancels tax of up to ₹60,000, so total income up to ₹12 lakh, or salary up to ₹12.75 lakh after the standard deduction, pays nil tax. Just above ₹12 lakh, marginal relief limits the tax to the excess; the rebate does not cover tax on special-rate income such as capital gains on listed shares.

Question 5

How do I claim HRA, and can I claim HRA and a home-loan deduction together?

Accepted Answer

HRA exemption is available only in the old regime. The exempt amount is the least of the HRA received, rent paid minus 10% of salary, and 50% of salary in the specified cities (40% elsewhere). From tax year 2026-27 the 50% list adds Bengaluru, Hyderabad, Pune and Ahmedabad to Mumbai, Delhi, Kolkata and Chennai. You can claim HRA and home-loan interest together, for example if your own house is in another city or is let out.

Question 6

What are the limits for sections 80C, 80D and 80CCD(1B), and which deductions survive in the new regime?

Accepted Answer

In the old regime, section 80C (now 123) allows up to ₹1.5 lakh for PPF, ELSS, life insurance, home-loan principal and similar; 80CCD(1B) an extra ₹50,000 for your own NPS contribution; and 80D (now 126) up to ₹25,000 for health insurance, or ₹50,000 for senior citizens, plus the same again for parents. The new regime allows almost none of these. It keeps the standard deduction, the employer's NPS contribution (80CCD(2), now 124) and a few others.

Question 7

What is the standard deduction for salaried people and pensioners?

Accepted Answer

Every salaried employee and pensioner gets a flat standard deduction without any proof: ₹75,000 in the new regime and ₹50,000 in the old regime, or the salary itself if lower. Family pension received by a deceased employee's family gets a separate deduction of one-third, up to ₹25,000 in the new regime and ₹15,000 in the old. Under the 2025 Act the standard deduction moves from section 16(ia) to section 19.

Question 8

Form 16, Form 26AS and the AIS don't match. Why, and what should I do?

Accepted Answer

Form 16 shows only your employer's view of salary and TDS. Form 26AS shows tax credits from all deductors, and the AIS shows almost every reported transaction, including interest, dividends, share sales and rent. Differences arise from late or wrong TDS returns, other income the employer does not know about, and duplicate or wrong entries. Report income as per facts, ask deductors to correct their TDS returns, and give feedback on wrong AIS entries before filing.

Question 9

How long does an income-tax refund take, and why is it delayed or adjusted?

Accepted Answer

Most refunds are issued within a few weeks of the return being e-verified and processed. Delays usually come from a bank account that is not pre-validated or linked to your PAN, a mismatch between the return and Form 26AS or the AIS, or an inoperative PAN. The department can adjust a refund against an outstanding demand after giving you notice. Interest of 0.5% a month is paid on refunds under section 244A (now 437).

Question 10

How do I e-verify my income-tax return, and what if I miss the 30 days?

Accepted Answer

A return is complete only when verified, within 30 days of uploading it. E-verify with an Aadhaar OTP, net banking, a pre-validated bank or demat account, or a digital signature; or post a signed ITR-V to the CPC in Bengaluru. If you verify after 30 days, the date of verification is treated as the date of filing, so the return may become belated with a late fee. A return never verified is treated as not filed.

Question 11

How are family pension, gifts from relatives and agricultural income taxed?

Accepted Answer

Family pension is taxed as income from other sources, after a deduction of one-third, up to ₹25,000 in the new regime or ₹15,000 in the old. Gifts from relatives, and gifts on marriage or by inheritance, are fully exempt; other gifts are taxable if they exceed ₹50,000 in the year. Agricultural income is exempt, but if it exceeds ₹5,000 and you have other income above the basic exemption, it is used to work out the tax rate on your other income.

Question 12

Does the Income-tax Act, 2025 or the 1961 Act apply to my income?

Accepted Answer

The Income-tax Act, 2025 came into force on 1 April 2026 and applies to income of tax year 2026-27 (1 April 2026 to 31 March 2027) onwards. Income of FY 2025-26 and earlier years, including returns being filed now and assessments, reassessments and appeals for those years, continues under the Income-tax Act, 1961. TDS and TCS on payments from 1 April 2026 follow the new Act.

Question 13

Do my pending notices, assessments and appeals continue under the 1961 Act?

Accepted Answer

Yes. Section 536 of the Income-tax Act, 2025 repeals the 1961 Act but keeps it alive for everything relating to years before 1 April 2026. Pending notices, assessments, reassessments, penalties, rectifications, revisions and appeals for those years, and new ones started even after 1 April 2026, continue under the 1961 Act and its procedure. Only interest rates on such old demands and refunds, from 1 April 2026, follow the new Act.

Question 14

What are the new section numbers for common sections like 80C, 194C and 44AB?

Accepted Answer

The Income-tax Act, 2025 renumbered almost every section. Common examples: 80C is now section 123, 80D is 126, 87A is 156, 115BAC (new regime) is 202, 44AB (tax audit) is 63, 44AD and 44ADA are combined in 58, 54 is 82, 139 (return) is 263, 143(1) is 270(1), 148 is 280, and almost all TDS sections are now in 392 and 393, for example 194C in section 393(1), Table serial 6(i). Our section finder lists about 60 sections and 20 forms side by side.

Question 15

Has anything changed for salaried taxpayers under the Income-tax Act, 2025?

Accepted Answer

Very little in substance. For tax year 2026-27 the slabs, the ₹75,000 standard deduction, the ₹12 lakh tax-free limit of the new regime and the choice of regime are unchanged. What changes is the labels: 'tax year' replaces previous and assessment year, Form 16 becomes Form 130, Form 12BB becomes Form 124, and salary TDS moves from section 192 to section 392.

Question 16

What is a "tax year", and what happened to the previous year and assessment year?

Accepted Answer

Under the Income-tax Act, 2025, the year in which you earn income and the year in which it is taxed are the same: the tax year, which is the financial year from 1 April to 31 March. Tax year 2026-27 is the first. It replaces the 1961 Act's pair of previous year (when income is earned) and assessment year (the following year, when it is assessed). FY 2025-26 and earlier years keep the old terms.

Question 17

Who must pay advance tax, what are the due dates, and what is the interest for paying late?

Accepted Answer

If your tax for the year after TDS is ₹10,000 or more, pay advance tax in four instalments: 15% by 15 June, 45% by 15 September, 75% by 15 December and 100% by 15 March. Presumptive taxpayers pay it all by 15 March, and resident seniors (60 or over) without business income are exempt. Late or short payment attracts interest under sections 234B and 234C, now sections 424 and 425.

Question 18

Who can opt for presumptive tax under sections 44AD, 44ADA and 44AE, and what are the limits?

Accepted Answer

Small businesses with turnover up to ₹2 crore (₹3 crore if cash receipts are within 5%) can declare 8% of turnover as income, or 6% of digital receipts (section 44AD). Specified professionals with receipts up to ₹50 lakh (₹75 lakh if cash is within 5%) declare 50% (section 44ADA). Owners of up to 10 goods vehicles declare a fixed amount a vehicle a month (section 44AE). No books or audit are needed. Under the 2025 Act all three are in section 58.

Question 19

When is a tax audit compulsory, and what are the turnover limits?

Accepted Answer

A business needs a tax audit if its turnover exceeds ₹1 crore, or ₹10 crore where cash receipts and cash payments are each within 5% of the total. A profession needs one if gross receipts exceed ₹50 lakh. Presumptive taxpayers who declare lower income than the scheme allows, and whose income exceeds the basic exemption limit, also need an audit. The report is due by 30 September.

Question 20

What is section 43B(h) (now section 37), and what happens if I pay an MSE supplier late?

Accepted Answer

If you buy goods or services from a micro or small enterprise registered on Udyam and do not pay within 45 days (with a written agreement) or 15 days (without one), you cannot deduct the expense in that year. The deduction is allowed only in the year you actually pay. It applies from tax year 2023-24, and is now part of section 37 of the 2025 Act.

Question 21

What are the limits on cash payments, cash receipts and cash loans under income tax?

Accepted Answer

A business expense paid in cash above ₹10,000 to one person in a day is disallowed (₹35,000 for transporters). No one may receive ₹2 lakh or more in cash from a person in a day, for one transaction or for one event; the penalty equals the amount. Loans, deposits and advances for property of ₹20,000 or more cannot be taken or repaid in cash; the penalty again equals the amount.

Question 22

What are the income-tax depreciation rates, and how does the half-year rule work?

Accepted Answer

Income-tax depreciation is charged on the written-down value of each block of assets at prescribed rates: for example 10% for most buildings and furniture, 15% for general plant and machinery and cars, 40% for computers and 25% for intangible assets. An asset used for less than 180 days in the year of purchase gets half the rate that year. Book depreciation under Schedule II of the Companies Act is calculated separately.

Question 23

How is a partnership firm taxed, and how much remuneration and interest can partners be paid?

Accepted Answer

A partnership firm or LLP pays tax at 30%, plus surcharge above ₹1 crore and cess. It can deduct interest to partners up to 12% a year and remuneration to working partners within limits on book profit: on the first ₹6 lakh, the higher of ₹3 lakh or 90%, and 60% of the rest. Both must be authorised by the deed. Partners pay tax on what they receive, but their share of profit is exempt.

Question 24

How are losses set off and carried forward under income tax?

Accepted Answer

A loss is first set off within the same head, then against other heads, with exceptions: capital losses only against capital gains, and house property loss only up to ₹2 lakh a year against other income. Unabsorbed business losses carry forward for 8 years, speculation losses for 4, and capital losses for 8. Unabsorbed depreciation carries forward without limit. To carry forward most losses, file your return by the due date.

Question 25

When is a capital gain long-term, and at what rate is it taxed?

Accepted Answer

Listed shares and equity mutual funds become long-term after 12 months; property, gold, unlisted shares and most other assets after 24 months. On transfers from 23 July 2024, long-term gains are taxed at 12.5% (listed equity gains are exempt up to ₹1.25 lakh a year) and short-term gains on listed equity at 20%. Other short-term gains are taxed at your slab rate.

Question 26

Can I still use indexation when I sell a property bought before 23 July 2024?

Accepted Answer

Yes, if you are a resident individual or HUF selling land or a building acquired before 23 July 2024. You can pay the lower of two amounts: 12.5% of the gain without indexation, or 20% of the gain with indexation using the Cost Inflation Index. Companies, firms and non-residents get only the 12.5% rate without indexation.

Question 27

How do the capital gains exemptions under sections 54, 54EC and 54F (now sections 82, 85 and 86) work, and what is the Capital Gains Account Scheme?

Accepted Answer

If you sell a house and buy or build another, section 54 (now 82) exempts the long-term gain, up to the cost of the new house and ₹10 crore. Section 54F (now 86) does the same when you sell any other long-term asset and invest the net sale price in a house. Section 54EC (now 85) exempts up to ₹50 lakh of gain on land or buildings invested in specified bonds within six months. Money not used before the return due date must be parked in the Capital Gains Account Scheme.

Question 28

What if I sell property below the circle rate (section 50C, now section 78), and how is a jointly owned property taxed?

Accepted Answer

If the stamp duty value of land or a building is more than 110% of the price, the stamp duty value is treated as the sale price for capital gains. The buyer may also be taxed on the difference. If you dispute the value, you can ask for a reference to the Valuation Officer. In a joint sale, each co-owner computes and pays tax on their own share, claims their own exemptions, and gets TDS credit for their share.

Question 29

How are gains on gold, crypto and unlisted shares taxed?

Accepted Answer

Physical gold, jewellery and unlisted shares are long-term after 24 months; long-term gains are taxed at 12.5% without indexation, and short-term gains at your slab rate. Gold ETFs listed on an exchange are long-term after 12 months. Crypto and other virtual digital assets are taxed at a flat 30%, with no deduction other than cost and no set-off of losses. A 1% TDS applies on their transfer.

Question 30

How is the sale of inherited or gifted property taxed?

Accepted Answer

Receiving property by inheritance, will, or gift from a relative is not taxed. When you sell it, the cost is the previous owner's cost, plus improvements, and the holding period includes the previous owner's period. For land or buildings bought before 1 April 2001, the fair market value on that date can be taken as cost. The usual rates and exemptions under sections 54, 54EC and 54F (now 82, 85 and 86) apply.

Question 31

Do I have to deduct TDS when I buy a property?

Accepted Answer

Yes, if you buy immovable property other than agricultural land for ₹50 lakh or more from a resident seller. Deduct 1% of the higher of the price and the stamp duty value, pay it with the challan-cum-statement within 30 days from the end of the month of deduction, and give the seller the TDS certificate. From 1 April 2026 the form is Form 141, replacing Form 26QB. You do not need a TAN.

Question 32

What are the TDS rates and thresholds for rent, contractors, professionals, interest and commission?

Accepted Answer

For tax year 2026-27, under section 393 of the Income-tax Act, 2025: rent of land or buildings 10% above ₹50,000 a month; contractors 1% (individual or HUF) or 2% (others) above ₹30,000 a bill or ₹1 lakh a year; professional fees 10% and technical fees 2% above ₹50,000 a year; bank interest 10% above ₹50,000 a year (₹1 lakh for senior citizens); commission 2% above ₹20,000 a year. The 1961 Act sections 194-I, 194C, 194J, 194A and 194H applied before 1 April 2026.

Question 33

How does my employer deduct TDS on salary, and how do I declare my investments?

Accepted Answer

Your employer estimates your income for the whole year under the regime you choose, works out the tax, and deducts it evenly from each month's salary. To get old-regime deductions and HRA reflected, declare them at the start of the year and give proof, usually by January, in Form 124 (formerly Form 12BB). You can also tell your employer about other income, TDS elsewhere and a house-property loss. Whatever is missed can still be claimed in your return.

Question 34

When are TDS payments and TDS returns due, and what is the late fee and interest?

Accepted Answer

TDS deducted in a month is paid by the 7th of the next month (30 April for March). Quarterly TDS statements are due by 31 July, 31 October, 31 January and 31 May. From tax year 2026-27 the statements are Form 138 (formerly 24Q), Form 140 (26Q), Form 144 (27Q) and Form 143 (27EQ, for TCS). A late statement costs ₹200 a day up to the TDS amount (section 234E, now 427); late payment costs interest of 1% or 1.5% a month.

Question 35

How do I correct a wrong TDS challan or TDS return?

Accepted Answer

File a correction statement: download the consolidated file from TRACES, fix the PAN, amount or challan details in the return preparation utility and file it; some fixes can be made online on TRACES. A wrong challan is corrected on TRACES or through the Assessing Officer (TDS). From 1 April 2026, a correction statement can be filed only within two years from the end of the relevant financial year.

Question 36

How do I get TDS deducted at a lower rate or not at all (Form 13, 15G and 15H)?

Accepted Answer

If your total tax for the year will be nil, give the payer a declaration so no TDS is deducted on interest, dividends, rent and similar income: Form 15H if you are 60 or older, Form 15G otherwise (both replaced by Form 121 from tax year 2026-27). If your tax will be lower than the TDS but not nil, or the declaration route is not open to you, apply to the Assessing Officer for a lower or nil deduction certificate in Form 13 (now Form 128).

Question 37

When is TCS collected on foreign remittances, car purchases and sale of goods?

Accepted Answer

From tax year 2026-27, banks collect TCS on remittances under the Liberalised Remittance Scheme above ₹10 lakh a year: 2% for education or medical treatment (nil if paid from an education loan) and 20% for other purposes; overseas tour packages carry a flat 2%. A seller collects 1% on a motor vehicle above ₹10 lakh. TCS on sale of goods was abolished from 1 April 2025; large buyers deduct 0.1% TDS instead. TCS is not an extra tax: claim it in your return.

Question 38

Why is higher TDS deducted when PAN and Aadhaar are not linked, or for non-filers?

Accepted Answer

If you do not give your PAN, or your PAN is inoperative because it is not linked to Aadhaar, TDS is deducted (section 206AA, now 397(2)(b)) at the highest of twice the normal rate, the normal rate and 20% (5% for some payments), and TCS at a similar higher rate. The separate higher rate for people who had not filed returns (sections 206AB and 206CCA) was abolished from 1 April 2025. Linking PAN and Aadhaar makes the PAN operative again and normal rates apply from then.

Question 39

I got an income-tax notice. What should I do first?

Accepted Answer

Don't ignore it, and don't reply in a hurry. First check that it is genuine using the 'Authenticate notice' service on the e-filing portal, then note the section, the year and the last date to reply. Read what is being asked, collect the return and records for that year, and reply on the portal before the due date, or ask for more time before it expires. For scrutiny, reassessment or penalty notices, take professional advice before the first reply.

Question 40

What does an intimation under section 143(1) (now section 270(1)) mean, and what should I do?

Accepted Answer

It is the result of the automated processing of your return by CPC Bengaluru. It shows whether your figures were accepted as filed, or whether a refund or a demand arises, often because of arithmetic errors, mismatches with Form 26AS or the AIS, or disallowed claims. Compare it line by line with your return; if it is wrong, file a rectification request under section 154 (now section 287) or an appeal within 30 days.

Question 41

My return has been treated as defective under section 139(9) (now section 263(7)). What now?

Accepted Answer

The department has found a defect, for example income declared without the required schedules, tax claimed without TDS details, or the wrong ITR form. You must correct it, normally within 15 days of the notice (an extension can be requested). If you do not, the return is treated as never filed, with the consequences of a missed return.

Question 42

I received a notice under section 148 or 148A (now sections 280 and 281). What should I do?

Accepted Answer

It means the Assessing Officer believes income for an earlier year escaped assessment. Usually you first get a show cause notice under section 148A with the information relied on, giving 7 to 30 days to reply. Reply in full and on time, check whether it is within the time limit (broadly 3 years from the end of the assessment year, or 5 years if the escaped income is ₹50 lakh or more), and take professional advice: this reply forms the record for any later challenge.

Question 43

How do I reply to an income-tax notice on the portal, and can I ask for more time?

Accepted Answer

Log in to the e-filing portal, go to Pending Actions > e-Proceedings, open the notice and choose 'Submit Response'. Write the reply, attach documents in PDF, and submit before the due date; you get an acknowledgement number. If you need more time, use the 'Seek Adjournment' option before the due date and give a reason. Adjournment is at the officer's discretion, so don't count on it.

Question 44

What is a faceless assessment, and how does a personal hearing by video work?

Accepted Answer

In a faceless assessment, your case is handled online by an assessment unit you never meet, through the National Faceless Assessment Centre. Every notice and reply goes through the e-filing portal. If the officer proposes an addition, you get a show cause notice with a draft, and you can ask for a personal hearing, which is held by video conference. Under the 1961 Act this is section 144B; the 2025 Act equivalent is section 273.

Question 45

There is an outstanding demand on the income-tax portal. How do I agree or disagree with it?

Accepted Answer

Log in to the e-filing portal and open Pending Actions > Response to Outstanding Demand. For each demand, choose whether it is correct, partly correct or not correct. If correct, pay it with the 'Pay Now' option. If not, choose the reason (already paid, rectified, appealed, stayed and so on) and attach proof. Respond quickly: unanswered demands can be set off against your refunds and carry interest of 1% a month.

Question 46

What is the penalty under section 270A for under-reporting or misreporting income, and how does immunity work?

Accepted Answer

Under section 270A of the 1961 Act (now section 439), the penalty is 50% of the tax on under-reported income, or 200% where it results from misreporting, such as false entries or suppressed facts. For under-reporting, section 270AA (now 440) gives immunity from penalty and prosecution if you pay the tax and interest demanded on time, don't appeal, and apply in Form 68 within one month from the end of the month you receive the order.

Question 47

How do I appeal against an income-tax order, and what are the time limits and fees?

Accepted Answer

First appeal is to the Commissioner (Appeals), online in Form 35 (now Form 99), within 30 days of receiving the notice of demand or the order. The fee is ₹250 to ₹1,000, depending on the assessed income. If you lose, the second appeal is to the Income Tax Appellate Tribunal (ITAT) in Form 36 (now Form 115), within two months from the end of the month in which you receive the order, with a fee of ₹500 up to ₹10,000.

Question 48

I have appealed. Do I have to pay 20% of the demand to get a stay?

Accepted Answer

An appeal does not stop recovery by itself: you must apply to the Assessing Officer for stay under section 220(6) of the 1961 Act (now section 411(12)). CBDT guidelines set a standard payment of 20% of the disputed demand, and Budget 2026 announced a cut to 10% of the core tax; check whether the instruction has been issued. Courts have held that 20% is not automatic.

Income tax: answers to common questions

Individuals and salaried

The Income-tax Act, 2025

Business and professionals

Capital gains and property

TDS and TCS

Notices, assessment and appeals