In a major relief for taxpayers, the Union Budget 2025 has revamped the new tax regime, exempting individuals earning up to Rs 12 lakh annually from income tax. Additionally, salaried taxpayers will benefit from a Rs 75,000 standard deduction, effectively raising the tax-free threshold to Rs 12.75 lakh. The revised tax structure also introduces a 25% tax slab for incomes between Rs 20 lakh and Rs 24 lakh.
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Revised Tax Slabs Under the New Regime
- Income up to Rs 4 lakh: Nil
- Rs 4 lakh – Rs 8 lakh: 5%
- Rs 8 lakh – Rs 12 lakh: 10%
- Rs 12 lakh – Rs 16 lakh: 15%
- Rs 16 lakh – Rs 20 lakh: 20%
- Rs 20 lakh – Rs 24 lakh: 25%
- Above Rs 24 lakh: 30%
Finance Minister Nirmala Sitharaman stated that these revisions aim to boost disposable income, stimulate consumption, and simplify taxation. However, tax experts believe that individuals who rely on tax-saving investments may still find the old tax regime more beneficial.
Old Tax Regime vs. New Tax Regime
While the new regime offers lower tax rates, the old tax regime allows deductions under Section 80C, providing up to Rs 1.5 lakh in exemptions for investments in PPF, ELSS, and LIC premiums.
Tax Slabs Under the Old Regime
- Income up to Rs 2.5 lakh: Nil
- Rs 2.5 lakh – Rs 5 lakh: 5%
- Rs 5 lakh – Rs 10 lakh: 20%
- Above Rs 10 lakh: 30%
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Despite eliminating most exemptions, the government has retained:
- Section 24(b): Deduction for interest on housing loans (for rental properties).
- Section 80CCD(2): Deduction for employer contributions to the National Pension Scheme (NPS), up to 14% of salary.
Which Tax Regime Should You Choose?
For individuals who do not invest heavily in tax-saving instruments, the new tax regime could be more beneficial due to lower tax rates and a higher exemption limit.
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