ITR Filing for Salaried Clients: A CA's Complete Guide for AY 2025-26
Salaried taxpayers form the largest client base for most CA firms. This guide covers the right ITR form selection, Form 16 reconciliation, common deductions, and how to handle complex cases like multiple employers or rental income.
Why Salaried ITR Filing Is More Complex Than It Looks
Many CAs assume salaried returns are straightforward — salary income, Form 16, plug and file. But in practice, salaried clients bring a host of complexities: multiple employers in the same year, stock options (ESOPs), rental income, capital gains from mutual funds, home loan deductions, and the new vs old tax regime choice. Getting it right the first time prevents defective return notices and revision headaches.
Which ITR Form for a Salaried Person?
| Form | Use When |
|---|---|
| ITR-1 (Sahaj) | Salary + one house property + other income (interest) — total income up to ₹50 lakh. No capital gains, no foreign income. |
| ITR-2 | Salary + capital gains (mutual funds, shares, property) + more than one house property + foreign income/assets + income above ₹50 lakh. |
| ITR-3 | Salary + business/professional income (consultancy, freelancing, etc.). |
Old Regime vs New Regime — How to Advise Your Client
For AY 2025-26, the new tax regime is the default. Clients must actively opt for the old regime. As a CA, you must run a comparative calculation for each client:
New Regime (Default) — Tax Slabs
- Up to ₹3 lakh — Nil
- ₹3 lakh – ₹7 lakh — 5%
- ₹7 lakh – ₹10 lakh — 10%
- ₹10 lakh – ₹12 lakh — 15%
- ₹12 lakh – ₹15 lakh — 20%
- Above ₹15 lakh — 30%
Rebate u/s 87A: Full tax rebate if total income does not exceed ₹7 lakh (new regime). For old regime, rebate applies if income ≤ ₹5 lakh.
When to Recommend Old Regime
The old regime becomes beneficial when the client has significant deductions — typically when 80C + 80D + HRA + home loan interest sum exceeds ₹3.75 lakh (for incomes between ₹15-50 lakh). Use this quick rule: if total Chapter VI-A + HRA + home loan deductions exceed 30% of gross salary, old regime likely wins.
Form 16 Reconciliation — Step by Step
- Part A of Form 16: Contains TDS deducted and deposited. Cross-check this with Form 26AS and AIS. Any mismatch means the employer may not have deposited TDS on time — the credit may not reflect in your client's 26AS, even though TDS was deducted. This is a compliance issue on the employer's side that you must flag.
- Part B of Form 16: Contains the salary breakup — basic, HRA, special allowance, perquisites, deductions allowed by employer. Verify:
- HRA calculation: actual HRA received vs 40%/50% of basic (non-metro/metro) vs actual rent paid minus 10% of basic — whichever is least is the exemption
- Leave travel allowance (LTA): exempt for actual travel expenses within India (economy class airfare / AC train fare), for two journeys in a block of four calendar years
- Perquisites like company car, accommodation, ESOP — these should appear in Form 16 Part B
- Multiple employers: If a client changed jobs, collect Form 16 from both employers. The second employer should have been informed of income from previous employment (as required by Section 192). If not, TDS may have been computed on lower income, resulting in tax shortfall. You must compute the correct tax on aggregate income.
Key Deductions — Old Regime
- Section 80C (₹1.5 lakh): EPF, PPF, ELSS, NSC, life insurance premium, home loan principal, children's tuition fees, 5-year FD
- Section 80D: ₹25,000 for self/spouse/children health insurance; ₹50,000 if any member is a senior citizen; additional ₹25,000/₹50,000 for parents
- Section 24(b): ₹2 lakh on home loan interest for self-occupied property; no limit for let-out property (but loss can only be set off against other heads up to ₹2 lakh, balance carried forward for 8 years)
- Section 80TTA/80TTB: ₹10,000 deduction on savings account interest (non-senior citizens); ₹50,000 for senior citizens on all interest income
- Section 80EEA: Additional ₹1.5 lakh on home loan interest for first-time buyers (loan sanctioned by March 31, 2022 — check if applicable)
- Section 80CCD(1B): Additional ₹50,000 for NPS contribution over and above 80C limit
Capital Gains in ITR-2 — Key Points
If your client has sold equity mutual funds, shares, or property, you need to report capital gains:
- LTCG on listed equity (Section 112A): Above ₹1 lakh — taxed at 12.5% (FY 2024-25 onwards, budget change from 10%). No indexation.
- STCG on listed equity (Section 111A): 20% (changed from 15% in FY 2024-25 budget).
- LTCG on property (Section 112): 12.5% without indexation (new rule from July 2024). Or 20% with indexation for properties purchased before July 23, 2024 — taxpayer can choose the beneficial option.
- STCG on property: Taxed at slab rate.
Common Notices After Salaried ITR Filing
- Defective return notice (139(9)): Filed ITR-1 when ITR-2 was required (had capital gains). File a revised return in the correct form within 15 days.
- Intimation u/s 143(1): Auto-processed mismatch. Most commonly — TDS credit claimed doesn't match 26AS, or deductions claimed differ from employer-reported figures. Respond with supporting documents through the Income Tax e-Filing portal.
- Scrutiny notice u/s 143(2): Triggered by high-value transactions, large deductions relative to income, or cash deposits. Respond with full documentation within the stipulated time.
