Income Tax Basics for Beginners: A Simple Guide to Start Smart

Understanding how income tax works is one of the first steps toward financial independence. If you’ve just started earning, it’s natural to feel overwhelmed by tax terms and processes. But once you break it down, income tax isn’t all that complicated.

In India, income tax is progressive—this means the more you earn, the higher the rate you pay. The good news? With smart planning, you can reduce your taxable income through deductions and exemptions.

Let’s start with a few terms that you’ll often see:

• Previous Year: The year in which you earn your income (e.g., FY 2024–25 runs from 1 April 2024 to 31 March 2025).
• Assessment Year: The year following the previous year, when you file your return.
• Gross Total Income: Your total income before any deductions.
• Taxable Income: Income after deductions are subtracted from your gross total income.
• Standard Deduction: A fixed deduction from salary—Rs. 50,000 (old regime) or Rs. 75,000 (new regime).
• TDS: Tax Deducted at Source—deducted by your employer or bank.
• Form 16: A certificate issued by your employer showing salary paid and tax deducted.
• ITR Forms: Different forms to file your return, based on the type of income.

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Understanding Salary & Tax Regimes

Your salary includes components like Basic, HRA, and Special Allowance. While some are taxable, others come with exemptions (like HRA if you pay rent).

You can choose between two tax regimes:

Old Regime Tax Slabs

• Up to Rs. 2.5 lakh – NIL
• Rs. 2.5–5 lakh – 5%
• Rs. 5–10 lakh – 20%
• Above Rs. 10 lakh – 30%

New Regime Tax Slabs (FY 2025–26)

• Up to Rs. 4 lakh – NIL
• Rs. 4–8 lakh – 5%
• Rs. 8–12 lakh – 10%
• Rs. 12–16 lakh – 15%
• Rs. 16–20 lakh – 20%
• Rs. 20–24 lakh – 25%
• Above Rs. 24 lakh – 30%

Tip: Compare both regimes before choosing. A reliable income tax calculator can help you decide better.

Popular Deductions under the Old Regime

If you opt for the old tax regime, here are common deductions to reduce your taxable income:

• Section 80C: Up to Rs. 1.5 lakh via PPF, ELSS, life insurance, etc.
• Section 80D: Premiums for health insurance
• Section 80TTA: Savings account interest (up to Rs. 10,000)
• Section 80CCD(1B): Rs. 50,000 for NPS contributions

Note: The new regime doesn’t allow most deductions, except employer contributions to NPS and some housing-related ones.

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• TDS (Tax Deducted at Source) is deducted before your salary or interest is credited. Banks deduct 10% on FD interest (20% without PAN).
• You can view your TDS history in Form 26AS.
• Final tax payable = Tax on income – TDS already paid

Use an FD calculator or income tax calculator to get an accurate estimate and avoid surprises at the time of filing.

Maximise your earnings with stable, compounding returns.
FDs from Bajaj Finance allow monthly, quarterly, half-yearly, yearly or on-maturity payout options—tailored to your income needs. Open FD. 

Also Read: What is TDS?

Filing ITR: Picking the Right Form

• ITR-1: For salaried income up to Rs. 50 lakh
• ITR-2: For capital gains or income from multiple houses
• ITR-3: For business or professional income
• ITR-4: For presumptive income (freelancers, small business owners)

Keep documents like:

• Form 16
• Form 26AS
• Rent receipts
• Investment proofs

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Learning the basics of income tax early helps you stay financially disciplined, compliant, and tax-efficient. Whether you’re planning your first ITR filing or exploring smart deductions, start with the fundamentals—and revisit your plan every year.

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