What is New Tax Regime: The new tax regime to be implemented from April 1 will benefit the salaried people the most. Under this, you will not have to pay any kind of tax on income up to Rs 12 lakh.
Income Tax Regime Selection: March 31 is coming and with this the financial year 2024-25 will be completed. The new financial year 2025-26 will start from April 1. After this, taxpayers will have to select one of the old and new tax regimes. However, both the regimes are equally good with their respective benefits. But which regime will be best for you also depends on your income, deduction and financial goals.
Old Tax Regime
The old tax regime was in place before the new tax regime was introduced. The old regime offers more than 70% exemptions and deductions. This reduces one’s taxable income and thus reduces the tax liability. The most preferred deduction is under section 80C, which allows a deduction of up to Rs 1.5 lakh from taxable income. Some of the major deductions under the old tax regime include employee’s contribution to the Employees’ Provident Fund (EPF), exemption on Leave Travel Allowance (LTA), exemption on House Rent Allowance (HRA), employer’s contribution to NPS under section 80CCD (2) and health insurance premium deduction under section 80D.
Income up to Rs 12 lakh tax free
Changes in tax slabs under the new tax regime were announced in the Union Budget 2025. These changes will be implemented from April 1, 2025. Under this, those with income up to Rs 12 lakh do not need to pay any kind of tax. With a standard deduction of Rs 75,000, this deduction limit increases to Rs 12.75 lakh. The new regime has the option of limited deduction and it provides concessional tax slabs. Under the new regime, employer’s contribution to NPS, standard deduction and gratuity received on retirement are tax free.
Old or new, which is better?
According to Subramanyam Brahmajosyula, Chief Product and Marketing Officer, SBI General Insurance, the new financial year is coming. In such a situation, taxpayers are preparing to file ITR in 2025. To select between new and old regime, it is necessary to carefully consider income, deductions and financial goals. He said, in the new regime, less tax has to be paid with less deduction. The old regime allows you to claim exemptions and deductions. This makes it beneficial for people who have deductions to show in the relevant section.
In simple words, you can also say that the old tax regime promotes saving through benefits. On the other hand, the new regime is simpler and has less paperwork. Also, the possibility of tax fraud is reduced. However, the selection of your tax regime depends on the financial situation of any person.
(Disclaimer: Businessleague does not give any kind of tax related suggestion to the readers. Decide the regime selection according to your income and the advice of a financial advisor.)
