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Individual - Taxes on personal income

Taxation of individuals in India is primarily based on their residential status in the relevant tax year. The residential status of individuals is determined independently for each tax year and is ascertained on the basis of their physical presence in India during the relevant tax year and past years. See the Residence section for more information.

The following types of residential status are envisaged for an individual:

  • Resident in India, which is further divided into the following two categories:
    • Resident and ordinarily resident (ROR).
    • Resident but not ordinarily resident (RNOR).
  • Non-resident in India (NR).

Under Indian tax laws, the scope of taxation differs as per the residential status of an individual:

  • RORs are subject to tax in India on their worldwide income, wherever received.
  • RNORs are subject to tax in India only in respect to income that accrues/arises or is deemed to accrue/arise in India, or is received or deemed to be received in India, or is from a business controlled in or a profession set up in India.
  • NRs are subject to tax in India only in respect to income that accrues/arises or is deemed to accrue/arise, or is received or deemed to be received in India.

RNOR and NR individuals are not subject to tax in respect to their income earned and received outside of India.

Personal income tax rates

Alternate personal tax regime (APTR)

Effective 1 April 2023, the tax rates under the ATPR, devoid of any deductions or exemptions, have been revised as follows:

Taxable income (INR) Tax on column 1 (INR) Tax on excess (%)
Over (column 1) Not over  
0 ₹ 300,000 - 0%
₹ 300,000 ₹ 600,000 - 5%
₹ 600,000 ₹ 900,000 ₹ 15,000 10%
₹ 900,000 ₹ 1,200,000  ₹ 45,000 15%
₹ 1,200,000 ₹ 1,500,000 ₹ 90,000 20%
₹ 1,500,000 ₹ 150,000 30%

Under the APTR, the taxpayer is not eligible to claim certain exemptions/deductions/set-off of losses/carry forward of losses, such as:

  • Leave travel allowance.
  • House rent allowance.
  • Allowance under which incomes that do not form part of the total income of the Income-tax Act, except certain prescribed allowances.
  • Exemption of free food and beverages through vouchers provided by the employer.
  • Deduction for professional tax.
  • Deduction of interest payment on housing loans for self-occupied property and restrictions on set-off of loss from let out property.
  • All Chapter VIA deductions of the Income-tax Act available for expenditure by way of employee’s contribution to provident fund, children tuition fees, insurance premium, donations, medical premium, etc., except employer’s contribution to notified pension scheme, such as National Pension Scheme.

Note that this is not an exhaustive list and just an overview of certain deduction/exemptions that are not allowed in the APTR.

The APTR option can be exercised for every financial year (FY) if the taxpayer has no business income. If the taxpayer has business income, the option, once exercised, will be mandatory for all subsequent financial years as well, with only a one-time change being permitted later.

The Revenue Department has clarified that the employer will seek information from each of its employees having salary income regarding their intended tax regime, and each such employee will intimate the same to the employer. Upon intimation, the employer will compute the total income and deduct tax at source thereon according to the option exercised.

If intimation is not made by the employee, it will be presumed that the employee continues to be in the default tax regime and has not exercised the option to opt out of the alternate tax regime.

It is also clarified that the employee can elect to change the option of the tax regime at the time of filing one's India tax return.


How is income taxed in India?
Levy of income tax in India is dependent on the residential status of a taxpayer. Individuals who qualify as a resident in India must pay tax on their global income in India, i.e. income earned in India and abroad. Whereas, those who qualify as Non-residents need to pay taxes only on their Indian income.
How much salary needed to pay income tax in India?
According to the Income Tax Act, it is mandatory to file income tax returns if: If your gross total income is over Rs. 2,50,000 in a financial year.
What is the tax rate for 40 lakh salary in India?
If you make ₹ 4,000,000 a year living in India, you will be taxed ₹ 1,533,000. That means that your net pay will be ₹ 2,467,000 per year, or ₹ 205,583 per month. Your average tax rate is 38.3% and your marginal tax rate is 43.2%.
What is TDS cut in salary?
TDS on salary means that tax has been deducted by the employer at the time of depositing the salary into the employee's account. The amount deducted from the employee's account is deposited with the government by the employer.
How to calculate salary?
Multiply the hourly wage by the number of hours worked per week. Then, multiply that number by the total number of weeks in a year (52). For example, if an employee makes $25 per hour and works 40 hours per week, the annual salary is 25 x 40 x 52 = $52,000.
What is 80C in income tax?
Section 80C permits certain investments and expenses to be tax-exempted. By well-planning the 80C investments that are spread diversely across various options like NSC, ULIP, PPF, etc., an individual can claim deductions up to Rs 1,50,000. By taking tax benefits under 80C, one can avail of a reduction in tax burden.

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