Every year, our salaried clients ask the same question: 'My employer already deducted TDS - do I still need to file?' The answer is almost always yes. But filing the ITR is just the last step in a year-long compliance cycle that most employees do not realise they are part of.
This guide maps the complete annual compliance journey for salaried taxpayers in India - from April's tax regime selection to July's ITR filing and beyond. It covers what documents you need, which form to use, what the new 2026 rules change, and the specific mistakes our CA team sees repeatedly. Whether you earn Rs 6 lakh or Rs 50 lakh, this checklist applies to you.
What Is ITR for Salary and Why Does Annual Compliance Matter?
Income Tax Return (ITR) for salary is the annual declaration filed by salaried individuals reporting their total income, deductions claimed, taxes paid, and any remaining tax liability or refund due to the Income Tax Department. For most salaried employees, this means filing ITR-1 (Sahaj) through the e-Filing portal at incometax.gov.in under Section 139(1) of the Income Tax Act, 1961.
Annual compliance matters because the Income Tax Department now cross-references your ITR with multiple data sources - Form 26AS (TDS credits), AIS (Annual Information Statement showing bank transactions, property deals, investments), and employer filings (Form 24Q/Form 143). Any mismatch triggers automated notices. For salaried employees using ITR filing for salary (know more) services, proactive compliance prevents notices, preserves refund eligibility, and maintains a clean financial record for loans and visas.
From FY 2026-27 onwards, the Income Tax Act, 2025 replaces the 1961 Act. But for filing your FY 2025-26 return (due 31 July 2026), the existing law applies. Understanding both frameworks is necessary because some 2026 rule changes - like Form 130 replacing Form 16 - are already announced.
Key Terms You Should Know
- ITR-1 (Sahaj): The simplest return form for resident individuals with salary, one house property, and other income up to Rs 50 lakh. Cannot be used if you have capital gains (beyond Rs 1.25 lakh LTCG under 112A), foreign assets, or multiple properties.
- Form 16: TDS certificate issued by the employer under Section 203, containing Part A (TDS details) and Part B (salary computation, deductions, tax calculation). Used for FY 2025-26. Replaced by Form 130 from FY 2026-27.
- Form 130 (New from FY 2026-27): Three-part system-generated TDS certificate replacing Form 16 under the Income Tax Act, 2025. Part A (employer/employee details), Part B (payment/TDS details), Part C (detailed computation). Downloadable only from TRACES.
- AIS (Annual Information Statement): A comprehensive statement on the e-Filing portal showing all financial transactions reported by banks, mutual funds, registrars, and other entities. Must be verified before filing ITR to catch mismatches.
- Section 115BAC (New Tax Regime): The default tax regime from FY 2023-24 onwards. For FY 2025-26, income up to Rs 12 lakh (Rs 12.75 lakh with standard deduction) attracts nil tax. Most Section 80C/80D deductions are not available under this regime.
- Section 234F (Late Filing Fee): Penalty for filing ITR after the due date - Rs 5,000 if total income exceeds Rs 5 lakh; Rs 1,000 if total income is below Rs 5 lakh.
- Standard Deduction (Section 16(ia)): Flat deduction of Rs 75,000 from salary income under the new tax regime for FY 2025-26 (Rs 50,000 under old regime). Available without any investment or proof submission.
Who Must File ITR on Salary Income Under Section 139?
Filing an ITR is mandatory under Section 139(1) for every salaried individual whose gross total income exceeds the basic exemption limit. Under the new tax regime (default), this limit is Rs 3 lakh for FY 2025-26.
- Any individual whose total income (before deductions) exceeds Rs 3 lakh under new regime or Rs 2.5 lakh under old regime
- Salaried employees with TDS deducted - even if net tax is zero, filing is needed to claim refunds or report income correctly
- Employees with income from salary plus one house property (rental income or interest on home loan)
- Salaried individuals with bank interest, FD interest, or dividend income exceeding Rs 10,000
- Employees who switched jobs during the year - both employers' incomes must be consolidated in one ITR. Consider income tax return filing (know more) to avoid double-counting of exemptions
- Persons with deposits exceeding Rs 1 crore in current accounts, or spending Rs 2 lakh+ on foreign travel, or paying Rs 1 lakh+ on electricity - mandatory filing regardless of income
Even if your income is below the exemption limit, voluntary filing is advisable for building financial history (loan eligibility, visa processing) and claiming TDS refunds.
Legal Framework: Current Law vs New Income Tax Act 2025
| Aspect | Income Tax Act, 1961 (FY 2025-26 Filing) | Income Tax Act, 2025 (FY 2026-27 Onwards) |
|---|---|---|
| Applicable For | ITR filed in July 2026 for FY 2025-26 | ITR filed in July 2027 for FY 2026-27 (Tax Year) |
| TDS Certificate | Form 16 (Part A + Part B) issued by employer | Form 130 (Part A + B + C) - system-generated from TRACES only |
| Employer TDS Return | Form 24Q (quarterly) | Form 143 (quarterly) |
| Employee Declaration | Form 12BB (investment declarations) | Form 124 (with mandatory landlord relationship for HRA) |
| Standard Deduction | Rs 75,000 (new regime); Rs 50,000 (old regime) | Rs 75,000 (new regime); Rs 50,000 (old regime) - no change announced |
| Default Tax Regime | New regime (Section 115BAC) | New regime (continuation) |
| Terminology | Financial Year (FY) + Assessment Year (AY) | Proposed replacement with 'Tax Year' |
| ITR Due Date (Non-Audit) | 31 July | 31 July (ITR-1/ITR-2); 31 August (ITR-3/ITR-4 non-audit) |
| Revised Return Deadline | 31 December | 31 March (with small fee - Budget 2026 proposal) |
The critical takeaway: for the filing cycle ending July 2026, the existing 1961 Act governs everything. The 2025 Act changes kick in only for income earned from 1 April 2026 onwards.
Annual Compliance Calendar: Month-by-Month for Salaried Employees
- April - Choose your tax regime. At the start of the financial year, decide between old and new regime. Inform your employer via Form 12BB. Under the new regime, most 80C/80D deductions are unavailable but the nil-tax threshold is higher. For salaried employees, this decision can be changed at the time of ITR filing (non-business cases). Consult tax planning services (know more) if your deductions exceed Rs 3.75 lakh - old regime may still be beneficial.
- April-January - Submit investment proofs to employer. Employers typically set a January-February deadline for submitting proof of rent receipts (HRA), home loan certificates (Section 24(b)), 80C investments (PPF, ELSS, LIC), 80D insurance premiums, and NPS contributions (80CCD). Missing this deadline does not mean you lose deductions - you can still claim them directly in your ITR.
- 15 June, 15 September, 15 December, 15 March - Advance tax dates. If your tax liability after TDS exceeds Rs 10,000, advance tax instalments are due on these dates. Most salaried employees do not need to pay advance tax if their employer deducts TDS correctly. But those with significant FD interest, rental income, or capital gains must pay advance tax to avoid Section 234B/234C interest.
- May-June - Collect Form 16 from employer. Employers must issue Form 16 by 15 June. Verify that Part A details (TDS amounts) match your Form 26AS on the e-Filing portal. Check Part B for correct salary components, exemptions, and deductions. From FY 2026-27, this becomes Form 130 - downloadable only from TRACES, not manually generated.
- June-July - Verify AIS/TIS on the e-Filing portal. Log in to incometax.gov.in and check your Annual Information Statement (AIS). It shows all reported transactions - bank interest, dividends, property transactions, mutual fund purchases. If any transaction is incorrect, submit feedback on the portal before filing your ITR. AIS mismatches are the leading cause of automated notices for salaried taxpayers.
- By 31 July - File ITR. For FY 2025-26, the due date is 31 July 2026. File ITR-1 if eligible (income under Rs 50 lakh, salary + one house property + other sources). Use ITR-2 if you have capital gains, foreign assets, or multiple properties. E-verify within 30 days of filing (Aadhaar OTP, net banking, or DSC).
- After filing - Track refund and respond to notices. Refunds typically process within 2-6 weeks after e-verification. Check your email and e-Filing portal for any defective return notices (Section 139(9)) or adjustment notices (Section 143(1)). Respond within 15-30 days to avoid demand confirmations.
Documents and Records Needed for Salary ITR Filing
- Form 16 (Part A and Part B) from employer - the primary salary TDS certificate
- Form 26AS - downloaded from TRACES or e-Filing portal - verify TDS credits match Form 16
- AIS (Annual Information Statement) - verify all reported transactions (bank interest, dividends, mutual funds)
- Bank statements for all accounts - for interest income verification and cross-referencing with AIS
- Rent receipts and landlord PAN (if claiming HRA exemption under old regime and rent exceeds Rs 1 lakh per year)
- Home loan interest certificate from bank (for Section 24(b) deduction - up to Rs 2 lakh for self-occupied property)
- 80C investment proofs - PPF passbook, ELSS statement, LIC premium receipts, NSC certificates, tuition fee receipts
- 80D health insurance premium receipts (for self, spouse, children, and parents)
- NPS contribution statement (for Section 80CCD(1B) additional deduction of Rs 50,000 under old regime, or employer contribution under 80CCD(2) in both regimes)
- Capital gains statement from Demat/trading account (if applicable - disqualifies ITR-1, requires ITR-2)
- PAN and Aadhaar (linked and active) - mandatory for e-filing and e-verification
- Bank account details (IFSC code, account number) - for refund credit
ITR Filing Fees, Penalties, and Due Dates for FY 2025-26
Filing the ITR itself has no government fee - the e-Filing portal is free. Penalties arise only for late filing or non-filing:
| Scenario | Deadline | Penalty/Interest |
|---|---|---|
| On-time filing (ITR-1/ITR-2) | 31 July 2026 | None - no fee, no interest |
| Late filing (income > Rs 5 lakh) | After 31 July 2026 | Rs 5,000 under Section 234F + interest under Section 234A at 1% per month on outstanding tax |
| Late filing (income ≤ Rs 5 lakh) | After 31 July 2026 | Rs 1,000 under Section 234F |
| Belated return deadline | 31 December 2026 (current law); proposed 31 March 2027 with fee (Budget 2026) | Same late fee applies + loss of certain carry-forward benefits |
| Updated return (Section 139(8A)) | Within 24 months from end of AY (i.e., by 31 March 2029 for AY 2026-27) | Additional tax at 25% (if filed within 12 months) or 50% (if filed within 24 months) |
| Non-filing despite mandatory obligation | No filing at all | Prosecution under Section 276CC (imprisonment up to 7 years for tax evasion exceeding Rs 25 lakh) |
Note: The Rs 5,000 late fee under Section 234F is the maximum for non-audit cases. Budget 2026 proposes extending the revised return window to 31 March with a small fee. For salaried employees, the practical advice is straightforward: file by 31 July to avoid all penalties and interest.
Common Mistakes Salaried Employees Make in ITR Filing
Mistake 1: Not verifying AIS before filing. The AIS shows transactions that third parties (banks, mutual funds, registrars) have reported to the Income Tax Department. If your ITR does not match the AIS data, you will receive an automated notice. Always download and review AIS before starting your ITR. If a transaction is incorrect, use the 'Submit Feedback' option on the portal to flag it.
Mistake 2: Claiming deductions under the new regime that are not allowed. Under Section 115BAC (new regime), deductions like Section 80C (PPF, ELSS, LIC), 80D (health insurance), HRA exemption, and Section 24(b) (home loan interest) are NOT available. Only the standard deduction (Rs 75,000) and employer NPS contribution (80CCD(2)) are permitted. Filing with disallowed deductions triggers a defective return notice.
Mistake 3: Using the wrong ITR form. If you sold mutual funds or shares during the year, you have capital gains and cannot use ITR-1 - you must file ITR-2. If you hold unlisted equity shares or have foreign assets, ITR-1 is disqualified. Filing the wrong form results in rejection and re-filing. Verify your eligibility against the conditions before selecting the form.
Mistake 4: Not consolidating income from multiple employers. If you switched jobs during the year, both employers deduct TDS independently at lower slab rates. But your total income from both must be combined in one ITR. Without consolidation, you may end up with a tax shortfall and interest liability. Ensure you have Form 16 from both employers and that PAN registration (know more) is consistent across both.
Mistake 5: Not e-verifying the ITR after filing. Filing the ITR is not complete until you e-verify it within 30 days. If you miss the verification deadline, the return is treated as if it was never filed. E-verify through Aadhaar OTP (fastest), net banking, or by sending a signed ITR-V to CPC Bengaluru by post.
Penalties for Late Filing and Non-Compliance
Under Section 234F of the Income Tax Act, 1961, a late filing fee of Rs 5,000 is levied if the ITR is filed after the due date (31 July 2026 for salaried individuals). If total income is below Rs 5 lakh, the late fee is capped at Rs 1,000.
Under Section 234A, interest at 1% per month (or part of a month) is charged on the outstanding tax amount from the due date until the date of filing. For example, if you owe Rs 20,000 in self-assessment tax and file 3 months late, the interest is Rs 600 (Rs 20,000 × 1% × 3 months).
Under Section 234B, if advance tax paid is less than 90% of the assessed tax, interest at 1% per month is charged on the shortfall from April to the date of assessment.
Under Section 276CC, wilful failure to file an ITR is a prosecutable offence. If the tax evaded exceeds Rs 25 lakh, imprisonment can extend up to 7 years. For amounts below Rs 25 lakh, imprisonment ranges from 3 months to 2 years.
Additionally, late filing results in loss of certain benefits: you cannot carry forward capital losses to future years, and the time for receiving refunds is delayed significantly.
How Salary ITR Connects with Other Compliance Requirements
Salary ITR filing is one node in a larger compliance web. Your employer files quarterly TDS returns (Form 24Q, or Form 143 from FY 2026-27 under the new Act) with the Income Tax Department, and the TDS appears in your Form 26AS/Form 168. If the employer's TDS return filing (know more) is late or incorrect, your TDS credits will not reflect in Form 26AS, and your ITR processing will be held up.
The employer also files Form 12BA (for perquisites) and issues Form 16. From FY 2026-27, the new Form 122 (employee declaration to employer), Form 124 (employee claims), Form 130 (TDS certificate), and Form 143 (employer's quarterly return) replace these. The data flow becomes fully system-driven - your pre-filled ITR will pull directly from the employer's filings. Accuracy at the employer's end is critical.
For salaried individuals with side income (freelancing, rental, interest), the ITR connects with GST (if freelance turnover exceeds Rs 20 lakh), advance tax obligations (if tax after TDS exceeds Rs 10,000), and potentially tax audit requirements (if business turnover thresholds are crossed). A complete annual compliance review should cover all income streams, not just salary.
Old Regime vs New Regime: Impact on Salaried Taxpayers
| Criterion | New Tax Regime (Default - Section 115BAC) | Old Tax Regime |
|---|---|---|
| Nil Tax Threshold | Rs 12 lakh (Rs 12.75 lakh with standard deduction) for FY 2025-26 | Rs 2.5 lakh (Rs 3 lakh for senior citizens) |
| Standard Deduction | Rs 75,000 | Rs 50,000 |
| Section 80C (PPF, ELSS, LIC) | NOT available | Available - up to Rs 1.5 lakh |
| Section 80D (Health Insurance) | NOT available | Available - Rs 25,000 to Rs 1 lakh |
| HRA Exemption (Section 10(13A)) | NOT available | Available - based on actual rent, salary, and city |
| Home Loan Interest (Section 24(b)) | NOT available | Available - up to Rs 2 lakh (self-occupied) |
| NPS Employer Contribution (80CCD(2)) | Available - up to 14% of salary (central govt) or 10% (others) | Available - same limits |
| Tax Slabs (FY 2025-26) | 0-3L: Nil; 3-7L: 5%; 7-10L: 10%; 10-12L: 15%; 12-15L: 20%; 15L+: 30% | 0-2.5L: Nil; 2.5-5L: 5%; 5-10L: 20%; 10L+: 30% |
| Can Switch? | Yes - salaried employees can switch at the time of ITR filing each year | Yes - same flexibility for non-business taxpayers |
Note: The new regime is beneficial for employees who do not have significant deductions (below approximately Rs 3.75 lakh). If you have a home loan, HRA, PPF, LIC, 80D, and NPS totalling over Rs 3.75 lakh, calculate both regimes before choosing. The regime selection can be changed every year in the ITR for salaried (non-business) taxpayers.
Key Takeaways
Salaried employees earning above Rs 3 lakh (new regime) must file ITR annually under Section 139(1) of the Income Tax Act - even if TDS is fully deducted. The due date for FY 2025-26 is 31 July 2026.
ITR-1 (Sahaj) is the correct form for most salaried individuals with income under Rs 50 lakh from salary, one house property, and other sources. Capital gains, foreign assets, or multiple properties require ITR-2.
The annual compliance cycle is not just the July filing - it includes April regime selection, monthly proof submission to employer, quarterly advance tax checks, June Form 16 collection, AIS verification, and post-filing e-verification and notice monitoring.
From FY 2026-27, the Income Tax Act, 2025 replaces the 1961 Act. Form 16 becomes Form 130, Form 24Q becomes Form 143, and the system moves to fully digitised, TRACES-only TDS certificates. Salaried employees should prepare for stricter data matching.
Late filing penalties start at Rs 1,000 (income below Rs 5 lakh) and go up to Rs 5,000 under Section 234F, plus 1% per month interest on outstanding tax under Section 234A. The cost of delay always exceeds the effort of timely filing.
Need Help with ITR Filing for Salary?
Annual salary compliance involves regime selection, investment proof management, AIS verification, Form 16 reconciliation, and timely ITR filing - each step governed by specific sections of the Income Tax Act with deadline-linked penalties.
Explore our ITR filing for salary services (know more) for end-to-end compliance support - from Form 16 analysis and AIS mismatch resolution to optimal regime selection and error-free ITR-1/ITR-2 filing.
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