Old vs New Tax Regime: Another major news is for Income Taxpayer’s. Today marks a positive development for one crore individuals across the nation, as starting April 1, 2025, their salaries (Salary growth in New Tax Year 2025-26) are set to rise. To take advantage of this benefit, you only need to make a small adjustment. With the onset of the new financial year, this change will not only ease your financial burden but could also help elevate your financial aspirations. Let’s explore what this opportunity entails and how you can seize it.
The Finance Minister’s Announcement
Finance Minister Nirmala Sitharaman revealed in the budget that from April 1, 2025, individuals earning up to Rs 12 lakh will not be subject to income tax under the new tax regime. Additionally, a standard deduction of Rs 75,000 will be available, meaning those with a salary of up to Rs 12.75 lakh will be tax-exempt. Previously, this threshold was set at Rs 7 lakh, above which taxes were applicable. Consequently, individuals earning Rs 10 lakh, who paid taxes last year, will now retain all their earnings this year.
Old Regime vs New Regime
In the Old vs New Tax Regime, salaried individuals have the option to choose between the two systems each year. The new regime is now the default option, but the old regime remains available. Under the old regime, income up to Rs 2.5 lakh is tax-free, followed by tax slabs of 5%, 20%, and 30%. It allows for deductions such as 80C (up to 1.5 lakh), 80D (25,000-50,000), and home loan interest (up to 2 lakh). If you benefit from HRA, home loans, or specific investments, the old regime might be more advantageous, especially if your income exceeds Rs 15 lakh.
When can you opt for the new tax regime?
Starting from April 1, 2025, which marks the beginning of the financial year 2025-26, individuals earning up to Rs 12.75 lakh will be exempt from paying any taxes. Income up to Rs 12 lakh is tax-free, and with an additional deduction of Rs 75,000, the total income threshold for tax exemption reaches Rs 12.75 lakh. It’s important to note that this exemption applies solely to salary income, while capital gains will still be subject to taxation.
Is the new regime advantageous?
The Finance Minister has indicated that around 1 crore individuals will benefit from tax exemption. The Chairman of the CBDT has mentioned that currently, 75% of taxpayers are already utilizing the new regime, and this number could rise to between 90% and 97%.