Old vs New tax regime: Some important changes have been announced for the new tax regime in Budget 2025. Its aim is to provide relief to the middle class people. Finance Minister Nirmala Sitharaman has proposed to increase the basic exemption limit to Rs 4 lakh and increase the income limit for exemption under section 87A of Income Tax to Rs 12 lakh. Along with this, no tax will have to be paid on income up to Rs 12 lakh from salary.
Old vs New tax regime: Some important changes have been announced for the new tax regime in Budget 2025. Its aim is to provide relief to the middle class people. Finance Minister Nirmala Sitharaman has proposed to increase the basic exemption limit to Rs 4 lakh and increase the income limit for exemption under section 87A of Income Tax to Rs 12 lakh.
Along with this, no tax will have to be paid on income up to Rs 12 lakh from salary. In fact, with the standard deduction of Rs 75,000, those earning Rs 12.75 lakh annually will not have to pay any tax. This will provide relief to lakhs of taxpayers whose income is less than Rs 12.75 lakh.
However, what if you earn more than Rs 12.75 lakh? Should you still opt for the new income tax regime or go back to the old income tax regime? Here we tell you the details:
When should you opt for the new tax regime?
The new tax regime is better for these taxpayers:
- Those who have income of Rs 12 lakh or more or are entitled to full exemption under section 87A.
- Are not eligible for any exemption under section 80C (payment towards Provident Fund, PPF, life insurance or housing loan) or 80D (medical insurance premium) of Income Tax.
- Want an easy tax filing process and don’t want to get bogged down in compliance hassles.
If you do not want to claim many exemptions and want to follow a simple tax filing process, then the new tax regime may be beneficial for you.
When should you opt for the old tax regime?
The old tax regime is more suitable for those who claim more exemptions, e.g.
- Section 80C: Contribution towards PF, PPF, life insurance premium, housing loan repayment etc.
- Section 80D: Medical insurance premium for self and family
- House Rent Allowance (HRA) and Leave Travel Allowance (LTA).
- Home loan interest
Under the old tax regime, taxpayers had the option to substantially reduce their taxable income, provided they were eligible to avail maximum benefits of such exemptions.
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