Budget 2025 has brought significant changes to India’s tax structure, making the new tax regime more appealing to middle-class taxpayers. The biggest change is the revised tax slab, which ensures that individuals earning up to Rs 12 lakh annually will not have to pay any income tax.
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As the gap between the tax rates in the old and new regimes widens, fewer individuals may find the old tax structure attractive. However, there are still specific cases where the old tax regime could be more beneficial.
Old Tax Regime Still Makes Sense
- Tax-Saving Investments
If you have invested significantly in tax-saving schemes like Public Provident Fund (PPF), National Pension System (NPS), or Sukanya Samriddhi Yojana (SSY), the old tax regime may be more suitable. The new tax regime offers lower tax rates but removes most deductions and exemptions, reducing the overall tax benefit for such investments.
- High House Rent Allowance (HRA)
Employees receiving a substantial house rent allowance (HRA), especially those getting up to Rs 1 lakh per month, can claim tax exemptions under the old tax regime. In contrast, the new tax regime does not provide this benefit.
- High-Income Earners
Those earning more than Rs 24 lakh annually and falling under the 30 percent tax bracket may not see major savings under the new tax regime. As income levels increase, the tax benefits under the new regime diminish, making the old system a better choice in some cases.
- Using Tax Calculation Tools
If you’re unsure which tax regime is best for you, the Income Tax Department’s online tax calculator can help compare tax liabilities under both systems. This allows taxpayers to make an informed decision based on their financial situation.
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While Budget 2025’s tax reforms make the new regime more attractive, individuals with higher investments, HRA benefits, or substantial incomes may still find value in the old tax regime. Choosing the right regime depends on a taxpayer’s specific financial situation.
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