ITR Filing Guide for Income Below ₹50 Lakh — Salaried Individuals (FY 2025-26)

Which ITR Form Applies — ITR-1 or ITR-2?

This is the first decision a CA must make for every salaried client. The Income Tax Department prescribes specific eligibility criteria for each form, and filing the wrong form is a defective return under Section 139(9).

ITR-1 (Sahaj) — Eligibility

ITR-1 can be filed by a resident individual (not HUF, not a company) whose total income for FY 2025-26 does not exceed ₹50 lakh, and whose income consists only of:

• Income from salary or pension
• Income from one house property (excluding loss brought forward from prior years)
• Income from other sources — interest from savings account, fixed deposits, family pension (excluding lottery winnings, racehorse income, or income taxable at special rates)
• Agricultural income not exceeding ₹5,000

ITR-1 cannot be used if the individual is a director in a company, holds unlisted equity shares, has foreign assets or foreign income, has capital gains of any kind, has brought-forward losses, or is a partner in a firm.

ITR-2 — When to Use Instead of ITR-1

ITR-2 applies to individuals and HUFs with income from salary, house property, other sources, and capital gains — provided they do not have income from business or profession. If a salaried client also has capital gains from listed equity shares (delivery-based), they must file ITR-2, not ITR-1. ITR-2 must also be used when income exceeds ₹50 lakh, or if the client is a director in a company, holds unlisted shares, or has foreign assets.

In short: if your salaried client has only salary, one house property, and interest income (total ≤ ₹50 lakh) — ITR-1. Any capital gains or other complexity — ITR-2.

Tax Regime Choice: New Regime as the Default from AY 2024-25

From AY 2024-25 (FY 2023-24) onwards, the new tax regime under Section 115BAC is the default regime for individuals. A taxpayer who does not explicitly opt out remains in the new regime. For salaried individuals, the choice must be communicated to the employer at the start of the year (for TDS purposes) and can be changed at the time of filing the ITR — subject to restrictions for those with business income.

Salaried individuals (no business income) may switch between the old and new regime each year at the time of filing their ITR.

New Tax Regime Slabs — AY 2026-27 (Finance Act 2025)

The Finance Act 2025 revised the new tax regime slab structure effective AY 2026-27:

Note: These slabs apply to income after the standard deduction. Health and education cess of 4% applies on the computed tax. Surcharge applies when income exceeds ₹50 lakh — see the guide for income above ₹50 lakh for surcharge rates.

Old Tax Regime Slabs — AY 2026-27

The old tax regime slabs remain unchanged from prior years:

Under the old regime, the basic exemption limit for senior citizens (aged 60–79) is ₹3,00,000 and for super senior citizens (aged 80 and above) is ₹5,00,000.

Standard Deduction: ₹75,000 for Salaried Individuals

The Finance Act 2024 (effective from AY 2025-26, i.e., FY 2024-25) raised the standard deduction for salaried employees and pensioners from ₹50,000 to ₹75,000. This deduction is available under both the old and new tax regimes. The higher ₹75,000 standard deduction continues to apply for AY 2026-27 (FY 2025-26).

For family pensioners, the standard deduction is one-third of pension income or ₹25,000, whichever is lower — this cap remains unchanged.

Section 87A Rebate — AY 2026-27

Section 87A provides a rebate (deduction from computed tax) for resident individuals whose total income does not exceed the prescribed limit.

New Tax Regime — ₹60,000 Rebate for Income up to ₹12 Lakh

Under the Finance Act 2025, the Section 87A rebate under the new tax regime has been significantly enhanced: individuals with total income up to ₹12,00,000 are eligible for a rebate of up to ₹60,000, effectively resulting in zero tax liability. This limit applies to income exclusive of special-rate income such as STCG under Section 111A and LTCG under Section 112A — the rebate does not apply to tax on such special-rate income.

Old Tax Regime — ₹12,500 Rebate for Income up to ₹5 Lakh

Under the old regime, the rebate remains at ₹12,500 for individuals with total income up to ₹5,00,000. This limit has not changed with Finance Act 2025.

Important: The rebate applies to tax computed on income at slab rates. It does not reduce tax on income taxed at special flat rates (capital gains under Section 111A or Section 112A). The 4% health and education cess is applied after the rebate is deducted.

TDS from Salary — Section 192 and Verification

Under Section 192, every employer is required to deduct TDS from salary payments at the time of payment. The employer must estimate the employee's total income for the financial year, factor in the applicable regime, standard deduction, and declared deductions/exemptions, and deduct tax accordingly at the average rate of income tax.

For AY 2026-27, the employer deducts TDS based on the regime the employee has opted for. If the employee does not inform the employer, the employer deducts TDS under the new tax regime by default.

Verifying TDS via Form 26AS and AIS

Before filing the ITR, CAs must verify that TDS deducted by the employer matches what is reflected in:

• Form 26AS: The tax credit statement available on the income tax portal (incometax.gov.in). It shows TDS deducted and deposited by the employer under Section 192, along with any other TDS/TCS credits.
• Annual Information Statement (AIS): Introduced by CBDT, the AIS provides a more comprehensive view — it includes salary income reported by the employer, interest income reported by banks, dividend income reported by companies, and capital gains data from depositories. A mismatch between the AIS and the ITR data filed is a primary trigger for scrutiny notices.

Any discrepancy between Form 26AS and the employer's TDS certificate (Form 16) must be resolved before filing. If the employer has not deposited the deducted TDS, the employee still gets credit — but the CA should document this and advise the client to follow up with the employer.

Form 16 — Part A and Part B Explained

Form 16 is the TDS certificate issued by the employer under Section 203 of the Income Tax Act. It has two parts:

• Part A: Contains the employer's TAN, PAN, the employee's PAN, and quarterly breakup of TDS deducted and deposited. Part A is generated directly from the TRACES portal and carries the employer's digital signature. CAs should verify that Part A figures match Form 26AS exactly.
• Part B: Contains the detailed salary breakup — basic salary, HRA, allowances, perquisites, deductions claimed (80C, 80D, HRA exemption, LTA, etc.), and the net taxable salary. Part B is prepared by the employer and is the primary source document for computing taxable salary.

If a client has changed jobs during the year, they will have two Form 16s. Both must be considered — the new employer's Form 16 Part B may or may not account for income from the previous employer, depending on whether the client disclosed it. Verify the combined salary figure against AIS.

Due Dates for AY 2026-27

The 31 July 2026 due date applies to salaried individuals, ITR-1 and ITR-2 filers who are not required to get their accounts audited under Section 44AB or any other law.

Late Filing Fee — Section 234F

If the ITR is filed after 31 July 2026 but on or before 31 December 2026 (belated return under Section 139(4)), a fee is payable under Section 234F:

• ₹5,000 if total income exceeds ₹5,00,000
• ₹1,000 if total income does not exceed ₹5,00,000

Additionally, if there is any tax due at the time of filing the belated return, interest under Section 234A accrues at 1% per month (or part thereof) from the original due date (31 July 2026) until the date of filing. Capital losses cannot be carried forward if the return is filed after the due date under Section 139(1).

Documents Required for Filing

• Form 16 (Part A and Part B) from all employers
• Form 26AS and Annual Information Statement (AIS) downloaded from the income tax portal
• Bank statements for interest income verification
• Proof of investments claimed under Chapter VIA (80C, 80D, 80G, etc.) — relevant only for old regime filers
• HRA exemption documents: rent receipts, landlord PAN (if rent exceeds ₹1 lakh per annum)
• Home loan interest certificate (for house property income/deduction under Section 24)
• Capital gains statements from brokers (if any — in which case ITR-2 must be filed)

What CAs Must Verify Before Filing

• Form selection: Confirm the client has no capital gains, directorship, or foreign assets before using ITR-1.
• Regime selection: Compare tax liability under both regimes. For clients with significant Section 80C investments and HRA, the old regime may still be beneficial — run both calculations.
• AIS reconciliation: Check AIS for any income the client may have forgotten — bank FD interest, dividend credits, or previous employer salary.
• TDS credit match: Confirm Form 26AS TDS matches Form 16 Part A. Any mismatch must be resolved — do not claim credit that does not appear in Form 26AS.
• Standard deduction applied: ₹75,000 is available under both regimes. Ensure it has been applied.
• 87A rebate computed correctly: Under the new regime, the ₹60,000 rebate applies only if total income is ≤ ₹12 lakh and does not include special-rate capital gains income.
• Advance tax compliance: If tax liability after TDS exceeds ₹10,000, advance tax was due. Check whether advance tax was paid — interest under Sections 234B and 234C may apply if not.
• ITR pre-fill data: The ITD portal pre-fills ITR data from AIS/TIS. Verify pre-filled data before submitting — pre-fill errors are the client's responsibility post-submission.

How FirstReports Helps CAs

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Related Reading

• How to Calculate STCG and LTCG for ITR-2 (FY 2025-26)
• Section 87A Rebate and Capital Gains — What CAs Must Know
• Advance Tax Calculation for FY 2025-26
• Download capital gains reports from all major brokers →