New Tax Rules: Big news for common people of India. The new financial year will commence on April 1, 2025, bringing with it significant changes to income tax regulations. In the 2024 Budget, the central government introduced several key measures aimed at enhancing the appeal of the new income tax regime, which are now being put into effect. These modifications will primarily impact the working class, influencing both their monthly earnings and tax obligations.
Under the new regime, individuals earning up to Rs 12 lakh annually will not be subject to income tax.
Finance Minister Nirmala Sitharaman emphasized in the 2024 Budget that there will be no tax on annual income up to Rs 12 lakh under the new tax framework. However, this exemption applies solely to the new regime.
As a result, taxpayers will need to assess whether the new system is advantageous for them or if they would benefit more from remaining in the old regime.
The government is prioritizing the new tax regime and is actively working to enhance its attractiveness.
In recent years, the central government has consistently sought to make the new regime more beneficial and user-friendly. Initiatives such as reforms in tax brackets and reductions in rates have been implemented to support this goal.
With the recent change allowing income up to Rs 12 lakh to be tax-free, this new system is particularly advantageous for taxpayers who don’t invest in tax-saving options.
The old tax regime still offers deduction benefits
While the new tax regime features lower tax rates, it lacks many deductions. Benefits like those from section 80C, home loan interest deductions, and health insurance premium relief under 80D are exclusive to the old tax regime. Therefore, for individuals with home loans or those claiming HRA, the old regime might still be the more favorable choice.
Choosing between the new and old regimes: What’s best for you?
If you don’t engage in tax-saving investments and prefer straightforward tax calculations, the new tax regime could be a better fit. Conversely, if you actively invest to reduce your tax burden, sticking with the old regime is likely the smarter option.
Deciding on the right tax regime hinges on your income, investments, and expenses, so it’s wise to consult your tax advisor before the new financial year kicks off.
Updates on TDS as the new financial year approaches
Starting in the first week of April, companies will reach out to their employees via email or notices to determine which income tax regime they prefer—old or new. Tax deductions (TDS) will be applied to April salaries based on the employee’s choice. Thus, it’s crucial to understand the differences between the two tax structures and identify which one aligns better with your income and investment strategies.