The Indian income tax system has witnessed notable changes in recent years, especially with the introduction of the new tax regime in 2020. The Union Budget 2025 has introduced further revisions to tax slabs, making it essential for taxpayers to understand the differences between the 2024 and 2025 tax structures. This article provides a comprehensive comparison to help you make informed tax planning decisions.
Overview of the New Tax Regime 2025
The financial year 2025-26 brings several updates aimed at simplifying taxation and offering relief to taxpayers. Key highlights include:
- Basic Exemption Limit: Increased to ₹4,00,000 for all taxpayers, regardless of age.
- Tax-Free Income: Income up to ₹12,00,000 is tax-free, thanks to an enhanced rebate under Section 87A, now increased to ₹60,000.
- Revised Tax Slabs:
- Standard Deduction: Salaried individuals can now claim a standard deduction of ₹75,000, effectively making income up to ₹12,75,000 tax-free.
Comparison Between 2024 and 2025 Tax Regimes
Key Differences in Tax Slabs
The 2025 tax regime has introduced lower tax rates for certain income brackets, making it more favorable for taxpayers.
Rebate and Exemptions
- 2024: A rebate of ₹25,000 under Section 87A was available for incomes up to ₹7,00,000.
- 2025: The rebate has been increased to ₹60,000, making incomes up to ₹12,00,000 tax-free.
Standard Deduction
- 2024: Salaried individuals could claim a ₹50,000 standard deduction.
- 2025: This has been increased to ₹75,000, offering additional tax relief.
Old Tax Regime vs. New Tax Regime
Old Tax Regime (Unchanged in 2025)
The old tax regime continues to allow deductions and exemptions such as:
- Section 80C (up to ₹1,50,000)
- House Rent Allowance (HRA)
- Leave Travel Allowance (LTA)
- Home loan interest deductions
However, tax rates under the old regime are generally higher compared to the new regime.
New Tax Regime (2025)
The new regime offers lower tax rates but eliminates most deductions and exemptions. It is now the default option, and taxpayers must opt for the old regime by filing Form 10-IEA.
Which Regime Should You Choose?
Opt for the New Regime if:
- Your income is below ₹12,00,000.
- You prefer a simpler tax structure with minimal documentation.
- You do not have significant deductions or exemptions.
Opt for the Old Regime if:
- You have substantial tax-saving investments.
- You claim HRA, LTA, or home loan interest deductions.
- Your income exceeds ₹15,00,000 and you can maximize deductions.
Impact on Taxpayers
- Middle-Income Earners: The new regime offers significant relief, with incomes up to ₹12,00,000 being tax-free.
- High-Income Earners: Those earning above ₹24,00,000 will benefit from the new 25% slab, reducing their overall tax burden.
Conclusion
The revised income tax slabs for 2025 provide substantial benefits, particularly for middle-income groups. However, the choice between the old and new regimes depends on individual financial circumstances and investment strategies. To make an informed decision, consider using a tax calculator to compare liabilities under both regimes.
0 Comments