Income Tax in India (AY 2026-27) — ITR, Regimes, Deductions & Notices

Which ITR form applies to you

The form follows the kind of income you have, not the amount of tax you owe. ITR-1 (Sahaj) covers a resident individual with salary or pension, one house property and ordinary other-source income such as bank interest, within the prescribed total-income limit. Capital gains, more than one house property, or foreign income or assets push you to ITR-2. Business or professional income with regular books means ITR-3, while ITR-4 (Sugam) is for those declaring under the presumptive scheme in sections 44AD or 44ADA and staying inside its limits. Choosing the wrong form is not a neutral mistake: a return filed on a form that does not permit your income type can be treated as defective under section 139(9), which starts a correction clock and, if ignored, can end with the return treated as never filed. If your situation sits on a boundary — say a single share sale during the year — the safer form is the wider one.

How the new regime actually works

The new regime under section 115BAC is the default for AY 2026-27; you have to opt out to use the old one. Tax is charged on taxable income in ₹4 lakh bands: nil up to ₹4,00,000, then 5%, 10%, 15%, 20% and 25% across successive bands, with 30% applying above ₹24,00,000. Salaried taxpayers get a ₹75,000 standard deduction. The part that surprises people is the section 87A rebate: up to ₹60,000, which wipes the liability entirely for taxable income up to ₹12,00,000 — about ₹12,75,000 of gross salary once the standard deduction is applied. Just above that threshold, marginal relief prevents a cliff where an extra rupee of income costs far more than a rupee of tax, and it stops binding at roughly ₹12,70,588. Surcharge runs at 10% above ₹50 lakh, 15% above ₹1 crore and 25% above ₹2 crore, and is capped at 25% — the old regime's 37% band does not apply here. A 4% health and education cess sits on top of tax plus surcharge.

When the old regime still wins

The old regime charges more on the same income — nil to ₹2,50,000, 5% to ₹5,00,000, 20% to ₹10,00,000 and 30% above — and its standard deduction is ₹50,000 rather than ₹75,000. It pays for that with deductions the new regime removes: section 80C up to ₹1,50,000 covering PPF, ELSS, EPF, life insurance premium and home-loan principal; 80D for health insurance up to ₹25,000 for yourself and family; section 24(b) for home-loan interest up to ₹2,00,000 on a self-occupied property; 80CCD(1B) for an additional ₹50,000 of NPS; and HRA exemption where you actually pay rent. The crossover generally sits somewhere around ₹3.5 to ₹4 lakh of total deductions, but that is a rule of thumb rather than a rule — the honest answer is to compute both on your own numbers, which is what the regime calculator does. One structural trap in the old regime is worth knowing: its 87A rebate is only ₹12,500 and applies up to ₹5,00,000 of taxable income with no marginal relief, so the cliff just above ₹5 lakh is real and is the law as written.

Filing, verification and the deadlines that bite

Before filing, reconcile against your Annual Information Statement and Form 26AS. Most mismatches that later become notices are visible there first — a bank interest entry you forgot, a TDS credit claimed at a different figure from the one the deductor reported. The due date for individuals not subject to audit is 31 July. Filing late attracts a fee under section 234F of ₹5,000, reduced to ₹1,000 where total income does not exceed ₹5 lakh, and it applies even when no tax is owed. Section 234A interest of 1% per month runs separately, but only on tax still unpaid, so someone fully covered by TDS pays the fee and little or no interest. Filing is not the last step: an unverified return is treated as never filed, and you have 30 days from filing to e-verify. If you miss the original deadline you can still file a belated return, and a mistake in a filed return can be corrected by a revised return — both carry their own cut-off, so the practical advice is the same either way, which is to act rather than wait.

Advance tax, and the three interest sections people confuse

If your total tax liability after TDS is ₹10,000 or more, tax is payable during the year rather than at the end of it, in four instalments — 15% by 15 June, 45% by 15 September, 75% by 15 December and 100% by 15 March, each figure cumulative. Three different sections then charge interest for three different failures, all at 1% per month, which is why they get conflated. Section 234A is for filing the return late, and runs on unpaid tax. Section 234B applies where advance tax actually paid was under 90% of the assessed liability. Section 234C applies where an individual instalment fell short of its milestone, even if the annual total was eventually right. It is entirely possible to satisfy 234B and still owe 234C by paying the correct amount in the wrong rhythm. All three compute on calendar months with part of a month counted in full, so a payment made one day into a new month costs the same as thirty. There is one piece of built-in fairness: 234C interest is not charged on capital gains and certain other income you could not have forecast, provided the full tax on it is paid in the instalment immediately following the transaction.

Capital gains, in one place

Capital gains are taxed under their own rates rather than at your slab, and the holding period decides which applies. For listed equity shares and equity mutual funds, a holding of more than 12 months is long-term and taxed under section 112A at 12.5% on gains above a ₹1.25 lakh annual exemption; a shorter holding is short-term and taxed under section 111A at 20%. The exemption is annual and applies across all such gains together, not per transaction. Two practical points matter more than the rates. First, each SIP instalment is a separate purchase with its own acquisition date, so a single redemption pulls units from several holding periods at once and the split between long and short term has to be computed per unit rather than per redemption. Second, capital gains interact with advance tax: you cannot forecast in June a sale you make in December, which is why section 234C relief exists — but that relief is lost if you do not pay the full tax in the instalment immediately following the transaction. Gains are also a common trigger for moving from ITR-1 to ITR-2.

When a 143(1) intimation arrives

A notice under section 143(1) is not an assessment, an audit or an accusation. It is the automated processing summary generated after the Centralised Processing Centre compares your return against its own computation, and most of them either agree with you or report a small arithmetical difference. Read which side the difference falls on first. If it shows a refund, nothing is required. If it shows a demand, the usual causes are a TDS credit claimed at a figure the deductor never reported, income visible in the AIS that was omitted, or a deduction claimed without the proof the system expects. Check the department's figure against your own before paying anything, because an intimation can be wrong — and where it is, the route is a rectification request under section 154 rather than a fresh return. If you agree with it, pay promptly, since interest continues to run. Respond within the time stated on the intimation; ignoring it is what turns a routine reconciliation into a formal demand.

Free tools for this

• HRA Exemption Calculator
• Income Tax Calculator
• Salary / CTC Breakup Calculator

Guides on this topic

• Why Is My ITR Refund Delayed in 2026? (And How to Fix It)
• Missed the ITR Deadline for AY 2026-27? Your Options
• Section 80C Investments 2026: Complete Comparison — PPF vs ELSS vs NPS vs NSC vs More
• Income Tax Slab Rates AY 2026-27 (FY 2025-26) — New vs Old Regime, Rebate, Surcharge & Marginal Relief
• Form 121 Has Replaced Forms 15G and 15H — How to Stop TDS on Interest from 1 April 2026

Related services

• Income Tax Return (ITR) Filing
• TDS Return Filing
• Income Tax Notice & Assessment
• Income-Tax Appeal (CIT(A) / ITAT)

Frequently asked questions

Which ITR form should I file?

Salaried with income up to ₹50 lakh and one house: usually ITR-1. Capital gains: ITR-2. Business/profession: ITR-3, or ITR-4 under the presumptive scheme. Confirm on the e-filing portal.

Is income up to ₹12 lakh tax-free?

Under the new regime for AY 2026-27, the Section 87A rebate makes income up to ₹12 lakh effectively tax-free for resident individuals; with the ₹75,000 standard deduction a salaried break-even is a little higher.

Old or new regime — which is better?

Compute both. The old regime can beat the new one if your deductions (80C, 80D, HRA, home-loan interest) are large; otherwise the new regime usually wins. Our income-tax calculator compares them.