C. Deduction Components | 4. Income Tax
Income Tax is a direct tax levied by the Central Government on income earned by individuals, including salaried employees. It is calculated based on the tax regime selected by the employee.
🧾 Tax Regimes:
- ✅ Old Tax Regime: Allows exemptions and deductions (HRA, 80C, 80D, etc.)
- ✅ New Tax Regime: Lower tax slabs but no major deductions/exemptions
- Final tax liability depends on salary structure, chosen regime, and investment declarations
📌 Key Points for Employers:
- Mentioning income tax in offer/increment letters is not mandatory
- Tax varies based on:
- Chosen tax regime (Old or New)
- Declared investments, deductions, and additional income
- Income tax is typically auto-calculated and deducted monthly via payroll software
✅ Summary:
- Levied by the Central Government
- Old vs. New Tax Regime – Employee chooses what suits best
- Not required to mention in HR documents like offer/increment letters
- Tax varies for each individual based on declarations and income profile
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