All 5 Heads of Income — Tax Computation for Delhi Residents FY 2025-26
Indian income tax law classifies all income into five heads. For Delhi's professionals — primarily employed in Government, IT Services, Media — salary income dominates, but many also earn from house property (rental income from investment flats), capital gains (equity or real estate), and other sources (FD interest at 7%). Understanding all five heads is essential for accurate tax planning at Delhi's cost levels.
Head 1: Income from Salary — Delhi Structure
The typical Rs 10.5L CTC package at Delhi employers like Government of India and Infosys breaks down as:
- Basic salary (40% of CTC): Rs 4,20,000/year — forms the base for HRA, gratuity, and PF calculations.
- HRA (50% of basic): Rs 2,10,000/year —Delhi is classified as a metro city for HRA purposes, meaning the HRA exemption cap is 50% of basic salary. With a rent of Rs 28,000/month in Delhi, the exempt HRA is the minimum of: actual HRA (Rs 2,10,000), 50% of basic (Rs 2,10,000), and rent paid minus 10% of basic (Rs 2,94,000). Exempt HRA: Rs 2,10,000.
- Special allowance (35% of CTC): Rs 3,67,500/year — fully taxable, no exemption available under the New regime or Old regime.
- Standard deduction: Old regime Rs 50,000, New regime Rs 75,000 (raised from Rs 50,000 in Budget 2024 — applicable from FY 2024-25 onwards).
Delhi's Professional Tax of Rs 0/year (Rs 0/month) is also deductible from gross salary before computing taxable income — a small but legitimate deduction under both regimes. Delhi residents pay zero professional tax — an advantage over cities like Mumbai (Rs 2,500/yr) or Bengaluru (Rs 2,400/yr).
Old Regime vs New Regime: Delhi Comparison at Rs 10.5L
Here is the complete tax computation comparison for a Delhi professional earning Rs 10.5L CTC, paying Rs 28,000/month rent, and claiming full deductions:
Old Regime (with all deductions):
- Gross salary (after HRA exemption Rs 2,10,000): Rs 8,40,000
- Less standard deduction (Rs 50,000): Rs 7,90,000
- Less Section 80C (EPF + ELSS + PPF): − Rs 1,50,000
- Less Section 80D (self + parents health insurance): − Rs 50,000
- Less Section 24(b) home loan interest: − Rs 2,00,000
- Taxable income: Rs 3,90,000
- Income tax at old slab rates: Rs 7,000
- Add 4% cess: Total tax: Rs 0
- Effective tax rate: 0.0%
- Monthly take-home (after tax + PT): Rs 87,500
New Regime (FY 2025-26 slabs):
- Gross salary: Rs 10,50,000
- Less standard deduction (Rs 75,000): Rs 9,75,000
- No other deductions — no HRA, no 80C, no 80D, no 24(b)
- Taxable income: Rs 9,75,000
- Income tax at new slab rates: Rs 37,500 → Rs 0 after 87A rebate
- Add 4% cess: Total tax: Rs 0
- Effective tax rate: 0.0%
- Monthly take-home (after tax + PT): Rs 87,500
Verdict for Delhi at Rs 10.5L: The New regime saves Rs 0 annually. However, this changes if you have a home loan — Section 24(b) deduction of Rs 2L significantly benefits the Old regime. Without a home loan, at Rs 10.5L, the Old regime tax without 24(b) is Rs 36,920, making the decision in favour of New regime.
Head 2: Income from House Property in Delhi
Delhi's property market (South Delhi premium zones (Vasant Vihar, Golf Links) held above Rs 35,000/sqft in FY2025. Dwarka Expressway corridor saw 20%+ appreciation post-completion. Rohini and Dwarka remain affordable at Rs 8,000–12,000/sqft.) creates meaningful house property income for investment property owners. A let-out flat earning Rs 22,400/month (Rs 2.7L/year) in Dwarka computes as:
- Gross Annual Value (GAV): Rs 2,68,800
- Less municipal taxes paid: − Rs 13,440
- Net Annual Value (NAV): Rs 2,55,360
- Less 30% standard deduction on NAV (Section 24a): − Rs 76,608
- Less home loan interest on the let-out property: − Rs 6,93,600
- House property income: Rs 5,14,848 (LOSS)
The house property shows a loss of Rs 5,14,848 due to the large home loan interest deduction (unlimited for let-out properties, unlike the Rs 2L cap for self-occupied). Under the Old regime, up to Rs 2,00,000 of this loss can be set off against salary income in the same year, reducing your taxable income. Note: House property income/loss is NOT allowed in the New regime — you forgo this set-off if choosing New regime.
Head 3: Capital Gains from Delhi Real Estate and Equity
Capital gains from selling a Delhi property at Rs 12,000/sq.ft. are taxed separately — not at slab rate:
- LTCG on property (held >24 months): Sale of a 900 sq.ft. flat (current value Rs 1,08,00,000) originally bought for Rs 75,60,000 generates LTCG of Rs 27,10,800. Tax at 12.5% (Finance Act 2024, no indexation): Rs 3,52,404.
- LTCG on equity (held >12 months): Up to Rs 1,25,000 in equity LTCG per year is exempt under Section 112A. Beyond that, 12.5% tax applies. The exemption limit was raised from Rs 1L to Rs 1.25L in Budget 2024.
- STCG on equity (held <12 months): Taxed at 20% flat (raised from 15% in Budget 2024). Rs 50,000 STCG → Rs 10,400 tax.
- Stamp duty and registration on purchase: Delhi charges6% stamp duty + 1% registration (total 7.0%) — part of acquisition cost included in cost of acquisition for LTCG computation.
Capital gains are taxed as a separate layer — added to your total income for STCG computation, but taxed at special rates for LTCG. They are reported in Schedule CG of your ITR. Capital gains do NOT flow through Old vs New regime — both regimes apply the same capital gains rates.
Head 4: Business or Profession Income for Delhi Freelancers
Delhi's Government sector supports many independent consultants earning professional income. Freelancers can use:
- Presumptive taxation (Section 44ADA): If professional income is ≤ Rs 75L/year (raised in Budget 2023), you can declare 50% as profit — no books of accounts required. Tax is paid on 50% of gross receipts. For a Delhiconsultant earning Rs 40L, taxable income = Rs 20L under 44ADA.
- Actual income method: Deduct actual business expenses (internet, software, home office, travel, professional fees) from gross receipts. Requires detailed books but can result in lower taxable income if expenses are high.
- TDS deducted by clients: Clients deduct 10% TDS (Section 194J) on professional fees. Freelancers with income in Delhi's Governmentsector must pay advance tax for the tax beyond 10% TDS.
Head 5: Income from Other Sources — FD Interest in Delhi
Fixed deposit interest at 7% is one of the most common "other sources" incomes for Delhi professionals. A Rs 15L FD at 7%:
- Annual interest income: Rs 1,05,000
- TDS deducted by bank (10% if interest > Rs 40,000/year): Rs 10,500
- Additional tax at your slab rate: if marginal rate is 20%, tax on FD interest = Rs 21,000 → additional Rs 10,500 beyond TDS
- Section 80TTA: Savings account interest up to Rs 10,000/year is exempt (under Old regime only). The FD interest does NOT qualify for 80TTA exemption. Under New regime, even the Rs 10,000 savings interest exemption is unavailable.
FD interest must be declared every year as it accrues — not just when it matures. For a 3-year FD opened in Delhi, you must report 1/3 of total interest each year in your ITR (accrual basis). Bank TDS is deducted annually and shows in Form 26AS.
Unique Financial Context: Delhi
Delhi is a professional-tax-free Union Territory — residents pay Rs 0 in professional tax, a saving of up to Rs 2,500/year vs Mumbai or Bengaluru. Delhi NCR accounts for approximately 20% of India's total income tax collection despite having 5% of the population.
Delhi's government employees drive PPF and NPS adoption — the city leads India in small savings scheme investments, with Dwarka and Rohini seeing rapid real estate appreciation.
Multi-Head Total Tax: A Delhi Scenario
A Delhi professional with salary (Rs 10.5L) + let-out property income + FD interest (Rs 1,05,000) + equity STCG (Rs 50,000):
- New regime salary tax: Rs 0
- House property income: Rs 0 (New regime — no loss set-off)
- FD interest (added to salary for slab): Rs 1,05,000 additional income
- LTCG on property (if sold): Rs 3,52,404
- Equity STCG tax: Rs 10,400
- Combined tax liability: Rs 4.13L — substantially more than the salary-only estimate. Multi-head income significantly increases the complexity and the total tax outflow in Delhi.
Disclaimer: Tax computations above are illustrative for FY 2025-26 (AY 2026-27) for a resident individual taxpayer using Finance Act 2025 provisions. Actual liability depends on your complete income profile, specific deduction claims, TDS deducted, and applicable surcharge (if income exceeds Rs 50L). Capital gains rates, rebate thresholds, and slab rates are as per Finance Act 2024 and 2025. Consult a Chartered Accountant in Delhi for precise tax planning across all five heads.