Salaried individuals form a significant portion of taxpayers in India, and understanding the latest tax rules is crucial for efficient financial planning. The Income from Salaries head covers all earnings received by an employee in exchange for services rendered, including basic salary, allowances, bonuses, and perquisites.

As of April 2025, certain changes have been introduced in tax laws affecting salaried employees. Here’s a detailed guide on the latest tax rules, deductions, and exemptions.

1. What Constitutes Income from Salaries?

Income from salaries includes:

• Basic Salary
• Dearness Allowance (DA)
• House Rent Allowance (HRA)
• Special Allowances (Transport, Medical, etc.)
• Bonuses & Commissions
• Perquisites (Company Car, Rent-Free Accommodation, etc.)
• Leave Encashment
• Pension (For Retirees)

2. Key Tax Rules for Salaried Employees (April 2025 Updates)

A. Tax Slabs for FY 2024-25 (AY 2025-26)

Income Range (₹)             Tax Rate (Old Regime)          Tax Rate (New Regime – Default)

  Up to ₹2.5 Lakh                                          Nil                                                          Nil

   ₹2.5 – ₹5 Lakh                                             5%                                                         5%

   ₹5 – ₹7.5 Lakh                                            20%                                                      10%

  ₹7.5 – ₹10 Lakh                                           20%                                                      15%

 ₹10 – ₹12.5 Lakh                                         30%                                                      20%

 ₹12.5 – ₹15 Lakh                                         30%                                                      25%

 Above ₹15 Lakh                                           30%                                                      30%

Notes:

• New Tax Regime (Default): No deductions (except standard deduction of ₹50,000).
• Old Tax Regime: Allows deductions (HRA, 80C, 80D, etc.).

B. Standard Deduction (Applicable in Both Regimes)

• ₹50,000 deduction allowed for salaried employees.

C. House Rent Allowance (HRA) Exemption (Old Regime Only)

• • Actual HRA received
  • 50% of salary (metro) / 40% (non-metro)
  • Rent paid – 10% of salary

D. Leave Travel Allowance (LTA) (Old Regime Only)

• Exempt twice in a block of 4 years for domestic travel.
• Must provide travel bills (flight/train tickets).

E. Perquisites & Employer Benefits

• Rent-free accommodation: Taxable based on salary slab.
• Company car: Taxable if used for personal purposes.

F. Provident Fund (PF) & Gratuity

• Employer’s PF contribution > ₹7.5 lakh/year: Taxable as perquisite (for high-salary employees).
• Gratuity:
  • Government employees: Fully exempt.
  • Private employees: Least of ₹20 lakh, last drawn salary × 15/26 × years of service, or actual gratuity received.

3. TDS on Salary (Tax Deducted at Source)

• Employers deduct TDS based on average tax rate.
• Form 16 is issued, detailing salary breakup and TDS.
• No TDS if taxable income < ₹2.5 lakh.

4. How to File ITR for Salaried Employees?

• ITR-1 (Sahaj): For salaried individuals with income up to ₹50 lakh (no capital gains/business income).
• Documents needed: Form 16, investment proofs, rent receipts (if claiming HRA).

Conclusion

• Salaried employees must stay updated with the latest tax rules to maximize savings and avoid penalties. While the new tax regime offers lower rates with fewer deductions, the old regime may still benefit those with high investments.
• Evaluate both options before filing your return and consult a tax advisor if needed. Proper tax planning ensures compliance and financial efficiency!