The Income Tax Department has released the new ITR-1 (Sahaj) and ITR-4 (Sugam) forms for Assessment Year (AY) 2025–26. Taxpayers filing under the Old Tax Regime must be especially aware of the seven new disclosure requirements and updated eligibility conditions before filing their income tax returns.

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Filing your Income Tax Return (ITR) is a legal obligation and a smart financial move that helps you maintain tax compliance, claim refunds, and build financial credibility.

But filing ITR involves more than just entering figures—it requires careful planning, correct disclosures, and awareness of changing tax laws.

This guide covers everything you should keep in mind while filing your ITR, including:

• Foreign income,

• Cryptocurrency taxation,

• Futures & Options (F&O) reporting,

• Residential status, and more.

📌 Why Filing ITR Is Important

Filing your ITR:

• Prevents penalties and notices

• Helps claim TDS refunds

• Is mandatory for loan or visa applications

• Helps carry forward business and capital losses

• Builds a clean financial history with the Income Tax Department

✅ Key Points to Remember While Filing ITR (Assessment Year 2025–26)

1️⃣ Determine Your Residential Status

Your residential status under Section 6 of the Income Tax Act is critical because:

• Residents are taxed on global income

• Non-residents (NRIs) are taxed only on Indian income

• RNORs have limited global tax exposure

⏳ Count your stay in India over the past years carefully to determine this status.

2️⃣ Report Foreign Income and Assets

If you’re a Resident, you’re required to:

• Report all foreign income (salary, rent, interest, dividends)

• Disclose foreign assets like bank accounts, stocks, mutual funds, real estate, etc.

• Fill Schedule FA in the ITR

🔒 Non-disclosure can attract penalties under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.

3️⃣ Don’t Ignore Cryptocurrency Income

Under Section 115BBH:

• Crypto income is taxed at 30% flat rate

• No deduction allowed (except cost of acquisition)

• 1% TDS applies above ₹10,000 per year

Include all trades—even P2P or wallet-to-wallet transactions.

🪙 Disclose gains even if you haven’t converted crypto to INR.

4️⃣ Report F&O Trading as Business Income

F&O income is treated as speculative or non-speculative business income:

• Must be disclosed under ITR-3

• Maintain proper books of account

• File a tax audit if turnover exceeds limits

📘 Losses can be carried forward for 8 years—only if filed on time.

5️⃣ Use the Correct ITR Form

🚫 Wrong form = defective return = re-filing with penalty.

6️⃣ Match Form 26AS, AIS & TIS Before Filing

These reports show all income, taxes, and transactions linked to your PAN:

• Form 26AS – TDS, advance tax, refunds

• AIS (Annual Information Statement) – Comprehensive income details

• TIS (Taxpayer Information Summary) – Condensed view of AIS

🔍 Mismatch may lead to notice or refund delay.

7️⃣ Declare All Sources of Income

You must disclose:

• Salary, interest, rent

• Capital gains from shares or property

• Business/profession income

• Crypto/F&O income

• Dividend income

• Foreign income and gifts received

📣 Even exempt income like agricultural income must be declared.

8️⃣ Claim Deductions Under Old Tax Regime

If opting for the old regime, claim deductions like:

• Section 80C: PPF, LIC, ELSS, school fees

• 80D: Medical insurance

• 80G: Donations

• 80E: Education loan interest

• 24(b): Home loan interest

💡 New tax regime disallows most deductions—choose wisely.

9️⃣ Pay Self-Assessment or Advance Tax

If TDS is not sufficient to cover your tax liability:

• Pay advance tax in 4 installments (15 Jun, 15 Sep, 15 Dec, 15 Mar)

• Or pay self-assessment tax before filing ITR

Use Challan 280 for tax payments.

🔟 E-Verify Your Return Within 30 Days

You must verify your ITR to complete the process:

• Aadhaar OTP

• Net banking

• Bank account/Demat EVC

• Sending signed ITR-V to CPC Bangalore

⏰ Failure to e-verify = return considered “not filed”.

1️⃣1️⃣ File Before Due Date to Avoid Penalties

📩 Need Professional Help with Your ITR?

Our expert CA team helps with:

• Salary and capital gains ITR

• F&O and Crypto trading tax reports

• Foreign income and NRI returns

• Audit & business return filing

🌐 Visit: www.ncagrawal.com
📧 Email: info@ncagrawal.com
📞 Call: +91-9718046555

🔍 Top 12 FAQs on Income Tax Return Filing in India (2025)

Q1. Is it mandatory to file ITR if my income is below ₹2.5 lakh?
No, unless you fall under specific conditions like depositing >₹1 crore in a year, holding foreign assets, TDS deducted, etc.

Q2. What happens if I don’t report foreign income as a Resident?
You may face penalty and prosecution under the Black Money Act. Always disclose in Schedule FA.

Q3. Which ITR form should I use if I earned from crypto and salary?
Use ITR-3 if you have income from crypto, even if you’re salaried.

Q4. Can I claim expenses against crypto or F&O income?
Only cost of acquisition can be deducted for crypto. For F&O, business-related expenses are allowed.

Q5. What if I missed filing ITR last year but had losses?
You cannot carry forward losses if ITR wasn’t filed on time.

Q6. Is trading in US stocks or receiving foreign dividends taxable in India?
Yes, foreign dividends and capital gains are taxable if you are a Resident.

Q7. Can I file ITR myself or should I hire a CA?
You can file yourself, but if you have multiple income sources, trading, foreign assets, or crypto, a CA’s help is highly recommended.

Q8. Is Aadhaar mandatory to file ITR?
Yes, Aadhaar is mandatory for resident taxpayers unless specifically exempted.

Q9. How long should I keep ITR documents?
Keep ITR and related documents for at least 6 years for reference or scrutiny.

Q10. Can I revise my ITR after filing?
Yes, revised returns can be filed before 31st December 2025 (or before assessment is completed).

Q11. What is the penalty for late filing?
Up to ₹5,000 under Section 234F, plus interest and loss of carry-forward benefits.

Q12. Do I need to disclose my foreign bank account if I’m an NRI?
No, NRIs are not required to disclose foreign assets unless they become Residents.

In the case of Satwant Singh Sanghera vs. The Assistant Commissioner of Income Tax [W.P.(C) 13765/2024 & CM APPL. 57690/2024], the Delhi High Court addressed a significant issue concerning the liability of an employee for Tax Deducted at Source (TDS) that was deducted by the employer but not deposited with the government.​

Background

Satwant Singh Sanghera, a former co-pilot with Kingfisher Airlines Ltd., was employed from April 1, 2008, to December 15, 2011. During his tenure, the airline deducted TDS from his salary for the Assessment Years (AYs) 2009-10, 2010-11, and 2011-12. These deductions were reflected in Form 16A issued by the employer. However, the airline failed to deposit the deducted TDS amounts with the Income Tax Department.​

Subsequently, the Income Tax Department issued notices under Section 245 of the Income Tax Act, 1961, adjusting outstanding demands totaling ₹11,07,970 against Sanghera’s future tax refunds.

Court’s Findings

The Delhi High Court, comprising Justices Vibhu Bakru and Swarana Kanta Sharma, held that under Section 205 of the Income Tax Act, if tax has been deducted at source from an assessee’s income, the assessee cannot be held liable for its payment if the deductor fails to deposit it with the government. The court also referenced the Central Board of Direct Taxes (CBDT) instruction dated June 1, 2015, which clarifies that no demand should be enforced on the assessee in such scenarios. ​

The court further noted that the issue was covered by its earlier decision in Sanjay Sudan v. The Assistant Commissioner of Income Tax & Another (2023), where it was held that the tax department cannot recover TDS amounts from the employee if the employer has deducted but not deposited the tax.​

Judgment

In light of these findings, the Delhi High Court set aside the demand notices and adjustments pertaining to AYs 2009-10, 2010-11, and 2011-12. The court directed the Income Tax Department to pass necessary consequential orders and process any refunds due to Sanghera that had been adjusted against these demands. ​

Implications

This judgment reinforces the principle that employees should not be penalized for the non-compliance of their employers regarding TDS deposits. It provides relief to taxpayers facing similar issues where TDS has been deducted but not deposited by the employer.

For those interested in reading the full judgment, click on Indian Kanoon

1. TDS Rates for Resident Individuals and Entities

Note: TDS Rates without PAN – 20% flat (if TDS is lower than 20%)

2. Key Changes Effective from April 1, 2025

• Introduction of Section 194T:

  • TDS on Payments by Partnership Firms to Partners: A new section 194T has been introduced, mandating a 10% TDS on payments exceeding ₹20,000 made by partnership firms to their partners.

• Revised Threshold Limits:

  • Section 193 (Interest on Securities): Threshold limit increased to ₹10,000.

  • Section 194A (Interest other than Interest on Securities): For senior citizens, the threshold limit is ₹50,000; for others, it is ₹40,000.

  • Section 194D (Insurance Commission): Threshold limit increased to ₹15,000.

  • Section 194G (Commission on Sale of Lottery Tickets): Threshold limit increased to ₹15,000.

  • Section 194H (Commission or Brokerage): Threshold limit increased to ₹15,000.

3. Frequently Asked Questions (FAQs)

Q1: What is TDS and why is it deducted?

A: Tax Deducted at Source (TDS) is a means of collecting income tax in India, under which a certain percentage is deducted at the time of making specified payments like salary, commission, rent, interest, etc. The deducted amount is then remitted to the government on behalf of the payee.

Q2: What happens if I don’t provide my PAN to the deductor?

A: If you fail to provide your PAN,

A Complete Guide for 2025

Introduction

With the rising popularity of crypto trading and virtual digital assets (VDAs), the Indian government has implemented a structured tax regime for cryptocurrencies. As of 2025, taxpayers in India must comply with specific rules for disclosing, calculating, and paying taxes on income derived from cryptocurrencies and other VDAs. In this article, we will discuss how cryptocurrency is taxed in India, including capital gains, P2P crypto tax, and updates for Crypto Tax in India 2025.

Taxation of Virtual Digital Assets (VDAs) in India

The Finance Act, 2022, introduced a new framework for taxing income from VDAs, which includes:

• Cryptocurrencies (like Bitcoin, Ethereum)

• NFTs (Non-Fungible Tokens)

• Any other digital asset as notified by the government

Key Provisions:

1. Flat Tax Rate of 30% on profits from the transfer of VDAs.

2. 1% TDS (Tax Deducted at Source) on all transactions above a specified threshold.

3. No deduction for expenses (except cost of acquisition).

4. No set-off of losses from VDA against other income or future crypto gains.

How to Calculate Tax on Cryptocurrency in India

Step 1: Identify the Transaction

• Selling crypto for INR

• Swapping one crypto for another

• Using crypto for purchases

• Receiving crypto as payment or mining rewards

Step 2: Determine Income

Use this formula for each transaction:

Taxable Income = Sale Value – Purchase Cost

No deduction is allowed for transaction fees, platform charges, or mining costs.

Step 3: Apply 30% Tax Rate

Example:
If you bought Bitcoin for ₹1,00,000 and sold it for ₹1,50,000:
Profit = ₹50,000 → Tax = ₹15,000 (30%)

Step 4: Deduct TDS

A 1% TDS is deducted at source if the annual transaction volume exceeds ₹10,000 (₹50,000 for specified persons). This TDS can be adjusted while filing your Income Tax Return (ITR).

P2P Crypto Tax in India

Peer-to-peer (P2P) crypto transactions are also taxable. Since these bypass centralized exchanges, the responsibility to deduct TDS and report income lies entirely with the buyer/seller.

Points to Remember:

• Keep a detailed record of wallet addresses and transaction history.

• Even unregulated exchanges and wallet-based trades are tracked via KYC and crypto analytics tools used by tax authorities.

Crypto Capital Gains Tax in India

Crypto profits are not taxed like stocks or mutual funds. Here’s how it differs:

Even gifting or transferring crypto to others may be considered a transfer and taxed accordingly.

Crypto Tax in India 2025: Latest Updates

As of FY 2024-25 (AY 2025-26), the following remain applicable:

• No changes in the 30% tax or 1% TDS regime.

• Crypto platforms must issue Form 16A for TDS deduction on crypto transactions.

• Reporting of crypto in Schedule VDA in ITR is mandatory for individuals, even for small trades.

The government continues to refine tax enforcement on crypto with better data integration from exchanges, wallet addresses, and foreign trading platforms.

Filing Crypto Income in ITR

• Use ITR-2 or ITR-3, depending on other sources of income.

• Disclose income from VDA under the “Income from Other Sources” or “Capital Gains” section.

• Report all crypto-related transactions in Schedule VDA.

• Adjust 1% TDS in TDS Schedule while filing.

Why You Should Consult a Professional

Cryptocurrency tax in India involves complexities like exchange conversions, P2P trade records, and form filing. Consult a CA for Income Tax Filing, especially if:

• You traded on foreign platforms

• You had high-volume trades or losses

• You received airdrops, mining income, or crypto payments

• You require a CA Report for VISA or NRI disclosures

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FAQs on Cryptocurrency Tax in India

1. Is cryptocurrency legal in India?

Crypto is not illegal, but it is unregulated. However, it is fully taxable.

2. How much is the tax on crypto in India?

A flat 30% tax is levied on gains from cryptocurrency, regardless of income level.

3. Is crypto trading on foreign exchanges taxed?

Yes. Income must be disclosed, and 1% TDS is applicable if the transaction is routed via an Indian exchange or platform.

4. Can I adjust crypto losses against other income?

No. Crypto losses cannot be set off against any income, including crypto gains in another year.

5. Do I have to pay tax on airdrops and mining rewards?

Yes. These are considered income and taxed at the applicable slab rate in the year received.

6. Which ITR form should I use to report crypto?

Usually ITR-2 or ITR-3, based on the nature of income and business activities.

7. Do I need to show my wallet transactions?

Yes, especially in the case of P2P or foreign transactions. The IT Department may ask for logs, wallet IDs, or exchange records.

8. How is TDS applied on crypto trades?

TDS of 1% is deducted at source on transactions above ₹10,000. This is deducted by the exchange or buyer.

9. Is gifting cryptocurrency taxable?

Yes. Gifts in excess of ₹50,000 in a financial year are taxable unless received from a relative.

10. Can NRIs be taxed on crypto income in India?

Yes, if the income accrues or arises in India or is received in India.

Contact Us for Expert Assistance

Navigating the complexities of cryptocurrency taxation in India requires expert guidance. Whether you’re filing your first crypto return, calculating P2P gains, or managing capital gains from multiple exchanges, our team is here to help.

You can get in touch with N C Agrawal & Associates, your trusted CA for Income Tax Filing, CA for NRI Tax Filing, and CA for Cryptocurrency Tax Filing at:

📞 +91 9718046555
📧 info@ncagrawal.com

Let us assist you in filing your taxes accurately and compliantly.

Foreign Assets Disclosure in ITR: Applicability, Penalties, and Filing Guide

Introduction

With increasing global income and foreign investments, Indian taxpayers are required to be more transparent about their foreign assets and income. The Income Tax Act, 1961, mandates disclosure of foreign assets in the Income Tax Return (ITR) under Schedule FA. Non-disclosure can lead to severe penalties under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.

In this guide, we will explain everything about foreign asset disclosure in ITR, its applicability, the schedule FA, and the consequences of non-disclosure.

What is Foreign Asset Disclosure in ITR?

Foreign asset disclosure refers to reporting details of overseas assets and income held by a resident Indian taxpayer in their annual income tax return. This includes foreign bank accounts, properties, financial interests, trusts, and more.

Foreign Asset Disclosure in ITR: Applicability

Who is required to disclose foreign assets in ITR?

• Resident and Ordinarily Resident (ROR) individuals in India are required to disclose foreign assets.
• Non-Resident (NR) and Resident but Not Ordinarily Resident (RNOR) individuals are not required to disclose foreign assets.

Note: Disclosure is mandatory even if the asset does not generate any income during the year.

From which year is Foreign Asset Disclosure in ITR mandatory?

The requirement for foreign asset disclosure in the ITR started from Assessment Year 2012-13 (FY 2011-12). It became more stringent with the introduction of the Black Money Act in 2015.

Types of Foreign Assets to be Disclosed in Schedule FA

Schedule FA is a detailed section in the ITR form that captures information on:

1. Foreign Bank Accounts – Including savings, current, or term deposits.
2. Financial Interests – Shares, securities, bonds held in foreign companies or entities.
3. Immovable Property – Real estate or buildings situated abroad.
4. Trusts – Details of foreign trusts where the taxpayer is a trustee, beneficiary, or settlor.
5. Any other capital asset – Such as artwork, jewelry, etc., held abroad.
6. Signing Authority – If the taxpayer has authority in any foreign account.

Salaried employees receiving shares of the foreign holding company under ESOPs or RSUs must also disclose such holdings even if no income is generated.

If such shares are sold, the gains must be reported in ITR and capital gains tax must be paid accordingly. Even if the shares are vested but not sold, Schedule FA disclosure is still mandatory.

How to Fill Schedule FA in ITR

Step-by-Step Instructions:

1. Select the correct ITR Form – Usually ITR-2 or ITR-3 is applicable for those disclosing foreign assets.
2. Navigate to Schedule FA – Available in the ITR form after logging into the Income Tax e-filing portal.
3. Provide Year of Acquisition – Mention the year the foreign asset was acquired.
4. Country Details – Mention the country of location.
5. Nature of Asset/Account – Indicate whether it is a bank account, property, or financial interest.
6. Income Generated – Specify if any income was derived from the foreign asset.
7. Tax Details – Mention if the income was taxed in the foreign country.

Pro Tip: Keep documents like foreign bank statements, investment records, and property details handy while filing.

Penalty for Non-disclosure of Foreign Assets in Income Tax Return

The Black Money Act, 2015 prescribes heavy penalties:

• Penalty of INR 10 lakh per undisclosed foreign asset.
• Prosecution for up to 7 years.
• Additional taxes and interest may be levied.

Even if the foreign asset did not generate income, non-disclosure invites penalties.

How does the government identify undisclosed foreign assets?

• India has signed Information Exchange Agreements with many countries under FATCA and CRS.
• Foreign banks and institutions share details of accounts held by Indian residents.
• Data analytics and AI-based red flagging systems are used by the Income Tax Department.
• Cross-verification of foreign income declarations with Form 67, Form 26AS, and passport data.

Why Consult a Professional?

Disclosing foreign assets involves technical details and risks. A professional CA for NRI Tax Filing, CA for Income Tax Filing, or CA Report for VISA can assist with accurate and compliant filing. Many individuals also consult a CA near me for ITR filing to ensure that Schedule FA is properly completed.

FAQs on Foreign Asset Disclosure in ITR

1. Do NRIs need to disclose foreign assets in Indian ITR?

No. Only Resident and Ordinarily Resident (ROR) individuals need to disclose foreign assets in India.

2. What if I had a foreign asset but no income from it?

Disclosure is still mandatory even if no income is earned from the asset.

3. Which ITR forms allow foreign asset disclosure?

Primarily ITR-2 and ITR-3 contain Schedule FA for foreign asset reporting.

4. Is disclosure required for jointly held foreign assets?

Yes. If you are a joint holder or have signing authority, it must be disclosed.

5. Can I revise my return if I forgot to disclose?

Yes. If discovered early, file a revised return before the due date.

6. What documents are needed to fill Schedule FA?

Foreign bank statements, property documents, and investment proof should be retained.

7. Is the value of the foreign asset required in INR?

Yes, values should be converted and reported in Indian Rupees.

8. What if I disclosed foreign income but forgot the asset?

Both income and asset disclosure is mandatory. Partial disclosure is considered non-compliant.

9. Is a CA’s help mandatory for filing Schedule FA?

Not mandatory, but highly recommended due to complexity.

10. I received RSUs from my US employer. Should I disclose them?

Yes, even if they are not sold. Holding or vesting of foreign shares must be reported in Schedule FA. On sale, capital gains must be disclosed and taxed in India.

Conclusion

Foreign asset disclosure in ITR is a critical compliance requirement for Indian residents with overseas income or assets. It ensures transparency and helps avoid harsh penalties under Indian tax laws. If you need expert help, consult a CA for NRI Tax Filing, CA for Income Tax Filing, or CA near me for ITR filing to ensure your Schedule FA is accurate and compliant.

Trump’s 26% Tariff on India: Comprehensive Impact Analysis and Sector Exemptions

Introduction

President Donald Trump’s second administration has announced a new set of tariffs targeting India, marking a significant development in US-India trade relations. According to recent announcements, the United States has imposed a 26% “reciprocal tariff” on certain Indian goods, while exempting key sectors like pharmaceuticals. This article examines the context, details, and potential impacts of this policy decision for both nations.

What Is a Reciprocal Tariff?

A reciprocal tariff is a trade policy instrument designed to match or counterbalance tariffs imposed by another country. The core principle is simple: if Country A charges a certain percentage tariff on goods from Country B, then Country B imposes an equivalent tariff on goods from Country A. Key aspects include:

• Equivalence Principle: Tariffs are set to match what the other country charges
• Specific Targeting: Often applied to the same or similar categories of goods
• Policy Objective: Intended to create a “level playing field” in trade relations
• Negotiation Tool: Frequently used as leverage to pressure trading partners to reduce their own tariffs

In the case of Trump’s policy, the administration characterizes the 26% tariff as reciprocal because it claims this percentage matches what India charges on various American goods entering its market.

Background of US-India Trade Relations

The United States and India have maintained complex trade relations over the years, with bilateral trade reaching approximately $150 billion annually before 2025. While the two countries have strengthened strategic partnerships in defense, technology, and diplomacy, trade tensions have persisted across multiple administrations.

Previous points of contention included:

• India’s tariff structures on American products
• Intellectual property protection concerns
• Market access issues for US companies
• Digital services taxes
• Agricultural trade barriers

Details of the New Tariff Policy

According to recent announcements, the Trump administration has implemented a 26% tariff on certain goods imported from India. This measure appears to be part of President Trump’s broader “America First” trade agenda, which he has reinstated upon returning to office in January 2025.

Key aspects of the new tariff policy include:

• A 26% duty applied selectively to Indian exports
• Described as “reciprocal,” suggesting it matches tariffs India imposes on US goods
• Specific exemptions for critical sectors including pharmaceuticals
• Likely targets sectors where India maintains relatively high import duties

Exempted Sectors: Strategic Carve-outs in the Tariff Policy

Despite the broad application of the 26% tariff, the Trump administration has strategically exempted several sectors from these duties:

1. Pharmaceuticals and Medical Devices: In recognition of India’s critical role in the global pharmaceutical supply chain and its position as a major supplier of generic medications to the US market, pharmaceutical products have been exempted. This includes:
   • Generic prescription medications
   • Active pharmaceutical ingredients (APIs)
   • Medical devices and diagnostic equipment
   • Vaccines and biological products
2. Information Technology Services: While physical goods are the primary target of tariffs, IT services—a cornerstone of US-India economic relations—remain unaffected by this policy.
3. Essential Agricultural Products: Certain essential food items and agricultural goods have been excluded, particularly those that might impact US food security or inflation.
4. Defense-Related Equipment: Items related to defense cooperation between the two nations have been exempted to maintain strategic security partnerships.
5. Raw Materials for Essential Industries: Certain raw materials critical to US manufacturing have been excluded to prevent supply chain disruptions in key industries.

These exemptions reflect a targeted approach to the tariff policy, aimed at minimizing disruption to sectors considered strategically important for bilateral cooperation or domestic economic stability.

Global Context: Countries Affected by Trump’s Tariff Policy

The tariff on India is part of a broader international trade policy implemented by the Trump administration. Countries facing new or increased tariffs include:

1. China: Facing the highest tariffs at 60%, continuing the trade tensions from Trump’s first term
2. Mexico: 25% tariff on imports, despite USMCA trade agreement
3. Canada: 25% tariff, also a USMCA partner
4. European Union members: 20% tariff on various goods
5. Japan: 20% tariff on automotive and electronic goods
6. South Korea: 20% tariff despite existing trade agreements
7. Vietnam: 20% tariff, targeting its growing manufacturing sector
8. India: 26% reciprocal tariff
9. Brazil: 20% tariff on agricultural and industrial goods
10. Indonesia: 20% tariff on textiles and manufactured goods
11. Thailand: 20% tariff focusing on electronics and automotive parts
12. Malaysia: 20% tariff on electronics and semiconductor components

Potential Impact on India’s Economy

Export Sectors at Risk

India’s export sectors most vulnerable to these tariffs include:

1. Textiles and Apparel: India exports approximately $8 billion worth of textiles and garments to the US annually, representing a significant portion of its manufacturing exports.
2. Jewelry and Precious Stones: The gems and jewelry sector is a major export earner for India, with the US as a primary market.
3. Engineering Goods: Steel products, auto parts, and machinery exports could face disruption.
4. Chemical Products: Non-pharmaceutical chemical exports may experience pricing challenges in the US market.
5. Leather Products: The leather industry, which employs millions in India, could face decreased competitiveness.

Macroeconomic Implications

The tariffs could have several broader impacts on India’s economy:

• Trade Deficit Concerns: India’s trade surplus with the US (approximately $30 billion) could shrink.
• GDP Impact: Economists estimate a potential negative impact of 0.3-0.5% on India’s GDP growth if the tariffs are broadly implemented.
• Currency Pressure: The Indian rupee may face depreciation pressure as export earnings decline.
• Employment Effects: Manufacturing sectors targeted by tariffs could see job losses, particularly in labor-intensive sectors like textiles.

India’s Potential Responses

India has several options to respond to these tariffs:

Diplomatic Engagement

• Negotiations through established bilateral trade forums
• Seeking exemptions for additional sectors
• Proposing gradual tariff reductions on both sides

Retaliatory Measures

• Implementing counter-tariffs on US goods
• Targeting US agricultural products, aircraft, or other politically sensitive exports
• Adjusting procurement policies for government contracts

WTO Dispute Resolution

• Filing formal complaints through World Trade Organization mechanisms
• Building coalitions with other affected trading partners

Market Diversification

• Accelerating trade agreements with the European Union, United Kingdom, and other partners
• Enhancing participation in regional frameworks like RCEP or CPTPP

Global Trade Implications

The US-India tariff tensions reflect broader shifts in global trade dynamics:

• Deglobalization Trend: This represents another step in the fragmentation of global trade networks.
• Supply Chain Reconfiguration: Companies may accelerate efforts to diversify manufacturing locations.
• Regional Trade Blocks: May strengthen the formation of regional economic partnerships.
• Developing Economy Impact: Other emerging economies may benefit from trade diversion or suffer from similar protectionist measures.

Conclusion

The Trump administration’s 26% reciprocal tariff on Indian goods introduces significant uncertainty into what has been a growing economic relationship. This policy, part of a broader international tariff strategy affecting multiple countries, creates immediate challenges for specific export sectors while potentially reshaping global trade flows. The strategic exemptions for pharmaceuticals and other critical sectors suggest a nuanced approach rather than a blanket policy.

For India, this development presents both challenges and opportunities—forcing a reconsideration of export dependencies while potentially accelerating economic partnerships with other global markets. How both nations navigate this tension will significantly influence not just bilateral relations but also the broader architecture of international trade in a period of increasing economic nationalism.

Disclaimer

This article is provided for informational purposes only and does not constitute professional advice. The information contained herein is based on publicly available data and analysis as of April 2025, but specific details may change as policies evolve. The tariff rates, exemptions, and affected sectors mentioned are subject to official government announcements and may be modified by the relevant authorities.

This content represents the author’s understanding of the situation based on available information and should not be relied upon for business, legal, or financial decisions without consulting appropriate professionals and official sources. The analysis of potential impacts is speculative and not a guarantee of future economic outcomes.

No part of this content should be construed as an endorsement or criticism of any political position or policy decision. Readers are encouraged to verify all information independently and consult with qualified professionals regarding any actions they may take in response to these tariffs.

In recent times, many so-called “finfluencers” and “fraudcasters” have been spreading a misleading narrative about taxation. According to them, if your taxable income exceeds ₹12,00,000—even by ₹1—you will lose the rebate and suddenly have to pay ₹62,400+ in taxes. This claim sounds alarming, but it is entirely false.

The above myths emerged immediately after the Budget 2025 without proper interpretation. The summary of personal taxes slabs as per Budget 2025 can be read by clicking here.

Thankfully, the Income Tax Act provides for Marginal Relief, ensuring that an additional ₹1 in income does not create an unfair tax burden. Let’s break this down in simple terms.

The Finfluencer & Fraudcast Myth

They claim that if your income is ₹12,00,001, your tax liability will jump to ₹62,400+. The idea of suddenly losing the rebate sounds frightening and discouraging for taxpayers. However, this is a misinterpretation of tax laws and how rebates work under the new tax regime.

The Truth: Marginal Relief Applies

Under the new tax regime, taxpayers earning up to ₹12,00,000 get a rebate under Section 87A, effectively making their tax liability zero. But what happens if your income is ₹12,00,001?

Instead of immediately paying ₹62,400+ in tax, Marginal Relief ensures that you pay only ₹1 in tax!

Yes, you read that right! If your taxable income is just ₹1 above ₹12,00,000, you will not face a sudden, steep tax burden. Instead, the tax amount is adjusted in such a way that you only pay the additional tax corresponding to the extra income.

What Is the Maximum Income for Marginal Relief?

Marginal relief is available until your income reaches approximately ₹12,73,934.

• If your taxable income is between ₹12,00,001 and ₹12,73,934, marginal relief ensures you only pay tax on the excess amount above ₹12,00,000.
• Once your income exceeds ₹12,73,934, the tax liability surpasses the additional income over ₹12,00,000, and marginal relief no longer applies.

Key Takeaways

✅ Marginal Relief exists to prevent unfair tax jumps.
✅ If your taxable income is between ₹12,00,001 and ₹12,73,934, tax is adjusted fairly.
✅ You do NOT suddenly lose all benefits or pay ₹62,400+ in tax for earning ₹1 more.
✅ Don’t believe misleading financial myths—always check official tax laws!

Frequently Asked Questions (FAQs)

1. What is Marginal Relief?

Marginal Relief is a provision in the Income Tax Act that ensures taxpayers do not face a sudden jump in tax liability when their taxable income slightly exceeds ₹12,00,000 under the new tax regime.

2. How does Marginal Relief work?

If your taxable income exceeds ₹12,00,000 by a small margin, Marginal Relief ensures that you only pay tax on the excess amount instead of facing a sudden, steep tax liability.

3. Does Marginal Relief apply to all taxpayers?

Marginal Relief applies to taxpayers under the new tax regime whose taxable income is between ₹12,00,001 and ₹12,73,934.

4. What happens if my income exceeds ₹12,73,934?

If your taxable income crosses ₹12,73,934, your tax liability exceeds the additional income over ₹12,00,000, and Marginal Relief no longer applies.

5. Is it true that earning ₹1 more than ₹12,00,000 leads to ₹62,400+ in taxes?

No, this is a myth. Marginal Relief prevents such an unfair tax burden. If your income is ₹12,00,001, your actual tax liability is just ₹1, not ₹62,400+.

6. How can I ensure I am calculating my tax correctly?

It is always best to consult a qualified Chartered Accountant (CA) to understand your tax liability and Marginal Relief calculations accurately.

7. Where can I get more reliable tax information?

Always refer to official government resources or consult a professional CA instead of relying on misinformation spread by unverified sources online.

Final Thoughts

The idea that a ₹1 increase in taxable income can create a huge tax burden is a misconception spread by those who don’t understand taxation properly. Marginal relief is a critical feature in our tax system that ensures fairness and prevents sudden financial shocks. So, the next time someone tells you that earning slightly more will lead to a massive tax jump, you’ll know the truth!

For professional tax guidance, always consult a qualified Chartered Accountant (CA) instead of relying on misleading online advice!

The Finance Bill, 2025, has introduced changes in personal income tax rates for the Assessment Year (AY) 2026-27. This article provides a detailed overview of the tax slabs under both the new tax regime (default) and the old tax regime (optional) while comparing tax liabilities at different income levels.

Personal Income Tax Rates for AY 2026-27

New Tax Regime (Default) – Section 115BAC

• Health & Education Cess: 4% applies to the total tax liability.
• Surcharge: Additional tax for income exceeding ₹50 lakh.
• No deductions or exemptions allowed.

Old Tax Regime (Optional) – No Change in Rates

• Rebate under Section 87A: Available for income up to ₹5 lakh (maximum rebate ₹12,500).
• Allows deductions under 80C, 80D, HRA, LTA, etc.

Comparison of Tax Liability under Both Regimes

To understand the impact of these tax rates, let’s compare tax liability for incomes of ₹20 lakh, ₹30 lakh, and ₹40 lakh under both regimes.

Tax Calculation for Different Income Levels

Tax Breakdown for ₹20,00,000

✅ New Regime:

• Tax on first ₹4,00,000 – Nil
• ₹4,00,001 – ₹8,00,000 @ 5% = ₹20,000
• ₹8,00,001 – ₹12,00,000 @ 10% = ₹40,000
• ₹12,00,001 – ₹16,00,000 @ 15% = ₹60,000
• ₹16,00,001 – ₹20,00,000 @ 20% = ₹80,000
• Total Tax = ₹2,00,000 + 4% Cess (₹8,000) = ₹2,08,000

✅ Old Regime (After ₹2L Deductions – Net Income ₹18,00,000):

• ₹2.5L – ₹5L @ 5% = ₹12,500
• ₹5L – ₹10L @ 20% = ₹1,00,000
• ₹10L – ₹18L @ 30% = ₹2,40,000
• Total Tax = ₹3,52,500 + 4% Cess (₹14,100) = ₹3,66,600

Disclaimer:

This article is for informational purposes only and should not be considered as professional tax advice. While every effort has been made to ensure accuracy, tax laws are subject to change, and individual circumstances may vary. Readers are advised to consult with a qualified Chartered Accountant or tax professional before making any tax-related decisions. The author and publisher disclaim any liability for any decisions made based on the content of this article.

Here’s a table of the new TDS rates as per the Finance Bill, 2025:

These changes will be effective from April 1, 2025 or any date as notified by the goverment