Employees have a certain number of paid leaves in a year which they can avail at their discretion. However, most of the time these leaves remain unused. In such a scenario, the employer allows the employee to carry forward the unused leave to the next year. The employees also have an option to get paid for their unused leaves instead of taking holidays. Such monetary compensation is taxable in the hands of the employee. This article will explain the tax implication on leave encashment received and the exemption that the employee can claim as per the Income Tax Act.

Short-term capital gains (STCG) refer to profits earned from the sale of capital assets held for a short duration. A short term capital gain arises when an asset is transferred within 24 months (for listed equity shares, units of equity oriented mutual funds or units of business trusts).The short term capital gains tax rate is 20% (for listed equity shares and equity mutual funds). For other assets such as gold, silver, house property, or land, the short term capital gains are taxed at the applicable income tax slab rates. What is Short-Term Capital Gains (STCG)?Short-term capital gains or STCG is the capital gains which arises due to the transfer of a short-term capital asset such as equity shares, mutual fund units, gold, silver, property or any such capital asset. Short-term capital assets are those which are held for up to 12 months (for listed equity shares, units of equity oriented mutual funds or units of business trusts) or 24 months in case of other assets. Key Highlights of Short Term Capital Gains (STCG)Short term capital gain arises when capital assets are sold within 12 months (listed equity shares or equity mutual funds) or 24 months (other assets).Short term capital gain on shares is taxed at a flat 20% under Section 111A.Short term capital gains tax on other assets (property, gold, etc.) is charged as per income tax slab rates.No indexation benefit is allowed, and proper reporting is required in ITR under Schedule CG.Short-Term Capital Gains Tax RateThe short-term capital gain tax rate varies depending on the type of capital asset being sold. STCG on equity shares, units of equity oriented mutual funds, or units of business trusts are taxed at a flat fixed rate of 20% under Section 111A.

Short-term capital gains (STCG) on shares is the profit earned from selling listed equity shares and equity oriented funds held for less than 12 months. Under Section 111A of the Income Tax Act, STCG on shares such as listed equity shares, equity-oriented mutual funds, and units of business trusts is taxed at 20%, provided Securities Transaction Tax (STT) is paid on the transaction.Though the Income Tax Act 2025 takes effect from 01st April 2026, the provisions of the 1961 act applies for AY 2026-27, as it pertains to income earned up to 31st March, 2026. Applicability of Section 111ASection 111A applies to short-term capital gains (STCG) arising from the sale of the following:Equity shares of a listed company, bought or sold through a recognised stock exchange with STT paidEquity-oriented mutual funds, traded through a recognised stock exchange with STT paidUnits of a business trustEquity shares, units of equity-oriented mutual funds, or units of business trusts traded on a recognised stock exchange in an IFSC, where the consideration is paid in foreign currency, even if STT is not applicableShort Term Capital Gains Tax Rate on SharesThe short-term capital gains (STCG) tax rate on gains arising due to transfer of listed equity shares, equity oriented mutual funds, and units of business trusts is 20% under Section 111A. These gains are taxed separately and no deductions under Chapter VI-A are allowed against STCG taxable under Section 111A. As per the Finance Act 2025, rebate u/s 87A is not available for STCG under section 111A. Adjustment of STCG Against Basic Exemption LimitShort-term capital gains (STCG) under Section 111A can be adjusted against your basic exemption limit if:You are an Indian resident taxpayer, andYour total income after deductions is below the basic exemption limit.In such cases, the shortfall can be adjusted against your STCG. Only the remaining STCG, after this adjustment, will be taxed at the applicable rate under Section 111A.Note: Non-residents, would not be allowed to claim the exemption limit and shall be required to pay a tax of 20% on such STCG under section 111A.Illustration: Ajay has a taxable salary income of only Rs 1 lakh and a Short-Term Capital Gain on the sale of equity shares of Rs 4 lakh. He also has Rs 50,000 as Income from Other Sources.

Section 80EE of the Income Tax Act allows first-time homebuyers to claim an additional deduction of up to Rs. 50,000 per year on interest paid on home loans sanctioned during FY 2016-17. To qualify, the property value must not exceed Rs. 50 lakh, and the loan amount must not exceed Rs. 35 lakh.

House Rent Allowance (HRA) exemption allows salaried employees to reduce their taxable income on rent paid for accommodation. HRA is a key component of salary and plays an important role in tax planning, as a portion of it can be claimed as tax exempt under specific conditions. By meeting the eligibility criteria, employees can effectively lower their tax liability using HRA exemption.Key HighlightsHRA exemption is only available under the Old Tax Regime.HRA cannot be claimed if the taxpayer lives in a property owned by them.The new Income Tax Rules 2026 have made beneficial changes in HRA rules. What is HRA?House Rent Allowance is an integral part of your salary structure, provided to cover the cost of accomodation. This is especially provided in big cities, where the rental expense is usually high. As per the provisions of the Income Tax Act, you can claim tax benefits using your HRA, on satisfaction of various criteria, prescribed under the act and the rules. Though HRA cannot be claimed if you do not live in rental premises, you can claim HRA and home loan together, on satisfaction of certain conditions.HRA Exemption FormulaHRA exemption amount is the lowest of the following:Actual HRA received from employer, or50% of basic salary (For specified cities) or 40% of basic salary (other cities), orRent paid minus 10% of basic salary In simple terms, the amount that can be claimed u/s 10(13A) as HRA exemption is least of the following: Specified CitiesOther Cities1.

Section 80C of the Income Tax Act allows individuals and HUFs to claim tax deductions of up to Rs. 1.5 lakh per financial year by investing in specified instruments such as PPF, ELSS, life insurance premiums, NSC, EPF, Sukanya Samriddhi Yojana, home loan principal repayment, and tuition fees. What is Section 80C Deductions?Section 80C deduction is a tax benefit that allow taxpayers to reduce their taxable income by up to Rs. 1.5 lakh by investing in specified instruments or making eligible payments. However, deductions under Section 80C are available only under the old tax regime through investments in eligible instruments such as PPF, ELSS, life insurance premiums, NSC, home loan principal repayment, and children’s tuition fees.Section 80C is one of the most widely used tax-saving provisions in India because it covers both investments and essential expenses. By strategically investing in eligible instruments, taxpayers can significantly lower their taxable income while building long-term savings.Section 80C Deductions ListThe following investments and expenses can be claimed as Section 80C Deductions:Life insurance premium paymentsPublic Provident Fund (PPF)Employee Provident Fund (EPF) contributionsEquity Linked Savings Scheme (ELSS) mutual fundsNational Savings Certificate (NSC)Sukanya Samriddhi Yojana (SSY)5 year tax-saving fixed depositsSenior Citizen Savings Scheme (SCSS)Home loan principal repaymentStamp duty and registration charges on property purchaseTuition fees paid for up to two childrenHowever, a combined deduction of up to Rs.

The Public Provident Fund (PPF) is a government-backed savings that provides assures, tax-free returns. For the first quarter of FY 2026-27, the intrest rate continues at 7.1% per annum. backed by sorveign gurantee, offering componding benefits, and enjoying EEE tax status, PPF continues to be a highly secure and reliable option for retirement  planning and tax savings in India. Key Highlights Interest Rate: 7.1% p.a. (FY 2026–27).Investment Limits: Min Rs. 500, Max Rs.

Under the advance tax system, taxpayers pay their tax liability during the financial year itself rather than at the time of filing returns. If the tax on total income after TDS exceeds 10,000 INR in a financial year, advance tax must be paid. Advance Tax Due DateThe due date to pay the 1st installment of advance tax for Q1 FY 2026-27 (Apr-Jun) is June, 2026 Taxpayers should make sure to pay 15% of the total tax liability for the year by June 15, 2026. Taxpayers shall refer to section 403 to 410 of the Income Tax Act, 2025 with effect from 1st April 2026What is Advance Tax?Advance tax is income tax paid through multiple installments before the end of financial year, instead of a lump sum payment after the end of the financial year. The provisions related to advance tax are covered under section 403 to section 410 of the Income tax act, 2025.The taxpayer calculates the estimated total income at the beginning of the financial year, thereby estimating his tax liability. The advance tax payments have to be made in fixed percentage through four installments as per the due dates provided by the income tax department.Who Should pay Advance Tax?As per section 404 of the Income tax act, any assessee whose estimated tax liability for the financial year exceeds Rs 10,000, he or she is required to pay advance tax. If TDS is already deducted against a person, and still Rs 10,000 tax is payable as per estimation, he /she also needs to pay advance tax.This provision applies to all taxpayers, salaried individuals, freelancers, and businesses.Note: Senior citizens - People aged 60 years or more who do not have income from any business or profession during the financial year are exempt from paying advance tax. However, senior citizens (60 years or more) having business or professional income must pay advance tax.Advance Tax Rates and Due Dates For FY 2026-27The due date for advance tax payments for FY 2026-27 is given below:Regular Taxpayers InstalmentDue DateAdvance Tax Payment PercentageFirst InstalmentOn or before 15th June 202615% of tax liabilitySecond InstalmentOn or before 15th September 202645% of tax liability (-) advance tax already paidThird InstalmentOn or before 15th December 202675% of tax liability (-) advance tax already paidFourth InstalmentOn or before 15th March 2027100% of tax liability (-) advance tax already paidNote: No interest u/s 425 shall be levied if you have paid advance tax up to 12% in first instalment and up to 36% in second instalment.Taxpayers Opting Presumptive Taxation For freelancers, small business owners who have opted for Presumptive Taxation Scheme under sections 44AD & 44ADA – the advance tax due dates are as follows.Due DateAdvance Tax Payment PercentageOn or before 15th March 2027100% of advance tax**Taxpayers opting for presumptive taxation also have the option to pay all of their tax dues by 31st March. However, any person engaged in business and opted for the presumptive scheme under for plying hiring and leasing of vehicles, is required to pay advance tax in four instalments on or before the due date as prescribed by the income tax department.Want a CA to calculate and help pay your advance tax dues? Get in touch with ClearTax! Consequences of short-payment or non-payment of Advance TaxInterest on Advance Tax u/s 424As per Section 424, you must pay at least 90% of the total taxes as advance tax or TDS/TCS by 31st March.

Capital gains on property arise when you sell a house, land, or real estate at a profit, and the capital gains tax you pay depends mainly on the holding period of the asset. If the property is held for more than 24 months, the gain is treated as long-term capital gains (LTCG) and taxed at 12.5% without indexation (or 20% with indexation, where applicable). If sold within 24 months, it is classified as short-term capital gains (STCG) and taxed as per your income tax slab rates.You can also reduce your tax liability by claiming exemptions under Sections 54, 54EC, and 54F on long term capital gains, or by setting off capital losses against gains.Classification of Capital Assets The capital gains tax rate depends on whether the asset transferred is a long-term or short-term capital asset which is determined based on the holding period of the asset. For assets such as gold, silver, house property and land, the holding period for classification is 24 months. Capital assets held for more than 24 months are classified long-term capital assets and the gains are taxed as long-term capital gains. Capital assts held for up to 24 months are classified as short-term capital assets and the gains are taxed as short-term capital gains. Type of Capital AssetHolding PeriodTax TreatmentShort-Term Capital AssetUp to 24 monthsGains taxed as Short-Term Capital Gains (STCG)Long-Term Capital AssetMore than 24 monthsGains taxed as Long-Term Capital Gains (LTCG)Long Term Capital Gain Tax Rate on PropertiesAny profit on transfer of capital assets such as house, land, or real estate held for more than 24 months are classified as long-term capital gains. The long-term capital gains tax rate on transfer of properties is 12.5% without indexation.

The ITR filing process can become complex depending on your residential status, the ITR form selected and the nature of your income. You can file your ITR online through the Income Tax Portal, or using the offline utility and then by uploading it on the portal. Simple Steps to file ITR OnlineYou can file your ITR following these simple steps:Step-1: Login to the Income Tax PortalStep-2: Go to ‘File Income Tax Return’Step-3: Select Tax yearStep-4: Select 'Filing Status"Step-5: Select ‘ITR Type’Step-6: Select reason for filing the returnStep-7: Validate the detailsStep-8: E- verify the returnWhat is ITR?ITR stands for Income Tax Return, in which the taxpayer discloses all the details related to his income, assets, taxes, losses, refunds, etc. for the relevant tax year.Documents Required for Filing ITRBefore filing ITR, there are a few documents and details that you need to gather in order to file ITR.PAN and AadhaarBank StatementsForm 16Donation receiptsStock trading statements from the broker platformInsurance policy paid receipts related to life and healthBank account information linked to PANAadhaar registered mobile number for e-verifying the returnInterest certificates from banksHow to File ITR Online?The step-by-step guide on how to file ITR online for FY 2025-26 through the Income Tax Portal:Step 1: Log in to the Income Tax PortalLog in to the income tax portal by entering your PAN and password. Step 2: Select the relevant Tax Year and mode of filing ITRSelect ‘Tax Year’ as ‘AY 2026-27’ if you file for FY 2025-26 and click on Online, then "Continue". (The income tax portal has not been yet enabled to file ITR for FY 2025-26, as the financial year is not over)Step 3: Select your filing statusSelect your applicable filing status i.e., Individual, HUF, or others and click "Continue".Step 4: Select the applicable ITR FormBefore filing your income tax return, it's important to choose the correct ITR form based on your income sources. ITR 1 to ITR 4 are meant for individuals and HUFs.