The Union Budget 2025 has made the new tax regime even more attractive, with no income tax for individuals earning up to Rs 12 lakh per year. This move is expected to encourage more taxpayers to shift from the old tax regime, which offers various exemptions and deductions.
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With a higher basic exemption limit and a full tax rebate for income up to Rs 12 lakh, the new tax regime is now a compelling choice for a majority of taxpayers. However, this shift also means taxpayers opting for the new regime will no longer benefit from deductions under various sections, including:
- Section 80C: Investments in PPF ( Public Provident Fund), ELSS (Equity Linked Savings Scheme), NSC (National Savings Certificate), Sukanya Samriddhi Yojana and life insurance premiums will no longer offer tax relief.
- Section 80D: Medical insurance premium deductions of Rs 25,000 (Rs 50,000 for senior citizens) will not apply.
- Section 80CCC: Contributions to pension funds will not be tax-deductible.
- Interest on home loans and HRA exemptions will also be unavailable under the new tax regime.
The government has not made any changes to the old tax regime which gives incentives to taxpayers investing in multiple small saving schemes like PPF, NSC, ELSS, SCSS, Sukanya Samriddhi Yojana. All of these schemes are covered under section 80C under which, a total deduction benefit of Rs 1.5 lakh is given by the govt. Ever since the new tax regime was launched in 2020, the govt has not given any major tax relief to individuals under the old tax regime; on the other hand, those who have switched to the new tax regime, have been incentivised year after year through relaxation in tax slabs and hike in standard deduction.
So those who are still imagining if they should invest in these, the above explainers everything you need to know.
ALSO READKey changes in budget 2025 apart from tax-free 12 lakh income- Full details here
Should Investment and Tax-Saving Be Linked?
Despite the loss of tax-saving benefits, tax expert argue that investment decisions should not be based solely on tax benefits. PPF and SSY still offer safe and decent returns,
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