Taxes, Scams and Reading the News
How income tax works for a first earner, how to spot a scam in seconds, and four questions that decode any money headline.
₹12 lakh of income, zero income tax
In the Union Budget of February 2025, the government raised the income up to which individuals pay no income tax, under the new regime, to ₹12 lakh a year. For salaried employees, who also get a ₹75,000 standard deduction, the effective limit became ₹12.75 lakh. The Budget of February 2026 left those slabs unchanged. And from April 1, 2026, a brand new law, the Income Tax Act, 2025, replaced the one India had used since 1961, along with its confusing “assessment year.”
For a first earner, that means something simple: most entry-level salaries in India pay no income tax at all. But everyone pays tax on almost everything they buy, through GST, and everyone with a bank account and a phone is a target for scams designed to take money they have already paid tax on. This final unit covers the money that leaves your hands through the government, the money that can leave through fraud, and the habit that protects against both: reading the news carefully.
New-regime income tax calculator, 2026-27
The rebate cancels the tax completely: taxable income is ₹12 lakh or less.
Enter a yearly salary. The calculator applies the standard deduction, the slabs, the ₹12 lakh rebate and 4% cess.
Direct and Indirect Taxes
Governments raise money in two broad ways. A direct tax is paid by the person who earns the income: income tax on salaries and business profits, and corporate tax on company profits. An indirect tax is charged on spending and collected by sellers: GST on most goods and services, customs duty on imports, and excise on petrol and diesel.
The difference matters for fairness. Income tax rises with income, so richer people pay a larger share. GST is the same rate for everyone who buys the same thing, so it takes a larger share of a poorer family’s income. Since September 22, 2025, GST has had two main rates, 5% and 18%, with a 40% rate for luxury and “sin” goods, and many essentials taxed at zero. A student with no income still pays GST on a phone recharge, a pizza and a pair of shoes.
How Income Tax Is Calculated
Income tax is charged in slabs: each slice of income is taxed at its own rate, so earning more never reduces your take-home pay. Under the new regime, the default since 2023, the slabs for 2026-27 are as follows.
Salaried people first subtract a standard deduction of ₹75,000 from their salary.
If taxable income is ₹12 lakh or less, a rebate cancels the tax completely.
Just above ₹12 lakh, marginal relief ensures the tax never exceeds the income above ₹12 lakh.
A 4% health and education cess is added to whatever tax remains.
The old regime still exists for those who choose it. It has higher rates but allows deductions for things like PPF, ELSS, life insurance premiums, home loan interest and rent. For most first earners without big deductions, the new regime is simpler and cheaper.
TDS, Filing and the New Tax Year
Employers estimate your yearly tax and deduct it from each month’s salary as TDS, tax deducted at source. Banks deduct TDS on interest above a threshold. You then file an income tax return online after the year ends, declaring all income and claiming credit for the TDS already paid. If too much was deducted, you get a refund; if too little, you pay the balance.
Under the Income Tax Act, 2025, which took effect on April 1, 2026, the old pair of terms, “previous year” and “assessment year,” has been replaced by a single tax year running from April to March. Income earned in tax year 2026-27 is simply reported for tax year 2026-27. Rates and slabs did not change with the new law; the language and structure did.
How Scams Work
Almost every financial scam follows the same script, whatever the details. It catches attention with a promise or a threat, creates urgency so you do not stop to think, gets you to pay or share a code, and then disappears.
Fake KYC calls: “Update your KYC or your account will be frozen.” Banks never ask for OTPs, PINs or app installs by phone.
“Digital arrest”: callers posing as police or CBI on video demand money to avoid arrest. There is no such thing as a digital arrest in Indian law.
Fake trading apps and WhatsApp “tips” groups: screenshots of big profits, an app that shows gains, and withdrawals that never work.
Task and job scams: small payments for liking videos, then a request for a large “deposit” to unlock earnings.
A Ponzi scheme pays early investors with money from new ones until new money dries up and it collapses.
Three Rules That Catch Most Scams
You do not need to recognise every scheme. Three questions catch nearly all of them. First, is a high return guaranteed? Real investments never guarantee high returns without risk; anything promising 5% a month is promising around 80% a year. Second, am I being rushed? Pressure to decide today exists to stop you checking. Third, can I verify who this is? Any genuine investment adviser, broker or fund is registered with SEBI, and any genuine lender with the RBI, and both regulators publish searchable lists.
If any answer is wrong, walk away. If money has already gone, call 1930 immediately and report it on cybercrime.gov.in. Reporting within the first few hours gives banks the best chance of freezing the money before it is moved.
Deep Dive: Reading a Money Headline
Most people meet economics through headlines, and headlines compress. Four questions turn a headline back into information.
Compared to what? Year-on-year numbers can be distorted by an unusual year before. That is the base effect.
Real or nominal? Growth in rupees includes inflation. Strip it out before celebrating.
Whose number? An average can hide very different experiences: rural and urban, rich and poor, large firms and small.
What does it change for me? Often less than the headline suggests, sometimes more.
Take a real one: “Retail inflation jumps to 5.54% in September.” Compared to what? September 2025, when inflation was 1.54%, so part of the jump is a base effect. Whose number? Rural inflation was 6.08% and urban 4.88%, so villages felt it more. Real or nominal? This is already a price change, but it turns a 6.5% FD into a real return of about 1%. What does it change for me? It helps explain why the RBI raised rates a week earlier, and why a floating home loan EMI is about to rise.
Case Study: The WhatsApp Group That Was Mostly Fraudsters
A pattern reported across India in 2025 and 2026 goes like this. Someone is added to a WhatsApp group about “stock tips.” Members post screenshots of daily profits and thank the “mentor.” The newcomer is invited to a trading app, deposits ₹10,000, and sees it grow to ₹14,000 in two days. When they try to withdraw, they are told to pay a “tax” or “unlock fee” first. Many pay. The app is fake, the profits were never real, and most of the group’s enthusiastic members were part of the operation.
Every one of the three rules would have caught it: guaranteed quick profits, pressure from the group, and an app and adviser not registered with SEBI. The skill this course has been building, asking where a number comes from and what mechanism could produce it, is the same skill that protects you here. A return with no believable mechanism behind it is not an opportunity. It is a warning.
Check yourself
0/12 answered1. Which is an indirect tax?
2. Why is GST considered harder on poorer households?
3. Under the new regime for 2026-27, a salaried person pays no income tax up to about:
4. Why does earning more never reduce take-home pay under slab taxation?
5. From Fig 10.2, about how much tax does a salaried person earning ₹15 lakh pay?
6. What is TDS?
7. What replaced “assessment year” from April 1, 2026?
8. Which is the clearest warning sign of a scam?
9. A caller on video says you are under “digital arrest” and must pay. What is true?
10. If you have lost money to a scam, the first step is to:
11. A headline says GDP grew 10% in rupees while inflation was 5%. Which question exposes the real story?
12. Why was part of September 2026’s jump to 5.54% a base effect?
Choose any economic headline from this week, on this site or in a newspaper. Answer the four questions from the Deep Dive in writing: compared to what, real or nominal, whose number, and what it changes for you or your family. Then write 150 to 200 words explaining the story to a younger sibling or friend without using any jargon you have not first explained.