Tax Savings Scheme: In the Union Budget for 2025-26, Finance Minister Nirmala Sitharaman introduced significant modifications in the income tax brackets and rates to support all taxpayers within the New Tax Regime.
Revised tax system
With the revised tax system, no tax will be owed on income up to Rs 12.75 lakh, which includes the standard deduction of Rs 75,000. Following these adjustments in tax brackets and rates, numerous taxpayers are now considering transitioning to the new tax system. Indeed, following the declaration of tax-exempt income up to Rs 12 lakh in Budget 2025, numerous tax filers believe that they can benefit from this alteration when submitting their Income Tax Return (ITR) this year.
Tax returns for the financial year 2024-25
However, this is not the case since taxpayers will submit tax returns for the financial year 2024-25, referred to as Assessment Year (AY) 2025-26, and the tax relief declared by the government pertains to the financial year 2025-26. In other words, this year you will need to adhere to the same traditional tax brackets and deduction guidelines. If your earnings exceed the taxable threshold, you can decrease your tax obligation by utilizing the exemptions and deductions offered in the old tax system. The final date for making an investment in this is March 31, 2025.
The modifications introduced in the Finance Bill 2025 will take effect from the financial year 2025-26, which corresponds to the assessment year 2026-27. In 2026, when you submit your tax return, you will have the option to file it based on these modifications. If you wish to benefit from the previous tax system, you may invest until 31 March 2025 and claim the deduction for it. However, keep in mind that if you choose the new tax regime, you will forfeit these deduction benefits.
Here are 5 well-known and top investment and tax-saving choices under the previous tax system:
According to Section 80C, you are eligible to claim a deduction on investments up to Rs 1.5 lakh.
ELSS (Equity Linked Savings Scheme) is a tax-saving investment connected to the stock market.
Sukanya Samriddhi Yojana (SSY) – This is an excellent investment plan for daughters. Investing in it allows you to reduce your tax liability.
Public Provident Fund (PPF) provides secure and tax-exempt returns.
National Savings Certificate (NSC) – offering assured returns.