ITR Filing for Salaried Employees | FY 2025-26 Complete Guide
File ITR-1 or ITR-2 accurately for AY 2026-27. Understand Form 16, HRA exemption, standard deduction, 80C investments, and avoid common mistakes that trigger income tax notices.
In This Guide – ITR Filing for Salaried FY 2025-26
Which ITR Form Should a Salaried Employee Use?
The most common mistake salaried employees make is filing the wrong ITR form. Use this comparison to pick yours correctly.
Use ITR-1 if you have:
- Salary or pension income only
- Income from one house property (self-occupied or let out)
- Interest income from savings, FDs, or post office
- Dividend income
- Total income up to ₹50 lakh
- Resident Indian only
Use ITR-2 if you additionally have:
- Total income exceeding ₹50 lakh
- Capital gains from shares, mutual funds, or property
- Income from more than one house property
- Foreign income or foreign assets
- NRI status or RNOR status
- Directorship in a company
You are a Director in any company, hold unlisted shares, have agricultural income above ₹5,000, have brought forward losses, or are an NRI. Filing ITR-1 in these cases will result in a defective return notice under Section 139(9).
What is Included in Salary Income for ITR?
Your taxable salary is not just the CTC. It includes multiple components, some of which are fully or partially exempt from tax.
Fully Taxable Components
- Basic Salary
- Dearness Allowance (DA)
- City Compensatory Allowance
- Bonus, Incentives & Commission
- Overtime Pay
- Special Allowance (excess over actual expense)
Partially Exempt Allowances
- HRA – exempt up to least of 3 conditions (Sec 10(13A))
- LTA – exempt up to actual travel cost (twice in 4 years)
- Children Education Allowance – ₹100/month per child (2 children)
- Hostel Allowance – ₹300/month per child (2 children)
- Transport Allowance for disabled employees
Fully Exempt Components
- Gratuity – up to ₹20 lakh (Sec 10(10))
- Leave Encashment on retirement – up to ₹25 lakh
- VRS compensation – up to ₹5 lakh (Sec 10(10C))
- Employer’s PF contribution – up to 12% of basic
- Uniform & meal allowance within limits
Company-provided car, rent-free accommodation, ESOP benefits, club membership, and interest-free loans are treated as perquisites. Their value is computed as per income tax rules and added to your taxable salary. Check Form 12BA issued by your employer for the full perquisite computation.
All Deductions Salaried Employees Can Claim
These deductions are available only under the Old Tax Regime. The New Regime does not allow most of these except Standard Deduction and NPS (80CCD(2)).
| Section | Deduction For | Max Limit | New Regime? |
|---|---|---|---|
| Std. Ded. | Standard Deduction (all salaried & pensioners) | ₹75,000 (New) / ₹50,000 (Old) | ✅ Yes |
| 80C | LIC, PPF, ELSS, EPF, Home Loan Principal, Tuition Fee, NSC, SCSS, 5-year FD | ₹1,50,000 | ❌ No |
| 80CCD(1B) | Additional NPS contribution (over and above 80C) | ₹50,000 | ❌ No |
| 80CCD(2) | Employer’s NPS contribution (reflected in Form 16) | 14% of Basic (Govt) / 10% (Others) | ✅ Yes |
| 80D | Health insurance premium for self, family, parents | ₹25,000 + ₹50,000 (senior parents) | ❌ No |
| Sec 24(b) | Home loan interest on let-out property (unlimited) or self-occupied (capped) | ₹2,00,000 (self-occ.) / No limit (let-out) | ❌ No |
| 80E | Interest on education loan for higher studies | No limit (for 8 years) | ❌ No |
| 80G | Donations to approved charitable institutions & PM funds | 50% or 100% of donation | ❌ No |
| 80TTA/80TTB | Interest on savings account (80TTA) / all interest for senior citizens (80TTB) | ₹10,000 / ₹50,000 (senior) | ❌ No |
Standard Deduction (₹50,000) + 80C (₹1.5L) + 80CCD(1B) (₹50,000) + 80D (₹25,000 + ₹50,000) + Home Loan Interest Sec 24 (₹2L) = Up to ₹5.25 lakh in deductions possible for a salaried individual with home loan and senior citizen parents.
HRA Exemption – How to Calculate for FY 2025-26
HRA (House Rent Allowance) is exempt under Section 10(13A) subject to the least of these three conditions.
Actual HRA Received
The HRA component as mentioned in your salary slip / Form 16
Actual Rent Paid minus 10% of Basic + DA
Rent paid – 10% × (Basic Salary + DA)
50% / 40% of Basic + DA
50% for metro cities (Delhi, Mumbai, Kolkata, Chennai) | 40% for all other cities
HRA Calculation Example
Given Details
Calculation (Annual)
If your total annual rent paid is above ₹1,00,000 (i.e., over ₹8,333/month), you must provide your landlord’s PAN to your employer and in your ITR. Without this, your employer cannot consider HRA exemption, and the IT Department may disallow it during scrutiny. Collect rent receipts and landlord PAN every year.
Documents Required for Salaried ITR Filing
Collect all these before you sit down to file. Missing documents cause AIS mismatches and notices.
From Your Employer
- Form 16 – Part A (TDS summary) and Part B (salary breakup)
- Form 12BA (perquisite statement, if applicable)
- Monthly salary slips for the full year (April 2025 – March 2026)
- Investment declaration proof submitted to employer
From Income Tax Portal
- Form 26AS – Tax credit / TDS statement
- Annual Information Statement (AIS) – verify all entries
- Taxpayer Information Summary (TIS)
- Pre-validated bank account (for refund credit)
For HRA & House Property
- Rent receipts (monthly) and rental agreement
- Landlord’s PAN (if annual rent > ₹1 lakh)
- Home loan interest certificate from bank (Sec 24b)
- Home loan principal repayment certificate (80C)
- Municipal tax / property tax receipts paid
Investment & Deduction Proofs
- LIC / PPF / NSC / ELSS statements (80C)
- Health insurance premium receipts (80D)
- NPS contribution statement (80CCD(1B))
- Donation receipts with 80G registration number
- Capital gains statement (if any shares / MF sold)
Identity & Bank
- PAN Card (must be linked with Aadhaar)
- Aadhaar Number (for OTP e-verification)
- Bank account number with IFSC (for refund)
- Savings account FD interest certificate (Form 16A from bank)
If You Changed Jobs
- Form 16 from each employer separately
- Form 12B submitted to new employer (if shared)
- Salary slips from all employers
- Check Form 26AS – TDS from all employers must be reflected
- Watch out for excess TDS or tax shortfall due to multiple employers
How to File ITR-1 Online – Step-by-Step for Salaried
Complete these steps on the official incometax.gov.in portal.
Login to Portal
Login at incometax.gov.in using PAN as User ID. Complete PAN-Aadhaar linking if pending.
Download AIS & 26AS
Verify salary, TDS, interest, and dividend entries. Raise feedback for any incorrect entries.
Choose ITR-1 or ITR-2
Select the correct form based on income type. Portal will show pre-filled data from Form 16.
Verify & Edit Salary
Cross-check pre-filled salary with Form 16 Part B. Add missing allowances, HRA, and perquisites.
Enter Deductions
Add 80C, 80D, HRA, home loan interest and other deductions if using Old Regime.
Submit & e-Verify
Pay any tax due, submit return, and e-verify within 30 days via Aadhaar OTP or Net Banking.
Multiple Employer Scenario: If you changed jobs during FY 2025-26, combine salary from all employers and check if total TDS deducted equals your actual tax liability. A difference means you need to pay Self-Assessment Tax (Challan 280) before filing.
Old vs New Regime – Which Saves More Tax for Salaried?
Budget 2026 made the New Regime more attractive. But the Old Regime may still be better if you have a home loan and make significant investments.
| Feature | Old Regime | New Regime |
|---|---|---|
| Basic Exemption Limit | ₹2,50,000 | ₹4,00,000 (Budget 2026) |
| Standard Deduction | ₹50,000 | ₹75,000 |
| NIL Tax Rebate (87A) | Up to ₹5 lakh income | Up to ₹12 lakh income |
| 80C Deduction | ✅ ₹1,50,000 | ❌ Not available |
| HRA Exemption | ✅ Available | ❌ Not available |
| Home Loan Interest (Sec 24) | ✅ Up to ₹2 lakh | ❌ Not available |
| 80D Health Insurance | ✅ Available | ❌ Not available |
| Employer NPS (80CCD(2)) | ✅ Available | ✅ Available |
| Switch Between Regimes | Salaried employees can switch every year at the time of ITR filing | |
If your total deductions (80C + 80D + HRA + Home Loan Interest) exceed ₹3.75 lakh, the Old Regime likely saves more tax. Below that threshold, the New Regime is generally better. Use our free calculator to compare both exactly for your income.
Common Mistakes Salaried Employees Make While Filing ITR
These errors are the most common reasons for income tax notices, demand notices, and refund delays.
Not Reporting Interest Income
FD interest, savings bank interest, post office interest – all appear in AIS. Not reporting them leads to automated 143(1)(a) notice. Report all interest and claim 80TTA (₹10,000 exemption on savings interest) in the Old Regime.
Filing Wrong ITR Form
Filing ITR-1 when you have capital gains from mutual fund redemption, sold shares, or are a company director will result in a defective return notice (Sec 139(9)) asking you to refile with the correct form.
Not Clubbing Spouse / Minor Income
Income of a minor child and income from assets transferred to spouse without adequate consideration must be clubbed with your income under Sections 64(1A) and 64(1). These appear in AIS and missing them triggers notices.
Blindly Accepting Pre-Filled Data
The IT portal auto-fills data from AIS, TIS, and Form 26AS but errors do occur – TDS mismatch, extra income, wrong PAN mapping. Always verify pre-filled data with your actual Form 16 before submitting.
Missing Dividend Income
Dividends from Indian companies are fully taxable from FY 2020-21 onwards. TDS at 10% is deducted if dividends exceed ₹5,000. The amount appears in AIS. Not reporting it leads to mismatch notices and interest under 234A.
Not Verifying the Return
Filing ITR without e-verification within 30 days means it is treated as not filed. E-verify using Aadhaar OTP, net banking EVC, or send signed ITR-V to CPC Bengaluru within the deadline. Without verification your ITR is invalid.
FAQs – ITR Filing for Salaried Employees
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