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Understanding the Input Tax Credit (ITC) under the Goods and Services Tax (GST) is important for businesses in order to reduce the tax burden. In order to prevent a cascade of taxes and cash flow restrictions, ITC makes sure that taxes are only applied to the value produced by goods at each level of the supply chain, rather than the combined value. Although claiming input tax credits is a straightforward idea, it does need timely return submission, documented verification, and compliance with and awareness of GST requirements.

What is Input Tax Credit (ITC)?

Input Tax Credit means that the GST paid on purchases or expenditures in the course of one’s business can be deducted against the GST expected to be collected on sales. ITC ensures that tax is payable only on the final value and prevents double taxation of the tax and value addition given to the services or products offered.

Example:

• You purchase raw materials worth ₹1,00,000 and pay ₹10,000 as GST.
• You sell finished goods worth ₹1,50,000 and collect ₹15,000 as GST.
• You can claim ITC of ₹10,000, which means you only pay ₹5,000 GST payable net.

So, ITC reduces tax liability and improves working capital efficiency.

Conditions to Claim ITC

A registered person under GST can claim ITC only when the following conditions are satisfied:

• The claimant must be registered under GST.
• Possession of a valid tax invoice or a debit note from a registered supplier.
• Goods or services are received.
• The supplier must pay GST to the government.
• The recipient must file a monthly GST return (GSTR-3B).
• Payment to the supplier must be made within 180 days from the invoice date.
• If the goods are received in instalments, ITC can be claimed only after the last lot is received.
• ITC can only be claimed for a business purpose; personal purchases are not covered.
• No ITC is permitted if depreciation has been claimed on the GST portion of capital assets.

ITC must also be claimed before:

• 30th November of the next financial year, or
• the date of filing the annual return, whichever is earlier.

Provisional ITC (i.e., claiming ITC without the supply having been reported in GSTR-1) was not required to be reported from January 2022.

How to Claim ITC?

The steps of claiming ITC under GST are as follows:

1. Reconciliation of Purchases Data

Match the purchase register with the GSTR-2B containing the invoice details as claimed by the supplier.

2. Verification of documents

Make sure that the tax invoices are valid and the supplier has complied with the GSTR-1 return filing.

3. GSTR-3B filing

In Table 4 of GSTR-3B returns, the eligible ITC, ineligible ITC, reversals and reclaims should all be declared.

4. Reverse Ineligible ITC

If the ITC is no longer available under Section 17(5) of the CGST Act or not claimed through GSTR-2B, then reverse the ITC when filing the GSTR-3B to avoid penalties down the line.

5. Proper Documentation

Keep all relevant invoices, debit notes, bills of entry and documentation if there was an ISD arrangement, all organised properly according to which audit/inspection that you might be facing.

Nowadays, companies use electronic tools that help them match GSTR-2B with purchase registers more accurately, increasing their chances of claiming ITC with minimal manual error or tax department enquiries.

When ITC Cannot Be Claimed

Under Section 17(5) of the CGST Act, businesses can find restrictions on ITC in the following circumstances:

• Goods or services that are used for personal consumption.
• Exempt supplies (i.e., supplies that are not taxable under GST).

The items specifically:

• A motor vehicle when used for personal purposes.
• Food, beverages, and club memberships (except if required by law).
• Health or life insurance (except if required by law).
• Construction of immovable property (i.e., building or office).
• Goods that have been lost, stolen, destroyed, or gifted.

Conclusion

Businesses that claim ITC under the GST have lower tax liabilities and better cash flow. However, if you wish to claim ITC, you must properly comply with ITC requirements and record and verify purchase data linked to GSTR-2B.

Companies are required to pay their suppliers on schedule and in accordance with GST regulations. In order to comply, businesses must also reverse ineligible ITC. Businesses may prevent errors, receive the full advantages of the ITC, and avoid penalties from tax authorities by using technology and automation to assist them in claiming the credit.

Capital Gains Tax is a tax imposed on the profits made when a capital asset (capital asset, i.e., property, stock, mutual funds, gold, etc.) is disposed of. Capital gains tax is a significant component of taxation and the tax system in India, affecting both investors and property owners.

The calculation, tax rates and exemptions for capital gains are based on how long the asset is held prior to its disposal. It is important for taxpayers to remain aware of their legal obligations because the budgets presented in Budget 2024 altered a number of capital gains tax rates, indexation, and asset types.

Types of Capital Gains

The types of capital gains are based on how long the asset is held before disposal. Typically, these are classified as 2 types:

Short-Term Capital Gains (STCG)

Short-Term Capital gains apply when the asset is sold in a short amount of time. The holding period depends on how the asset is held:

• For listed shares and equity mutual funds, where sold in 12 months
• For unlisted shares and properties, where sold in 24 months
• For other assets, such as gold, bonds, etc., which were sold in 36 months

Compared to long-term gains, the tax rate on profits from such sales is higher. Recent changes have raised the STCG tax rates for mutual fund redemptions and listed equity shares in an attempt to prevent speculation and short-term trading.

Long-Term Capital Gains (LTCG)

If the asset is held over and beyond the short-term thresholds discussed above, any profit on the sale of the asset would be treated as a long-term capital gain. The holding periods are:

• Over 12 months for listed equity shares and mutual funds
• Over 24 months for unlisted shares and immovable property
• Over 36 months for all other assets

LTCG will generally be taxed at lower rates than STCG. The only disadvantage is that for the sale of most assets, indexation will be eliminated for sales after July 23, 2024.

Capital Gains Tax Rates (FY 2025–26)

The tax rates that apply are shown below:

Asset Type	Holding Period	Tax Rate
Listed Equity Shares & Equity Mutual Funds	Short-Term (≤ 12 months)	20% (previously 15%)
	Long-Term (> 12 months)	12.5% on amounts above ₹1.25 lakh
Unlisted Shares & Real Estate	Short-Term (≤ 24 months)	Taxed as per slab
	Long-Term (> 24 months)	12.5% without indexation
Gold, Bonds, Debentures, Other Assets	Short-Term (≤ 36 months)	Taxed as per slab
	Long-Term (> 36 months)	12.5% without indexation

Note: Because most long-term assets were sold after July 23, 2024, indexation has been removed.

Exemptions on Capital Gains Tax

The Income Tax Act has exemptions for reinvestment of capital gains in certain sections:

Section 54: Exemption on the sale of residential property if reinvested in another house.

Section 54F: Exemption on the sale of any long-term capital asset if the sale profits are reinvested in a house.

Section 54EC: Exemption allowed if the profits are invested in specified bonds within 6 months of sale.

The Capital Gains Account Scheme (CGAS) can be used to temporarily store the sale profits in case immediate reinvestment is not possible.

Conclusion

Capital Gains Tax (CGT) plays a vital role in wealth management and decision-making in investing. It is critical to understand the difference between short-term capital gains and long-term capital gains so tax liabilities can be planned accordingly.

With the recent tax changes, some careful investment planning and holding periods beyond short-term assets and all the exemptions as per the new laws may reduce tax liability.

Income Tax Return is referred to as ITR. Different Income Tax Return (ITR) forms have been provided by the Indian Income Tax Department for different taxpayer categories. Every form is made according to the taxpayer’s category and the type of income. For compliance, accurate tax assessment, and penalty avoidance, it is essential to file the correct ITR form.

An Income Tax Return (ITR) is a form that taxpayers submit to the income tax department stating their earnings and any necessary taxes.

Till now, the department has issued seven forms. It is essential that all taxpayers submit their ITRs before the due date. ITR forms are applicable in many ways depending on the taxpayer’s income sources, income amount, and taxpayer category (individuals, HUF, firm, etc.).

ITR – 1 (SAHAJ)

The ITR-1 has been designed for residents with annual incomes up to ₹50 lakh. It can be applied if sources of income consist of:

• Pension or salary
• Income from a single property (unless there is a carried loss)
• Other sources of income (not include prizes from horse racing or the lottery)
• Income from agriculture up to ₹5,000
• Section 112A allows for long-term capital gains of up to ₹1.25 lakh without carrying forward losses

However, anyone with business or professional income, multiple home properties, capital gains that exceed certain restrictions, overseas assets or income, directorship in a corporation, or investments in unlisted equity shares are not permitted to use ITR-1.

ITR – 2

Individuals and HUFs without business or professional income are subject to ITR-2. It works well if your earnings include of:

• Pension or salary
• Revenue from residential real estate, including multiple properties
• Capital gains
• Foreign assets and income
• Agricultural earnings that exceed ₹5,000
• Other sources of income, such as winners from horse racing and the lottery

If you have unlisted equity shares, are a Resident Not Ordinarily Resident (RNOR), are a non-resident, or are a director of the company, you must file an ITR-2. This form is not intended for people who make a living through their profession or company.

ITR – 3

Individuals and HUFs with business or professional income are required to file ITR-3. It includes the following:

• Private businesses or occupations (where an audit is required or books of accounts are maintained)
• Income from partnerships (as a partner in a firm)
• earnings from capital gains, real estate, salaries, and other sources

ITR-3 is the appropriate form to use if your income comes from a proprietary business or occupation that is not subject to presumed taxes.

ITR – 4 (SUGAM)

Individuals, HUFs, and businesses (except from limited liability partnerships) that choose presumptive taxes under Sections 44AD, 44ADA, or 44AE and are residents are subject to ITR-4. It can be applied if:

• Up to ₹50 lakh is the total income
• Sections 44AD or 44AE are used to declare business income
• Section 44ADA’s definition of professional income
• income from a job, a single residence, or other sources (not including prizes from horse racing or the lottery)

This form is also available to freelancers with gross incomes up to ₹50 lakh. However, if you have income beyond ₹50 lakh, own foreign assets, or are a director of a corporation, you cannot use ITR-4.

ITR – 5

ITR-5 is meant for:

• Firms
• LLPs
• AOPs (Association of Persons)
• BOIs (Body of Individuals)
• Artificial Juridical Persons
• Estate of deceased or insolvent persons
• Business trusts and investment funds

ITR-5 should be filed by entities that must report income, excluding corporations and trusts.

ITR – 6

Companies are regulated by ITR-6, with the exception of those that assert an exemption under Section 11 (charitable/religious reasons). This return must be submitted electronically by businesses using a digital signature.

ITR – 7

ITR-7 is used by institutions, political parties, trusts, and other organisations that must file returns under:

• Section 139(4A): Trusts and legal obligations for charitable/religious purposes
• Section 139(4B): Political parties
• Section 139(4C): News agencies, scientific research associations, educational and medical institutions
• Section 139(4D): Universities and colleges
• Section 139(4E) & (4F): Business trusts and investment funds

WHY SHOULD YOU FILE ITR?

In addition to being required by law, submitting an ITR offers the following benefits:

• helps in obtaining income tax refunds
• Necessary for loan and visa applications
• allows capital or commercial losses to be carried forward
• serves as evidence of income
• required for businesses, including those with little profit

CONCLUSION

The type of income, the taxpayer category, and the income level all affect which ITR form is appropriate. Rejection or penalties may follow the submission of an inaccurate form.

Here, this is just a brief about how to know which ITR Form is applicable to you based on your income structure. Consult your Tax consultant before opting for ITR Form or connect with us through

91-9267970588 or taxacumen.consultancy@gmail.com

Goods and Services Tax (GST) is a form of indirect tax levied on the supply of goods and services in India. This multi-stage tax is at every stage of the supply chain, with the advantage of Input Tax Credit (ITC) at every stage. The current structure is transparent and uniform in taxation across states and avoids the cascading effect of taxes.

The central aim of GST is to support the concept of “One Nation, One Tax” through simplification and streamlining of India’s indirect taxation system.

Central Goods and Services Tax (CGST)

Central Goods and Services Tax (CGST) is imposed by the central government through the CGST Act, 2017. It is payable on all intrastate supplies of goods and services—i.e., where both the supplier and recipient are within the same state or union territory.

CGST is levied with SGST or UTGST on the very same taxable supply. The overall GST rate is divided evenly between the State and the Centre. For instance, if a commodity is taxed at 18%, then 9% is CGST and 9% is SGST. The CGST amount goes into the account of the central government and is utilised for national-level spending such as infrastructure, defence, and centrally sponsored schemes.

The central government allows input tax credits of CGST on acquisitions, which can be utilised to offset CGST or IGST liability but not SGST.

State Goods and Services Tax (SGST)

State Goods and Services Tax (SGST) is charged by the state governments under their respective SGST Acts, which have been enacted in line with the central GST structure. SGST is also charged in intra-state transactions and is levied by the state on which consumption takes place.

The state government involved receives the revenue from SGST. Similar to CGST, the SGST share of a transaction typically accounts for 50% of the overall GST. These revenues are utilised to fund state-level development like education, healthcare, infrastructure, and welfare schemes.

SGST paid as input tax can be utilised to set off SGST or IGST (in certain situations), but not CGST, which assists in keeping the revenues of states and the centre free from mutual dependence.

Illustration: A restaurant business in West Bengal offers services amounting to ₹10,000. If GST is 18%, ₹900 is CGST and ₹900 is SGST.

Union Territory Goods and Services Tax (UTGST)

Union Territory Goods and Services Tax (UTGST) is charged on intra-state supplies made within Union Territories (UTs) that lack legislatures. It is administered under the UTGST Act, 2017, and is payable in the following UTs:

• Andaman and Nicobar Islands
• Lakshadweep
• Chandigarh
• Dadra and Nagar Haveli and Daman and Diu
• Ladakh

In such regions, UTGST substitutes for SGST and is charged together with CGST. Both might be collected by the central government, but UTGST is separately credited to an account from CGST.

Similar to what occurs in SGST, the total GST is divided equally—e.g., CGST 9% and UTGST 9% for an 18% GST rate.

Note: UTs having their own legislature, i.e., Delhi, Jammu & Kashmir, and Puducherry, are not covered under UTGST. In such cases, SGST is charged in lieu.

Integrated Goods and Services Tax (IGST)

Integrated Goods and Services Tax (IGST) is charged by the Central Government under the IGST Act, 2017, and is levied on:

• Inter-state transactions (from one state or UT to another state or UT)
• Import of goods or services into India
• Export of Indian goods or services
• Supply to or by Special Economic Zones (SEZs)

IGST replaces the previous Central Sales Tax (CST) and follows a destination-based taxation system. That is, tax is levied and paid in the state where the goods or services are consumed, rather than where they are manufactured.

In interstate transactions, the seller levies IGST, which is paid to the central government. The Centre then remits the due share to the destination state where the services or goods are ultimately consumed.

Illustration:

A supplier in Maharashtra supplies goods to a customer in Haryana for ₹1,00,000 at 18% GST. The supplier collects ₹18,000 as IGST and remits the same to the Centre. The Centre subsequently adjusts Haryana’s share accordingly.

Yet another advantage of IGST is the cross-utilisation of the credit of input tax. IGST credit may be utilised to discharge IGST, CGST, or SGST, hence being extremely flexible and important for the free flow of credit and to avoid tax cascading.

The new tax regime under Section 115BAC(1A) and the old tax regime with deductions and exclusions are the two tax regimes that the Indian government permits salaried individuals and specific taxpayers to select between. The taxpayer must submit Form 10-IEA in order to keep the old regime.

What is Form 10-IEA?

The Income Tax Department introduced Form 10-IEA, a statutory declaration form. If a taxpayer wants to take advantage of deductions like the HRA, Section 80C benefits, standard deduction, etc., they can choose to stay under the old tax regime and avoid the default new one. This is particularly relevant for taxpayers who make money from their business or profession.

Who Should File Form 10-IEA?

Some taxpayers do not need to file Form 10-IEA. It is only required for Hindu Undivided Families (HUFs) and persons who:

• Having earnings that are classified as “Profits and Gains of Business or Profession”, choose to stick with the old tax regime rather than the new tax regime that was implemented in AY 2024–2025.
• It is not required for salaried individuals without company or professional income to file Form 10-IEA. When submitting their ITR, they have the option to select the previous regime directly. Nevertheless, the regime is only effective for that financial year after it is chosen.

Form 10-IEA: Why Was It Introduced?

Taxpayers previously opted for the new regime using Form 10-IE. However, the new tax regime is now the default choice starting in AY 2024–2025. Therefore, Form 10-IEA must be submitted by those who want to stay under the old regime.

By switching to a low-rate, no-exemption system, the government is attempting to simplify taxes while still providing flexibility to individuals who like common deductions.

The Procedure to File Form 10-IEA (Step-by-Step Guide)

Follow these simple steps to file Form 10-IEA online through the Income Tax e-filing portal:

Step 1: Log in on the e-Filing Portal

• Visit: https://www.incometax.gov.in
• Click on ‘Login’.
• Enter your PAN, password, and captcha code.

Step 2: Go to Income Tax Forms

• On the dashboard, click:
• ‘e-File’ > ‘Income Tax Forms’ > ‘File Income Tax Forms’

Step 3: Search and Select Form 10-IEA

• Scroll down or enter ‘Form 10-IEA’ in the search box.
• Click ‘File Now’ next to the form.

Step 4: Select the Correct Assessment Year

• Choose the assessment year for which you’re filing the return.
• Example: For FY 2024–25, select AY 2025–26.

Step 5: Check Required Documents & Click ‘Let’s Get Started’

• You’ll be shown a list of details needed to file the form.
• Once ready, click ‘Let’s Get Started’.

Step 6: Declare Business/Profession Income Status

• If you have income under “Profits and Gains from Business or Profession”, select ‘Yes’.
• Select the applicable due date for filing the return, then click ‘Continue’.
• Click the “Help Document” link for support with due dates.

Step 7: Confirm Your Regime Selection

• Click ‘Yes’ to confirm you are opting for the old tax regime.

Step 8: Fill Out All 3 Sections of the Form

i. Basic Information

• Your name, PAN, assessment year, and status will be auto-filled.
• If this is your first time opting out, the “Opting Out” option will be selected by default.
• If you have previously filed Form 10-IEA, the “Re-entering” option will be auto-filled.
• Click ‘Save’.

ii. Other Information

• This section requires you to declare whether you have any IFSC unit (under Section 80LA).
• If applicable, enter IFSC details and click ‘Save’.
• If you’re opting out of the new regime, this panel may be blacked out.

iii. Declaration & Verification

• Review the declaration section carefully.
• Tick the confirmation boxes and verify the details.
• Click ‘Preview’ to check the entire form before submission.

Step 9: e-Verify the Form

Choose one of the methods below to e-verify:

• Aadhaar OTP
• Digital Signature Certificate (DSC) – required if under audit
• Electronic Verification Code (EVC) via net banking or pre-validated bank account

Step 10: Submit the Form

• After successful verification, click ‘Yes’ to submit the form.

Step 11: Acknowledgement

Once submitted, a success message appears on screen with:

• Transaction ID
• Acknowledgement Receipt Number
• Keep these details for reference.

To download the submitted form, go to:

• ‘e-File’ → ‘Income Tax Forms’ → ‘View Filed Forms’

Due date: According to Section 139(1) of the Income Tax Act, you must file Form 10-IEA prior to the deadline for filing your Income Tax Return (ITR). For the majority of people, this is July 31st after the financial year ends.

Absence of Compliance: If you do not submit Form 10-IEA by the ITR deadline, the system will presume that you are selecting the default new choice, and you will not be able to claim exemptions or deductions permitted under the previous regime.

Conclusion

Form 10-IEA is a crucial document for taxpayers who want to take advantage of common deductions and exemptions while maintaining the old tax regime. The government’s objective to provide flexibility while promoting a simpler system is reflected in it. ITR processing runs smoothly and eliminates unnecessary tax charges when it is filed accurately and on time. At filing time, knowing when and how to utilise this form can help you avoid problems and save money.

Every individual tax payer always looking for the way to legally minimize their liability. Here, there are several deductions available under Chapter VI-A of the Income Tax Act that can lower your income tax. The amount of tax you have to pay can be reduced by lowering your gross total income through investments in certain plans or expenditure on qualified expenses.

One must know that, many sections for deductions are not available for those who opt for New Tax Regime tax payers.

Section	Feature
80C	Tax-saving investments and expenses
80CCC	Pension fund payments
80CCD(1), 80CCD(1B), 80CCD(2)	NPS contributions (self and employer)
80D	Medical insurance premium
80DD	Medical care of disabled dependents
80DDB	Treatment of specified diseases
80E	Interest on education loan
80EE	Interest on home loan (first home, FY 2016-17)
80EEA	Interest on housing loan
80EEB	Interest on electric vehicle loan
80TTA	Savings account interest
80TTB	Senior citizens’ deposits interest
80GG	Rent (without HRA)
80U	Deduction for disabled individuals
80G	Donations to charities
80GGB / 80GGC	Donations to political parties
80RRB	Royalty on patents
80QQB	Royalty income for authors

Section 80C – Deductions on Investments and Expenses

For tax savings, Section 80C is the most popular choice. Up to ₹1.5 lakh can be claimed annually for investments and payments, including Sukanya Samriddhi Yojana, EPF contributions, PPF deposits, life insurance premiums, ELSS mutual fund investments, NSC, tax-saving FDs, and Senior Citizens Savings Scheme.

Deductions are also available for principal repayments on home loans, stamp duty/registration costs, and tuition for two children.

Section 80CCC and 80CCD – Pension Schemes

A deduction for pension fund payments is permitted under Section 80CCC, up to a total of ₹1.5 lakh when paired with Section 80C.

The National Pension System (NPS) or Atal Pension Yojana contributions are deductible under Section 80CCD(1). Up to 10% of their salary may be claimed by salaried workers, and up to 20% of their gross total income may be claimed by independent contractors.

Additional payments to NPS are eligible for an additional ₹50,000 deduction under Section 80CCD(1B).

Employers are permitted to contribute to NPS under Section 80CCD(2); these contributions are not included in the ₹1.5 lakh limit.

Section 80D – Medical Insurance Premium

Premiums for health insurance are deductible under Section 80D. You and your family are eligible to receive up to ₹25,000 (or ₹50,000 if you are an elderly person), and your parents are eligible for an additional ₹25,000 or ₹50,000. Preventive health examinations are also eligible for up to ₹5,000 in reimbursement. You can receive up to ₹1 lakh in combined benefits if you and your parents are both elderly.

Medical Care for Dependents with Disabilities Under Section 80DD, deductions are permitted under Section 80DD if you spend money on a disabled dependant’s medical care, education, or rehabilitation. For a standard disability, you can get ₹75,000, and for a severe disability, ₹1.25 lakh.

Section 80DDB – Medical Treatment of Specified Diseases

The costs of treating some serious illnesses, such as cancer or kidney failure, can be deducted under Section 80DDB. If you are under 60, you can claim up to ₹40,000, and if you or your dependant are an elderly person, you can claim up to ₹1 lakh.

Section 80E – Education Loan Interest

For yourself, your spouse, your children, or a student for whom you are a legal guardian, Section 80E permits you to deduct interest paid on an education loan taken out for further education. From the year you begin loan repayment, you can take use of this benefit for eight years.

Section 80EE / 80EEA – Interest on Home Loan

Only homeowners (individuals) who owned a single home on the loan approval date are eligible for the deduction under section 80EE.

Only if the loan was taken out during FY 2016–17 can this deduction be claimed starting in FY 2016–17.

An extra ₹1.5 lakh can be deducted from interest paid on loans taken out for affordable housing under Section 80EEA.

Section 80EEB – Interest on Electric Vehicle Loan

A deduction of up to ₹1.5 lakh can be made under Section 80EEB for interest paid on loans for the purchase of electric vehicles. This encourages people to take eco-friendly transportation.

Section 80TTA / 80TTB – Interest on Deposits

Individuals and HUFs may deduct up to ₹10,000 in interest from savings accounts under Section 80TTA.

Senior adults are eligible for a higher deduction limit of ₹50,000 on interest generated from bank and post office accounts under Section 80TTB.

Section 80GG – Rent Paid

If you do not receive House Rent Allowance (HRA) from your employer, you can deduct the amount of your rent under Section 80GG. There are limitations on the deduction depending on your income and rent amount.

Section 80U – Deduction for Disabled Individuals

According to Section 80U, individuals with disabilities are eligible to receive ₹75,000 for a normal disability and ₹1.25 lakh for a severe disability.

Section 80G – Donations to Charitable Institutions

Donations made to authorised charitable organisations and funds are deductible under Section 80G. Depending on the fund’s eligibility, you can claim either 100% or 50% of the donation amount. You must use banking channels to make donations beyond ₹2,000.

Section 80GGB / 80GGC – Political Contributions

Companies that donate to political parties or electoral trusts may deduct their expenses under Section 80GGB.

The same advantage is offered to individual taxpayers under Section 80GGC.

Section 80RRB – Royalty on Patents

Section 80RRB permits you to claim up to ₹3 lakh or the actual income, whichever is less, if you get royalties from a registered patent.

Authors of books (excluding textbooks) can claim a deduction of up to ₹3 lakh under Section 80QQB on their royalty income.

An indirect tax is one that is levied on the consumption of goods and services. It is not applied immediately to a person’s earnings. Instead, the seller must pay the tax in addition to the price of the goods or services they bought. An indirect tax is collected and paid to the government by an individual in the supply chain, such as a manufacturer or retailer.

However, when a customer buys a good or service, the producer or retailer incorporates the tax in the price. The buyer ultimately pays the tax by increasing the product’s price.

The indirect tax structure in India can be better understood by looking at the following list of indirect taxes:

Goods and Services Tax (GST)

One of the most significant reforms in India’s tax structure, GST, or Goods and Services Tax, has replaced many older levies that once fell under different types of indirect taxes. Introduced on July 1, 2017, GST consolidated multiple state and central taxes into a single tax applied to the supply of goods and services across the country.

GST is structured to promote transparency and remove the cascading effect of tax-on-tax. It is applicable at every stage of the supply chain, right from the manufacturer to the end consumer. The tax you pay is divided among different authorities based on the nature of the transaction:

• Central Goods and Services Tax (CGST): Collected by the central government on intra-state sales (within the same state).
• State Goods and Services Tax (SGST): Collected by the state government on intra-state sales.
• Integrated Goods and Services Tax (IGST): Collected by the central government on inter-state transactions (between different states).
• Union Territory Goods and Services Tax (UTGST): Applied in Union Territories where SGST does not apply.

Different slabs of GST rates—0%, 5%, 12%, 18%, and 28%—are distinguished based on the goods or services being offered. The majority of consumer products and services are between 5% and 28%, apart from certain requirements.

GST has made it easier for businesses to comply with the tax system and guaranteed that you, as a consumer, pay a more efficient and transparent tax.

Customs Duty

According to the Customs Act of 1962, customs duty is a tax levied on the import and export of commodities. Basic customs duty, countervailing duty, and anti-dumping duty are some of its constituent parts. In addition of generating money, customs taxes also aid in controlling international trade and safeguarding local businesses.

Excise duty

Previously a significant indirect tax on Indian manufacturing, excise duty is now only applied to specific goods including alcohol, tobacco, and petroleum products. Other products are now subject to the GST system. The central government and state governments in these exempted categories still rely heavily on excise duty as a source of funding.

Value Added Tax (VAT) and Sales Tax

Value Added Tax (VAT) and Sales Tax were the two main state-level taxes on the sale of products prior to the introduction of the Goods and Services Tax (GST). VAT still applies to petroleum items and alcoholic drinks, which are exempt from the GST structure because of constitutional requirements, even though the GST has replaced them for the majority of goods.

Stamp Duty

State governments impose stamp duty, a tax, on a variety of legal documents, including agreements, sale transactions, and property transfers. Stamp duty is a separate fee on transactions involving immovable property and is not included in the GST. It is governed by the Indian Stamp Act, 1899, and the legislation of the respective states.

Entertainment Tax

Now mostly incorporated into GST, the entertainment tax was previously imposed by state governments on services including cable TV, amusement parks, and movie tickets. It may still be applied to certain entertainment services that are not included by the GST system, however, by certain states and local governments.

A Direct Tax is one that is levied upon a person or entity and paid to the government directly. It is impossible to transfer the tax burden to another person.

These are few types of direct tax:

Income Tax (IT)

According to the provisions of the Income Tax Act of 1961, income tax is a tax that is directly imposed on the earnings that individuals, Hindu Undivided Families (HUFs), businesses, limited liability partnerships (LLPs), enterprises, and other entities earn. Five categories are used to categorise the Income: Capital Gains, Profits and Earnings from Business or Profession, Income from House Property, Income from Salaries, and Income from Other Sources. After calculating the relevant deductions and exemptions (such as those provided by Sections 80C, 80D, etc.), tax is due on the total taxable income. Through the Finance Act, the government updates tax rates and slabs every year (Union Budget). The Government of India receives most of its revenue from income tax.

Corporate Tax

According to the Income Tax Act of 1961, Corporate tax is imposed on the net profit of businesses, both local and foreign. While international corporations are only taxed on their income made in India, domestic companies are taxed on their entire income. Under Sections 115BAA and 115BAB, businesses may choose to use concessional rates, subject to specific requirements. Companies may also be required to pay health and education cess and surcharges in addition to corporate tax. India’s revenue is largely derived from corporate taxes, particularly from big businesses in industries like manufacturing, finance, and information technology.

Capital Gains Tax

When Capital Assets, such as buildings, land, gold, shares, and other valuable property, are sold or transferred, the profits are subject to capital gains tax. It is divided into two categories according to the period of time the asset is held: Short-Term Capital Gains (STCG) and Long-Term Capital Gains (LTCG). Depending on the asset type and holding duration, the tax rate changes.

Securities Transaction Tax (STT)

The Securities Transaction Tax (STT) is a direct tax levied on securities-related transactions carried out on authorised stock exchanges, including the buying and selling of shares, derivatives, and equity-orientated mutual funds. In order to streamline the taxes of stock market transactions, it was created by the Finance Act of 2004. Different transaction types have different STT rates. Depending on the nature of the transaction, the buyer, seller, or both may be responsible for paying the tax, which is collected by stock exchanges.

Gift Tax

The 1958 Gift Tax Act served as the original legislation governing gift tax; however, it was repealed in 1998. Gift taxation is now regulated under Section 56(2)(x) of the Income Tax Act of 1961. The amount of gifts given to an individual or HUF in a fiscal year that exceed ₹50,000 in value (apart from certain relatives or exempt categories) is taxed as income from other sources. Some presents, including those given as a marriage present or as an inheritance, are still excluded.

Wealth Tax (Abolished)

A direct tax referred to as wealth tax was imposed on the net worth of specific people, HUFs, and businesses if it beyond the specified amount. It was regulated by the 1957 Wealth Tax Act. Real estate, gold, expensive cars, and jewellery were all subject to wealth tax. The Finance Act of 2015 eliminated wealth tax for the Assessment Year 2016–17 due to the high expenses of compliance and low revenue yield. However, in order to maintain transparency and stop tax evasion, high-value assets are still required to be reported on income tax returns.

Taxation is an essential resource for governance and revenue collection, and it is a sovereign right. The Constitution of India establishes the basis for taxation and divides authority between the central government and state governments.

In India, taxes are imposed in accordance with laws passed by the state and central governments. Direct and indirect taxes are the two main categories of taxes, and several acts and constitutional clauses regulate how they are implemented.

Constitutional Framework

The power to levy taxes in India is derived from:

Article 265: “No tax shall be levied or collected except by the authority of law.”

Article 246: Distribution of legislative powers under three lists:

• Article 246(1): Union List
• Article 246(3):  State List
• Article 246(2): Concurrent List

Seventh Schedule: Subjects on which central, state, or both can levy taxes.

Classification of Taxes

Direct Tax: One cannot transfer direct taxes to another party; they are imposed directly on people or organisations. Examples are corporation tax and income tax. They are progressive, which means that those with higher incomes pay more, so advancing income equality.

Indirect Tax: Imposed on products and services and have the possibility to be transferred from producers to consumers. Customs duty, excise duty, and GST are a few examples. Regardless of income, all consumers pay the same rate, making these regressive in general.

Criteria	Direct Tax	Indirect Tax
Nature	Progressive	Regressive
Example	Income Tax, Corporate Tax	GST, Customs Duty
Burden	On the taxpayer	Passed on to the consumer
Administered by	CBDT	CBIC
Compliance	Complex and documentation-heavy	Easy to collect at point of sale

Cess and Surcharge

The terms “cess” and “surcharge” are frequently confused. Article 270 of the Constitution refers to a cess, which is a form of tax collected for a particular purpose, such as infrastructure or education. However, as stated in Article 271, a surcharge is an additional tax that is imposed on top of already-existing taxes, typically to generate money for certain purposes.

The Consolidated Fund of India, which the government uses for public spending, receives the sums from both cess and surcharge. In the M/s. SRD Nutrients Pvt. Ltd. vs. Commissioner of Central Excise, Guwahati [SC 2017] case, the Supreme Court made it clear that the higher education and education cess should be regarded as a surcharge.

Advantages and Disadvantages

Aspect	Direct Taxes	Indirect Taxes
Nature	Progressive: determined by wealth or income	Regressive – same rate for everyone
Progress	Promotes income equality	The burden falls more on lower-income consumers
Transparency	Clearly specified and documented	Hidden in prices, consumers are unaware
Tax Burden	Cannot be shifted to others	Shifted to end consumers
Administration	Complicated filing and compliance procedures	Easily gathered at the moment of sale
Stability of Revenue	Predictable government revenue	Varies according to patterns in consumption
Impact on Inflation	Can aid in reducing inflation	Tends to cause inflation and price increases
Risk of Compliance	Increased chances of tax evasion	Integrated collection reduces evasion
Impact on Economy	Could discourage investment	Promotes saving; can be modified to meet policy objectives

This Article is here for educational purpose only. The Author here explains the very basic concept of Tax System in India.

In the 2020 budget, the Indian government introduced a new tax regime to simplify the tax system. Taxpayers have the option to choose between the old and new tax regimes under the existing tax system. Both regimes use different methods for calculating income taxes, and their tax slabs and deductions differ; each tax system has unique advantages over the others.

The old regime permitted several exemptions and deductions. The new regime, on the other hand, aims for a simple process of filing by eliminating most of these deductions while offering reduced tax rates. A major advantage of the new system for FY 2025–2026 is that the tax burden is zero for incomes up to ₹12,00,000.

Old Tax Regime

The traditional Indian tax system is referred to as the “old tax regime”. The HRA, LTA, Sections 80C and 80D, and other exemptions and deductions are available to taxpayers under this regime to reduce their taxable income and, consequently, their tax liabilities. The old and new tax systems are offered to the taxpayers according to their choice.

New Tax Regime

In 2020, the new tax system went into effect. Tax rates are lowered for all income levels. Most exemptions and deductions, including HRA, LTA, 80C, 80D, and others, are eliminated, somehow. This led to a lack of interest in the new tax system. Currently, the default tax system is the new one as well. In Budgets 2023 and 2024, the government made a few changes to increase the regime’s stability.

Features	Old Tax Regime	New Tax Regime (FY 2025-2026)
Tax slabs	Higher	Lower
Deductions/Exemptions	Numerous deductions and exemptions for various investments, expenses, and savings. These include deductions under Sections 80C, 80D, 80E, LTA, and house rent allowances.	Restricted major deductions or exemptions.
Standard Deduction	₹50,000	₹75000
Income eligibility for rebate u/s 87A	Up to ₹5,00,000 Rebate: 12,500	Up to ₹12,00,000 Rebate: 60,000
Complexity	Complex due to various deductions	Simplified tax filing
Best for	People who are claiming and paying home loan interest, HRA, etc.	People who do not claim HRA, House property loss due to loan repayment, etc.

Which regime is best to choose?

You should consider several criteria while deciding between the new and old tax regimes:

• Level of Income: Determine your yearly income and compare it to the tax slabs under the two regimes.
• Financial Objectives: Think about your financial goals. This can involve making a long-term investing plan or setting aside money for retirement. Through deductions, the previous administration promoted smart saving.
• Financial responsibilities: The old regime might have been preferable if planning for home loan, the income structure consists of HRA, where Sukanya samriddhi scheme is found more appropriate to investment for girl child, or any other financial planning.
• Tax Deductions: Speak with a financial counsellor or use a tax calculator. Before choosing, you can use this to compare the actual taxes due under the two regimes.

Tax slab for financial year 2025 – 2026

New Tax Regime

The revised tax slabs under the new regime that are applicable from 1st April 2025 are as follows:

Tax Slab	Tax Rate
Upto  Rs. 4,00,000	Nil
Rs. 4,00,001 – Rs. 8,00,000	5%
Rs. 8,00,001 – Rs. 12,00,000	10%
Rs. 12,00,001 – Rs. 16,00,000	15%
Rs. 16,00,001 – Rs. 20,00,000	20%
Rs. 20,00,001 – Rs. 24,00,000	25%
More than 24,00,000	30%

Old Tax Regime

The tax slabs under the old regime is unchanged for AY 2025-26 and AY 2026-27 are as follows:

Tax Slab	Tax Rate
Upto  Rs. 2,50,000	Nil
Rs. 2,50,001 – Rs. 5,00,000	5%
Rs. 5,00,001 – Rs. 10,00,000	20%
Rs. 10,00,001 – Rs. 15,00,000	30%
More than 15,00,000	30%

How to chose which Regime is better for you?

Taxpayers must know that NEW TAX REGIME has been set as default for all eligible taxpayers. One who wants to opt for the OLD TAX REGIME for tax computation, must select “OPT OUT” option within the due date of the return.

Also, the Taxpayer must mention Date of filing and Acknowledgement Number of the FORM 10-IEA for the same.

Disclaimer: The content here is only for reference and is subject to update time to time. To get to know the tax liability, consult your professional advisor or connect to our operation team via 91-9267970588 or taxacumen.consultancy@gmail.com