New vs Old Tax Regime: Union Budget 2025 has introduced significant changes in the income tax structure, providing relief to the middle class and salaried individuals.
Finance Minister Nirmala Sitharaman announced that individuals earning up to Rs 12.75 lakh will now be exempt from income tax, a move that will ease the financial burden for a large section of the population. These changes will apply under the new income tax regime for the financial year 2025-26, which aims to be more taxpayer-friendly and reduce the tax burden.
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Latest Income Tax Slabs FY 2025-26 Under Old Income Tax Regime
| Income Tax Slab | Income Tax Rate |
| Upto Rs. 2,50,000 | Nil |
| From Rs. 2,50,001 to Rs. 5,00,000 | 5% |
| From Rs. 5,00,001 to Rs. 10,00,000 | 20% |
| Above Rs. 10,00,000 | 30% |
With the introduction of these changes, many salaried taxpayers are now wondering whether to switch to the new income tax regime or continue with the old one, which offers more exemptions and deductions.
Tax experts suggest that to make the right decision, taxpayers should compare their total deductions under the old regime. If their gross income exceeds Rs 24.75 lakh, the new regime might be more beneficial, but only if their total deductions under the old system are less than Rs 8 lakh.
According to tax expert Surabhi Marwah from EY India, the new tax regime removes many exemptions available under the old system, such as deductions for savings, medical insurance, home loan interest, HRA, and education loans. If taxpayers claim deductions greater than Rs 8 lakh, it might be better for them to stick with the old tax regime. The decision should be made by carefully evaluating which regime offers the most savings based on individual circumstances.
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Finance Minister Sitharaman, in her Budget speech, emphasized the importance of the middle class in India’s growth. According to TOI, She said, “Democracy, Demography, and Demand are the key pillars in our journey towards Viksit Bharat. The middle class is the strength behind India’s growth.” She also stated that under the new regime, income up to Rs 12 lakh will be tax-free, with a special exemption for salaried individuals, who will get a Rs 12.75 lakh limit due to a standard deduction of Rs 75,000.
