For salaried employees in India, FY 2025-26 (AY 2026-27) is a significant year — the New Income Tax Act 2025 has been passed and is applicable from FY 2026-27. For FY 2025-26 returns however, the existing Income Tax Act 1961 continues to apply with the same regime choices as before. This guide covers everything a salaried employee needs to file correctly for FY 2025-26.
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1. Overview — Salaried ITR for FY 2025-26
A salaried employee receives income under the head "Salaries" — which includes basic pay, HRA, special allowances, bonuses, and perquisites. Your employer deducts TDS from your salary each month and issues Form 16 summarising your income and deductions for the year. Filing ITR reconciles all this and allows you to claim any excess TDS as refund.
2. New Income Tax Act 2025 — What It Means for Salaried Employees
The new Income Tax Act 2025 has been passed by Parliament and will be applicable from FY 2026-27 (AY 2027-28) onwards. For your FY 2025-26 ITR, the existing Income Tax Act 1961 still applies. Key points to know about the new Act:
- The new Act simplifies language and consolidates provisions — it does not introduce fundamentally new tax rates for salaried employees
- The new tax regime (with lower rates and fewer deductions) continues as the default
- Section numbers will change — for example, Section 80C will have a new reference number in the new Act
- HRA, standard deduction, and basic exemption limits are expected to be retained
- For FY 2025-26, file your ITR as per the existing Act — nothing changes for this year's filing
3. Understanding Form 16
Form 16 is the most critical document for salaried ITR filing. It has two parts:
| Part | Contents |
|---|---|
| Part A | Employer details, employee PAN, TDS deducted and deposited quarter-wise |
| Part B | Salary breakup — basic, HRA, allowances, perquisites, deductions under Chapter VI-A, net taxable income |
Your employer must issue Form 16 by 15th June 2026. If you changed jobs during FY 2025-26, you will receive Form 16 from each employer — both must be included in your ITR.
4. Which ITR Form for Salaried Employees?
| ITR Form | When to Use |
|---|---|
| ITR-1 (Sahaj) | One employer, one house property, other income (interest, dividend) — total income up to ₹50 lakh. No capital gains, no foreign assets. |
| ITR-2 | Multiple employers, capital gains, more than one house property, foreign income or assets, or income above ₹50 lakh. |
5. HRA Exemption — How to Calculate
HRA exemption is the lowest of three amounts:
- Actual HRA received from employer
- 50% of basic salary for metro cities (Delhi, Mumbai, Kolkata, Chennai); 40% for non-metro
- Actual rent paid minus 10% of basic salary
If annual rent exceeds ₹1 lakh, provide your landlord's PAN. If your landlord is an NRI, deduct 30% TDS before paying rent.
6. Key Deductions for Salaried Employees (FY 2025-26, Old Regime)
| Section | Deduction | Limit |
|---|---|---|
| 16(ia) | Standard Deduction | ₹50,000 |
| 80C | EPF, PPF, ELSS, LIC, tuition fees, home loan principal, 5-year FD, NSC | ₹1,50,000 |
| 80D | Health insurance — self, spouse, children + parents | Up to ₹75,000 |
| 80CCD(1B) | Additional NPS contribution | ₹50,000 |
| 24(b) | Home loan interest on self-occupied property | ₹2,00,000 |
| 80TTA | Savings account interest (below 60 years) | ₹10,000 |
| 80G | Donations to eligible charities | 50–100% of amount |
7. New vs Old Tax Regime for FY 2025-26
The new tax regime remains the default for FY 2025-26. Standard deduction under new regime is ₹75,000 (for salaried/pensioners). No 80C, HRA, or home loan deductions under new regime.
| Income Slab (New Regime) | Tax Rate |
|---|---|
| Up to ₹3,00,000 | Nil |
| ₹3,00,001 – ₹7,00,000 | 5% |
| ₹7,00,001 – ₹10,00,000 | 10% |
| ₹10,00,001 – ₹12,00,000 | 15% |
| ₹12,00,001 – ₹15,00,000 | 20% |
| Above ₹15,00,000 | 30% |
Section 87A rebate: Under new regime, income up to ₹7 lakh is effectively tax-free after rebate.
General rule: If your total deductions under old regime exceed ₹3.75 lakh, old regime saves more tax. If investments are minimal, new regime is simpler.
8. How to Claim Maximum Refund
- Cross-check Form 26AS and AIS before filing — all TDS must match
- Include interest income from all bank accounts
- Claim all eligible deductions — many employees miss 80D, 80TTA
- If you changed jobs, combine both employers' data
- E-verify immediately after filing — refunds processed only after verification
- Pre-validate your bank account on the income tax portal
Disclaimer: This article is for general informational and educational purposes only. It represents our professional views as Chartered Accountants. This content should not be construed as legal or tax advice. Tax laws are subject to change with each Union Budget. For advice specific to your situation, please consult our experts directly.
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