Tax basics when you have a salary and a side income

Your employer deducts tax from salary before you see it. That deduction does not know about the logo you designed for a friend, the tutoring, or the gains in a mutual fund. Those are still your income. This is the part people miss in the first year they earn from two places.

If you are still deciding whether to take the extra work, read side income on a first salary. This page is the tax once you do.

This is not a filing guide. Rules below were checked against public reporting in October 2026. Confirm them on the official income-tax site before you file. The law itself changed: the Income-tax Act, 2025 replaced the 1961 Act from 1 April 2026, and section numbers moved. The rates people pay did not, according to reporting after Budget 2026.

The regime you are probably in

The new regime is the default. You are in it unless you opt out. For a salaried person the practical picture, as reported for tax year 2026-27, is:

• Slabs start at nil up to ₹4 lakh and rise to 30 percent above ₹24 lakh
• A standard deduction of ₹75,000 on salary
• A rebate that brings tax to zero when total income is up to ₹12 lakh, which is why a salary around ₹12.75 lakh can still show no tax after the standard deduction

The old deductions people still call 80C and 80D, and the exemption for house rent, are not available in the new regime. They remain in the old regime, which a salaried person can still choose when filing. Do not buy an insurance policy or an ELSS fund only because someone said it saves tax, until you know the regime you will file under. If you are in the new regime, that purchase did not save the tax.

Side income is not “already handled by TDS”

If you invoice a client, that receipt is income even when the salary TDS looks tidy. Keep a note of invoices, the date you were paid, and expenses that belong to the work, such as a domain or software you would not have bought otherwise. A spreadsheet is enough in year one.

If the side income is large, advance tax can apply during the year rather than only at filing time. The threshold and the dates change. Look them up for the year you are in if the side income is more than pocket money. “I will sort it out in July” is how interest gets added.

Investing gains are a third bucket

Salary is taxed as salary. A freelance receipt is taxed as that income. A gain when you sell equity-fund units is a capital gain, with its own rates. As of October 2026 those rates for equity-oriented funds are 12.5 percent on long-term gains above ₹1.25 lakh in a year, and 20 percent on short-term gains. Holding more than 12 months is the long-term line. Your salary slab does not replace those rates.

The SIP calculator ignores this on purpose. A tool that pretended to know your tax would look more precise than it is.

What to do in the first year

Keep the payslips. Keep the side-income records. Do not assume the employer’s deduction closed the year. If both numbers are small, the return may still be simple, and it is still your return. If you are unsure, a chartered accountant for one filing is cheaper than a guess.