Search any section of the Income Tax Act 2025 in plain English. Each entry shows the new 2025 section number, the old IT Act 1961 equivalent, and a clear explanation of what the provision means and who it applies to.
Showing all 62 sections
Heads of Income
Total income is classified under five heads: (A) Salaries, (B) Income from House Property, (C) Profits and Gains of Business or Profession, (D) Capital Gains, and (E) Income from Other Sources.
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Salaries — Charging Section
Salary income is taxable in the year it is due, paid, or whichever is earlier. Covers basic pay, dearness allowance, bonus, commission, allowances, and perquisites.
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Standard Deduction from Salary
A flat deduction from salary income — ₹75,000 under the default regime, ₹50,000 under the optional regime. No receipts needed; applied automatically by your employer.
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House Property — Charging Section
Income from buildings or land appurtenant to them, of which the taxpayer is the owner, is taxed under this head based on the annual value of the property.
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Annual Value of House Property
The annual value is the amount the property can reasonably be expected to fetch as annual rent. For a self-occupied property (up to 2), the annual value is nil. For let-out property, it is the higher of actual rent or expected market rent.
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Deductions from House Property Income
Two deductions from annual value: (a) 30% standard deduction for let-out properties, and (b) interest on housing loan — up to ₹2 lakh for self-occupied; no cap for let-out.
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Home Loan Interest — Deduction Limit
Interest on housing loan is deductible — capped at ₹2,00,000 for self-occupied property; unlimited for let-out property (subject to the ₹2L overall loss set-off cap).
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Investments & Insurance Premium (₹1.5L limit)
Deduction up to ₹1,50,000 for specified investments: EPF, PPF, ELSS, Life Insurance premiums, home loan principal, NSC, Sukanya Samriddhi, 5-year tax-saving FD, and tuition fees. Only under the optional regime.
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Additional NPS Contribution (₹50,000)
An additional deduction of up to ₹50,000 for voluntary contributions to NPS Tier-I account, over and above the ₹1.5L limit under Section 123. Only under the optional regime.
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Pension Fund Premium
Deduction for premium paid toward any annuity plan of LIC or other insurer for receiving pension. The deduction is included within the overall ₹1.5L limit of Section 123.
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Health Insurance Premium
Deduction for medical insurance premium for self, spouse, children (₹25,000) and separately for parents (₹25,000; ₹50,000 if parents are senior citizens). Maximum combined ₹75,000.
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Education Loan Interest
Full deduction of interest paid on education loan for higher education in India or abroad. Available for 8 years (year repayment starts + 7 following years). No cap on amount — only interest qualifies, not principal.
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Rent Paid (No HRA received)
Deduction for rent paid when you do not receive HRA from your employer. Limited to the least of: ₹5,000/month, 25% of total income, or actual rent minus 10% of total income.
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Savings Account Interest (₹10,000)
Deduction up to ₹10,000 on interest earned from savings bank accounts with banks, co-operative societies, and post offices. Not for FDs. Not available to senior citizens (use Section 150 instead).
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Senior Citizen Deposit Interest (₹50,000)
For taxpayers aged 60+, deduction up to ₹50,000 on interest from all deposits — savings accounts, FDs, and RDs — with banks and post offices. Replaces Section 149 for senior citizens.
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Default Tax Regime — Slabs
The default tax regime applies automatically. Slabs: Nil up to ₹4L; 5% (₹4L–8L); 10% (₹8L–12L); 15% (₹12L–16L); 20% (₹16L–20L); 25% (₹20L–24L); 30% above ₹24L. Standard deduction ₹75,000. Zero tax if income ≤ ₹12L.
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Tax Rebate — Zero Tax up to ₹12 Lakh
Under the default regime, if total income does not exceed ₹12,00,000, a rebate equal to the full tax liability is allowed — resulting in zero tax. Applies to resident individuals only.
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STCG on Listed Equity (STT paid) — 20%
Short-term capital gains on listed equity shares or equity-oriented MF units where STT has been paid are taxed at 20%. Gains are short-term if the asset is held for 12 months or less.
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LTCG on Assets (General) — 12.5%
Long-term capital gains on sale of assets (other than listed equity) are taxed at 12.5% without indexation. Covers unlisted shares, property, gold, and debt mutual funds held for 24+ months (36+ for immovable property).
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LTCG on Listed Equity (STT paid) — 12.5% above ₹1.25L
Long-term capital gains on listed equity shares or equity MF units (with STT) are taxed at 12.5%. The first ₹1,25,000 of such gains per year is exempt. Must be held for more than 12 months.
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TDS on Salary
Your employer deducts TDS from salary every month. The employer estimates your total annual income, applies the regime and deductions you declared, computes annual tax, and divides by 12. Form 16 is issued as the TDS certificate.
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Multiple Employers — Form 12B
If you change jobs during the year, you must submit Form 12B to your new employer disclosing salary and TDS from your previous employer, ensuring correct aggregate TDS.
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Advance Tax — Obligation and Instalments
If net tax liability (after TDS) exceeds ₹10,000, you must pay advance tax in four instalments: 15% by June 15; 45% by September 15; 75% by December 15; 100% by March 15.
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Senior Citizens Exempt from Advance Tax
A resident individual aged 60+ with no business/profession income is not required to pay advance tax. Their full tax liability can be paid as self-assessment tax at the time of filing.
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Interest for Late Filing of Return
If you file your ITR after the due date (typically July 31), simple interest at 1% per month is charged on the unpaid tax amount, from the due date to the actual date of filing.
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Interest for Default in Advance Tax
If you paid less than 90% of your assessed tax as advance tax, interest at 1% per month is charged from April 1 of the assessment year to the date of actual payment.
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Interest for Deferment of Advance Tax Instalment
If you miss or underpay an advance tax instalment, interest at 1% per month for 3 months is charged on the shortfall for each instalment.
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Virtual Digital Assets (Crypto) — 30%
Income from transfer of Virtual Digital Assets (VDA) — including cryptocurrency, NFTs, and digital tokens — is taxed at a flat 30% with no expense deductions (except cost of acquisition). VDA losses cannot be set off against any other income.
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Presumptive Taxation — Small Business & Professionals
Small businesses (turnover ≤ ₹3 crore) and professionals (receipts ≤ ₹75 lakh) can declare income at a deemed rate without detailed books of accounts.
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HRA Exemption
House Rent Allowance received from employer is exempt up to the least of: (a) actual HRA received, (b) rent paid minus 10% of basic salary, or (c) 50%/40% of basic salary (metro/non-metro).
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Agricultural Income — Definition & Full Exemption
Agricultural income is completely exempt from income tax under Section 11 read with Schedule 2. To qualify, income must fall within one of the four categories defined in Section 2(5): agricultural produce, nursery income, agricultural land rent, or rural dwelling/warehouse rent used for agricultural purposes.
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Rule 270 — Separating Farm Income from Factory Profit
When a farmer processes their own agricultural produce in their own business (e.g., sugarcane → sugar, groundnuts → oil), income must be split using Rule 270. The farming portion — Fair Market Value (FMV) of raw produce minus cultivation cost — remains exempt agricultural income. The processing profit — sale price minus FMV minus manufacturing cost — is taxable business income.
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Rule 271 — Fixed Splits for Tea, Coffee & Rubber
For Tea, Coffee, and Rubber — crops where growing and manufacturing are inseparably intertwined — the law prescribes fixed statutory percentage splits instead of requiring individual FMV calculations. This removes the need to determine a 'farm gate price' for these complex crops.
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Partial Integration — How Agricultural Income Raises Your Tax Bracket
Although agricultural income is fully exempt from tax, it is added to your non-agricultural income to determine the tax rate on that non-agricultural income. This '4-step staircase' method ensures exempt agri income pushes your taxable income into higher slabs — a silent rate hike even though the agri income itself is never taxed.
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Exemption for Political Parties and Electoral Trusts
Income of registered political parties — from membership fees, voluntary contributions, and property — and approved electoral trusts distributing funds to political parties is fully exempt from income tax, subject to audit and return filing compliance.
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Deduction for Donations to Charitable Institutions (80G)
Donors can claim deductions of 50% or 100% of amounts donated to approved funds and charitable institutions under Section 133. Certain institutions qualify for 100% deduction without any cap, while donations to most others allow only 50% deduction, capped at 10% of adjusted Gross Total Income.
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Deduction for Donations for Scientific Research and Rural Development (80GGA)
Section 135 provides a 100% deduction — with no qualifying income ceiling — on donations made to approved scientific research associations, universities, rural development institutions, and national bodies for poverty eradication. This section is exclusively available to taxpayers who have no income from business or profession.
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Tax on Anonymous Donations Received by Charitable Trusts — 30%
Registered charitable trusts and NPOs must pay 30% tax on 'anonymous donations' — contributions where the donor's name and address are not recorded. A basic exemption applies: tax kicks in only beyond the higher of ₹1 lakh or 5% of total anonymous donations. Wholly religious trusts are fully exempt from this provision.
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Registration of Charitable Trusts and NPOs
All charitable trusts, religious institutions, educational societies, hospitals, and non-profit bodies must register under Section 332 to claim income tax exemption. Without registration, the trust's entire income is taxable at the Maximum Marginal Rate (MMR). New trusts get provisional registration valid for 3 years; thereafter, regular 5-year registration must be obtained.
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Switching Regimes for Charitable Organisations
A registered NPO that voluntarily surrenders its exemption status or gets converted into a taxable entity is treated as having dissolved, triggering accreted income exit tax under Section 352. This section prevents NPOs from accumulating assets tax-free and then converting to taxable commercial entities.
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Overall Tax Framework for Registered NPOs
Section 334 is the master charging provision for registered NPOs. It classifies an NPO's income into three streams — regular income (mostly exempt), specified income (taxable if misused), and anonymous donations (taxed at 30%) — and specifies the tax treatment for each stream.
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Regular Income of Registered NPO — The Exemption Provision
The primary exemption provision for charitable trusts: if at least 85% of the trust's 'regular income' is applied (spent) for charitable or religious objects in the same year, the entire income qualifies for exemption. The remaining 15% can be accumulated and still claimed as exempt if proper Form 10 filing is done before the ITR due date.
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What Counts as Taxable Regular Income for an NPO
Section 336 defines the components of an NPO's regular income that become subject to tax — essentially the portion that fails to meet the 85% application test or is applied for non-exempt purposes. This provision bridges Section 335 and Section 337 by specifying the taxable base calculation.
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Specified Income — When NPO Funds Are Misused
Section 337 identifies categories of income that lose exemption and are taxed at the Maximum Marginal Rate — primarily when a trust's income benefits trustees, founders, or their relatives personally, or when funds are invested in prohibited modes, or when the trust violates registration conditions.
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Income Excluded from Regular Income of an NPO
Section 338 lists specific receipts that are NOT included in an NPO's regular income computation — primarily corpus donations, deemed corpus amounts, and certain capital receipts. This ensures that structural funding (corpus) is not confused with operational income and is not subjected to the 85% application test.
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Corpus Donations — Permanent Fund Contributions
A corpus donation is a voluntary contribution made to a registered NPO with a specific written direction from the donor that it should form part of the 'corpus' (permanent fund) of the trust. Such donations are excluded from regular income and are not subject to the 85% application test — they must be kept invested in permitted modes.
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Deemed Corpus Donations
Section 340 specifies circumstances where certain receipts are treated as corpus donations even without a written donor direction — for example, capital grants from government specifically for asset creation, contributions for construction of buildings, and legacy bequests. This protects infrastructure funding from being treated as operational income.
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Application of Income — The 85% Charitable Spending Rule
Section 341 contains the heart of charitable trust exemption: at least 85% of a trust's regular income must be 'applied' (actually spent or incurred) for its charitable or religious objects during the year. Failure to meet this threshold makes the shortfall taxable at MMR.
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Accumulation of Income — Beyond the 15%
Section 342 allows a registered NPO to accumulate (retain without spending) up to 15% of its regular income without losing exemption. For higher accumulations, the trust must file Form 10 before the ITR due date, specifying the purpose and time period (maximum 5 years). Unspent accumulated income after 5 years becomes taxable.
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Deemed Accumulated Income — When Accumulation Goes Wrong
Section 343 specifies situations where income previously accumulated under Form 10 is retrospectively treated as income of an earlier year — triggering tax plus interest. This happens when accumulated funds are applied for purposes other than stated in Form 10, or remain unapplied after the 5-year period.
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Business Undertaking Held as Property of an NPO
When a business undertaking is part of the trust's assets — typically received through a bequest or donation — Section 344 governs how income from that business is treated. Profits from business undertakings incidental to charitable objects can remain exempt; purely commercial unconnected businesses lose the exemption.
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Restriction on Commercial Activities by Registered NPOs
Section 345 restricts registered NPOs from carrying out commercial activities that are not incidental to their charitable objects. Trusts that engage in substantial commercial activities — beyond what is needed for their charitable purposes — risk losing their tax-exempt status on the commercial income.
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General Public Utility Trusts — 20% Commercial Receipts Cap
Trusts registered under the 'General Public Utility' (GPU) object — the broadest charitable category — face a specific restriction: if receipts from commercial activities exceed 20% of total receipts during the year, the GPU object loses its charitable status for that year, making all income taxable.
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Books of Accounts — Mandatory for All Charitable Organisations
Every registered NPO must maintain prescribed books of accounts including cash books, ledgers, journals, and statements of receipts and payments. The books must be maintained at the trust's principal office and preserved for at least 10 years. Poor record-keeping is a common reason for loss of exemption during assessments.
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Audit of Accounts — Mandatory for NPOs above ₹2.5 Lakh
Every registered NPO whose total income (before claiming exemption) exceeds ₹2.5 lakh in a year must get its accounts audited by a Chartered Accountant. The audit report in Form 10B (or 10BB for larger trusts) must be filed along with the income tax return.
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Filing Income Tax Return for Charitable Organisations
Every registered NPO must file an income tax return even if its total tax liability is zero. The return must be filed by 31 October of the assessment year, along with Form 10B (audit report). A late return leads to loss of accumulation benefits and penalties.
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Permitted Modes of Investment for Charitable Trusts
Section 350 specifies the 'permitted modes' in which a charitable trust must invest its funds — particularly corpus and accumulated income. Investing in non-permitted modes makes the income attributable to such investments taxable, and can trigger registration cancellation in serious cases.
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Specified Violations — When NPO Registration is Cancelled
Section 351 lists specific violations that can lead to cancellation of an NPO's registration — the most severe outcome for a charitable trust. Key violations include applying income for non-charitable purposes, benefiting specified persons, issuing fake donation receipts, not maintaining books, and deliberate non-compliance.
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Exit Tax on Accreted Income — NPO Dissolution or Conversion
When a registered NPO converts to a non-charitable entity, merges with a non-NPO, or has its registration cancelled, a 30% 'exit tax' is levied on its 'accreted income' — the excess of FMV of all assets over total liabilities on the date of conversion or cancellation. This prevents charities from accumulating tax-free assets and then converting to commercial entities.
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Other Violations by Charitable Organisations
Section 353 covers violations by NPOs that are less severe than Section 351 specified violations but still result in partial or full loss of exemption. These include failure to comply with audit requirements, missing return deadlines, applying income for purposes outside the trust deed, and other procedural non-compliance.
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80G Approval — Enabling Tax Deduction for Donors
Section 354 governs the application by a registered NPO to get its donations approved under Section 133 (80G), which allows donors to claim tax deductions. 80G approval is separate from the NPO's own registration under Section 332 — it benefits the DONOR, not the NPO itself.
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Key Definitions for the Charitable Trust Chapter
Section 355 consolidates the definitions of key terms used throughout the NPO/charitable trust chapter — including 'charitable purpose', 'author of the trust', 'specified person', 'regular income', and 'voluntary contribution'. Understanding these definitions is essential for correctly applying all other sections in this chapter.
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Ask our tax teamSection references are based on the Income Tax Act 2025 as applicable to Tax Year 2026-27. This is an educational reference — not legal or tax advice. Verify with a Chartered Accountant before filing.