Tax in India

Who is the tax authority?

The Income Tax Department (ITD) sits under the Central Board of Direct Taxes (CBDT), which operates inside the Department of Revenue, Ministry of Finance. ITD administers the Income-tax Act, 1961 via the taxpayer portal at incometax.gov.in. Chartered Accountants (CAs) regulated by ICAI under the Chartered Accountants Act 1949 are the credentialed tax practitioners.

Indirect tax is split between two bodies. The Central Board of Indirect Taxes and Customs (CBIC) handles central GST and customs duty. State-level Commercial Taxes departments administer state GST (SGST). The GSTN (Goods and Services Tax Network) is the common IT backbone for all GST filings.

India is a G20 member, has signed and ratified the OECD Multilateral Instrument (MLI), and is in active consultation on OECD Pillar Two implementation via a Domestic Minimum Top-up Tax introduced in Budget 2025.

What is the tax year and when are returns due?

India uses a Previous Year (PY) / Assessment Year (AY) structure. The PY runs 1 April to 31 March; income earned in the PY is assessed in the AY that immediately follows. So PY 2024-25 (1 April 2024 to 31 March 2025) is assessed in AY 2025-26.

Advance tax is paid in four instalments inside the PY for any filer whose net tax liability after TDS exceeds INR 10,000. Belated returns under section 139(4) can be filed up to 31 December of the AY with a late-filing fee under section 234F.

Who counts as an Indian tax resident?

Section 6 of the Income-tax Act 1961 creates three residency categories: Resident and Ordinarily Resident (ROR), Resident but Not Ordinarily Resident (RNOR), and Non-Resident (NR). The basic test is physical presence in India for 182 days or more in the PY, OR 60 days or more in the PY plus 365 days across the four preceding PYs.

The 60-day threshold rises to 182 days for Indian citizens leaving India for employment abroad. For Indian citizens or persons of Indian origin visiting India, the threshold is 182 days if their total Indian-source income does not exceed INR 15 lakh; between INR 15 lakh and higher income, it reduces to 120 days, with a deemed-RNOR consequence rather than full ROR status.

The Finance Act 2020 added a deemed-residence rule under section 6(1A). An Indian citizen with total income (other than from foreign sources) above INR 15 lakh who is not liable to tax in any other country becomes a deemed Indian resident. ROR filers pay on worldwide income; RNOR filers pay on Indian-source income plus Indian-controlled foreign income; NR filers pay only on Indian-source income.

What are the personal income tax rates?

India operates two regimes simultaneously. The new regime under section 115BAC has been the default since FY 2023-24. The old regime requires an annual election and allows a wider range of deductions (section 80C, 80D, HRA, LTA, home-loan interest under section 24).

A section 87A rebate makes taxable income up to INR 12 lakh effectively tax-free under the new regime. Note: the new-regime slabs above reflect the FY 2024-25 structure; Budget 2025 further expanded slabs for FY 2025-26 — verify current slabs on incometax.gov.in before filing.

Surcharge and cess on top of base PIT:

The 4% Health and Education Cess applies to (tax + surcharge) for every filer, regardless of regime. Long-term capital gains on listed equity above INR 1.25 lakh per year are taxed at 12.5% under section 112A. Short-term capital gains on listed equity are taxed at 20% under section 111A.

How does corporate tax work?

Domestic companies have four rate tracks depending on company type and elections made.

Foreign companies pay tax at 35% on Indian-source income (reduced from 40% in Budget 2024), plus applicable surcharge and 4% cess. India introduced a Domestic Minimum Top-up Tax under OECD Pillar Two via Budget 2025 — practitioners should verify the operative effective date for each fiscal year. Transfer pricing under sections 92 to 92F includes safe-harbour rules, Advance Pricing Agreements (APAs), and Mutual Agreement Procedure (MAP) mechanisms.

How does GST work?

India's Goods and Services Tax (GST), in force since 1 July 2017, replaced a fragmented set of 17-plus central and state indirect taxes including central excise, service tax, and VAT. The structure is dual: Central GST (CGST) and State GST (SGST) apply on intra-state supplies; Integrated GST (IGST) applies on inter-state supplies and imports.

Mandatory registration thresholds: INR 40 lakh aggregate annual turnover for goods (INR 20 lakh in special-category states); INR 20 lakh for services (INR 10 lakh in special-category states). A Composition Scheme lets small suppliers under INR 1.5 crore pay a concessional flat rate without input-credit eligibility. E-invoicing for B2B transactions is mandatory for taxpayers with aggregate turnover above INR 5 crore. Customs duty on imports operates separately under the Customs Act 1962.

How are cryptoassets taxed?

The Finance Act 2022 created a dedicated Virtual Digital Asset (VDA) regime. Definitions in section 2(47A) cover cryptocurrency, NFTs, and notified digital assets.

Section 194S imposes 1% TDS on VDA transfer consideration above INR 50,000 per year for specified persons and INR 10,000 for others. Receiving a VDA as a gift is taxable under section 56(2)(x). Mining and staking income treatment is being clarified through ongoing CBDT guidance.

What is the treaty network?

India maintains approximately 95 comprehensive Double Taxation Avoidance Agreements (DTAAs). Most follow the UN Model Tax Convention with India-specific reservations on source-country taxation rights and Limitation on Benefits clauses. India signed and ratified the OECD MLI; the Principal Purpose Test applies to most covered DTAAs from 2020 onward.

The Mauritius and Singapore DTAAs were historically used for capital gains routing into India. India renegotiated both agreements; source-country capital gains rights were restored for investments made after April 2017. The 6% Equalisation Levy on online advertising continues alongside the DTAA framework as a unilateral measure.

Where does India sit in the South Asia cohort?

India anchors the South Asia major-economy cohort as the largest common-law income-tax jurisdiction in the region. Five archetypes span the sub-continent and nearby peers:

Common penalties and pitfalls

India's tax system has several traps that regularly catch foreign investors and NRI filers:

When should you talk to an Indian tax pro?

Some India filings are straightforward via the ITD portal. Others need a credentialed Chartered Accountant (CA) or an Income Tax Practitioner (ITP):

• Your income triggers a surcharge threshold (over INR 50 lakh)
• You have capital gains on listed equity, unlisted shares, or property
• You hold foreign assets as an ROR filer — Schedule FA in ITR-2 / ITR-3 is mandatory
• You are an NRI checking whether the section 6(1A) deemed-residence rule applies to you
• You are making a foreign remittance and need Form 15CA / 15CB certification
• You have VDA transfers — section 115BBH + section 194S compliance is non-trivial
• You are a company deciding between the legacy regime, section 115BAA, and section 115BAB
• You received an ITD notice (including a faceless-assessment notice via the portal)
• Your GST input-credit reconciliation (3B vs 2A/2B) shows mismatches
• You have transfer-pricing exposure on international or specified domestic transactions

You can find vetted India practitioners through the directory below.

This page is general information only. It is not personal guidance for your specific situation. Tax rules change. Always check current figures on incometax.gov.in or gst.gov.in, or consult a licensed Chartered Accountant in India, before filing.