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Though there is a common reduction of Rs 75,000 under brand-new tax obligation regimen, there are no reductions offered for financial investments under this regimen. It indicates if earnings surpasses Rs 12.75 lakh in FY 2025-26, tax obligation will certainly apply on the whole earnings and no reductions …Read More
Know Comparison Between Old Tax Regime Vs New Tax Regime
The Union Budget 2025-26 has actually made the brand-new earnings tax obligation regimen better appealing by making yearly earnings as much as Rs 12 lakh tax-free and sprucing up pieces. Taxpayers that have simple wage earnings are probably to choose this regimen however what regarding those that have financial investments, education and learnings expenditures for their youngsters, and various other financial savings like NPS? Here’s why old tax obligation regimen is still a much better choice for some taxpayers:
Income Tax Rates Under The New Regime After Budget 2025 (for FY 2025-26)
- Income as much as Rs 4,00,000: Nil
- Income from Rs 4,00,001 to Rs 8,00,000: 5%
- Income from Rs 8,00,001 to Rs 12,00,000: 10%
- Income from Rs 12,00,001 to Rs 16,00,000: 15%
- Income from Rs 16,00,001 to Rs 20,00,000: 20%
- Income from Rs 20,00,000 to Rs 24,00,000: 25%
- Income over Rs 24,00,000: 30%
Importantly, those gaining as much as Rs 12.75 lakh a year (consisting of a common reduction of Rs 75,000) will certainly need to pay absolutely no tax obligation throughout FY25-26. It is a refund.
Though there is a common reduction of Rs 75,000 under this regimen, there are no reductions offered for financial investments under this regimen. It indicates if earnings surpasses Rs 12.75 lakh in FY 2025-26, tax obligation will certainly apply on the whole earnings and no reductions (like HRA, ELSS, 5-Year FD, NPS) can be use.
To profit them (those gaining over Rs 12.75 lakh), the earnings tax obligation pieces have actually been spruce up in the Budget 2025-26 in such a fashion than it can conserve them tax obligations by as much as Rs 1,20,000 as compared to the present pieces.
Over and over this, there is a limited alleviation of about Rs 30,000 to profit those whose earnings lie ‘just above’ the threshold restriction. So, properly, those gaining around Rs 13 lakh will certainly pay absolutely no tax obligation throughout FY 2025-26.
Tax Rates Under The Old Tax Regime
The old tax obligation regimen has actually been left the same in the Budget 2025. Under this regimen, earnings as much as Rs 5 lakh is tax-free therefore discount. Here are the earnings tax obligation pieces under the old tax obligation regimen:
- Income as much as Rs 2,50,000: Nil
- Income from Rs 2,50,001 to Rs 5,00,000: 5%
- Income from Rs 5,00,001 to Rs 10,00,000: 20%
- Income over Rs 10,00,000: 30%
For seniors aged 60-80 years, the fundamental exception restriction is Rs 3,00,000. For very seniors (over 80 years), it is Rs 5,00,000.
The Old Tax Regime permits reductions under numerous areas, such as:
Section 80C: Up to Rs 1,50,000 for financial investments like PPF, ELSS, and LIC costs.
Section 80D: Health insurance coverage costs.
Section 24( b): Interest on home mortgage as much as Rs 2,00,000.
Other exceptions like HRA and LTA.
Old Vs New: Which Income Tax Regime Is Better?
According to a revenue tax obligation professional, “The earnings tax obligation regimen is unquestionably an all-natural selection for those gaining as much as Rs 12.75 lakh. However, for those gaining over it, there is a demand for case-by-case tax obligation calculation based upon the financial investments and various other reductions to establish which regimen is much better for them. It is constantly much better to calculate your tax obligations under both the programs prior to picking one.”
Divya Baweja, partner of Deloitte India, was quoted as saying by NDTV: “To decide whether to opt for the old regime or the new regime, one would need to see that if a taxpayer were to follow the old regime, what kind of deductions or exemptions he/she should be looking at to claim benefit akin to the new regime. That comparison factor would be based on the specific individual scenario. Basis the same, one would need to evaluate the regime which is more beneficial With the widening of the slabs in the new regime, the taxpayer would need to have higher deductions or exemptions to equate the tax under the new regime.”
