Do I have to pay income tax on a salary of ₹12 lakh?

Not under the new regime. After the ₹75,000 standard deduction your taxable income is ₹11,25,000, which is within the ₹12 lakh rebate limit, so the tax is nil. Salary up to ₹12.75 lakh is tax-free for a resident individual in the new regime.

Is income tax paid to the state or the central government?

Income tax is a central tax collected by the Income Tax Department, which works under the Central Board of Direct Taxes. A share of it reaches the states through the Finance Commission's devolution of central taxes.

What is the difference between income tax and GST?

Income tax is a direct tax on what you earn and you pay it yourself. GST is an indirect tax on what you buy: the seller collects it from you and pays it to the government. See the GST guide.

Do I need to file a return if I owe no tax?

You must file if your income before deductions is above the basic exemption limit (₹4 lakh in the new regime) or if certain high-value transactions apply, even when the rebate brings your tax to nil. Filing is also the only way to get back TDS that was deducted when no tax was due.

What is income tax?

Updated 11 October 2026

Income tax is a tax the central government charges on the income you earn in a year, whether it comes from a job, a pension, a business, rent, interest or selling investments. From 1 April 2026 it is governed by the Income-tax Act, 2025, which replaced the Income-tax Act, 1961. Most salaried people pay it through monthly deductions from their salary and settle the final figure by filing an income tax return.

Who has to pay income tax

Individuals, Hindu undivided families (HUFs), firms, companies, trusts and other bodies all pay income tax. Individuals pay at slab rates, which means each slice of income is taxed at its own rate, so the rate rises as income rises.

Where you live matters too. A person who is resident in India is taxed on income from anywhere in the world. A non-resident is taxed only on income earned or received in India.

Having income does not always mean paying tax. Under the new regime, a resident individual whose total income is up to ₹12 lakh pays nothing, because a rebate cancels the tax. A salaried person also gets a ₹75,000 standard deduction, so salary up to ₹12.75 lakh is effectively tax-free in tax year 2026-27.

The five heads of income

The law sorts every rupee you earn into one of five heads. Each head has its own rules for what is taxable and what can be deducted.

Salary: pay, allowances, bonus and perquisites from an employer, and pension from a former employer.
Income from house property: rent from a house, flat or shop you own.
Profits and gains of business or profession: income of shopkeepers, freelancers, doctors, consultants and traders.
Capital gains: profit on selling shares, mutual funds, property, gold and other assets.
Income from other sources: bank and post office interest, dividends, family pension and similar income that fits nowhere else.

How your tax is worked out

Add the income under all five heads. This is your gross total income.
Subtract the deductions your regime allows. The result is your taxable (total) income.
Apply the slab rates to the taxable income.
Subtract the rebate if your income is within the limit.
Add surcharge if income is above ₹50 lakh.
Add 4% Health and Education Cess on the tax plus surcharge.
Subtract tax already paid through TDS and advance tax. What is left is payable; any excess comes back as a refund.

The step-by-step salary guide walks through this with a full example.

Two tax regimes

Individuals can choose between two sets of rules. The new regime is the default: lower rates and wider slabs, but almost no deductions. The old regime has higher rates but lets you claim deductions such as HRA, section 80C and home loan interest.

Feature	New regime	Old regime
Income with nil slab rate	Up to ₹4 lakh	Up to ₹2.5 lakh (below 60)
30% rate starts above	₹24 lakh	₹10 lakh
Standard deduction (salary, pension)	₹75,000	₹50,000
Rebate	Up to ₹60,000 if income is up to ₹12 lakh	Up to ₹12,500 if income is up to ₹5 lakh
HRA, 80C, 80D, home loan interest	Not allowed	Allowed

See old vs new tax regime to find out which suits you, and the full slab tables for 2026-27.

A quick example

Worked example. Ravi earns a salary of ₹15,00,000 in tax year 2026-27 and stays in the new regime.
Taxable income = ₹15,00,000 − ₹75,000 standard deduction = ₹14,25,000.
Tax: nil on the first ₹4,00,000; 5% of ₹4,00,000 (₹4 lakh to ₹8 lakh) = ₹20,000; 10% of ₹4,00,000 (₹8 lakh to ₹12 lakh) = ₹40,000; 15% of the remaining ₹2,25,000 = ₹33,750. Slab tax = ₹93,750.
No rebate, because income is above ₹12 lakh. Cess at 4% = ₹3,750.
Total tax = ₹97,500, about ₹8,125 a month through TDS. That is 6.5% of his salary, far below his top slab rate of 15%.

Try your own numbers in the income tax calculator or see the ready-made tax on ₹15 lakh salary page.

How the tax is collected

TDS (tax deducted at source): your employer deducts tax from salary every month under section 392 of the 2025 Act (section 192 earlier). Banks deduct TDS on interest above certain limits. See TDS on salary.
Advance tax: if the tax not covered by TDS is ₹10,000 or more, you pay it in instalments during the year. See advance tax.
Self-assessment tax: any small balance you pay just before filing your return.
TCS (tax collected at source): collected by a seller on certain purchases, such as overseas tour packages. It counts towards your tax.

The tax year and your return

Income is taxed year by year. The year runs from 1 April to 31 March and, under the 2025 Act, is called the tax year. Tax year 2026-27 covers 1 April 2026 to 31 March 2027. After the year ends you file an income tax return on the e-filing portal, reporting all income and the tax already paid. Read how to file your ITR and which ITR form to use.