The Union Budget 2025, presented by Finance Minister Nirmala Sitharaman, has introduced significant reforms in the income tax structure, particularly favoring the new tax regime. These changes aim to simplify taxation and increase disposable income for taxpayers. This article provides a comparative analysis of tax savings before and after the implementation of the new budget provisions.
Key Changes in the New Tax Regime
1. Increased Rebate under Section 87A
The rebate limit has been raised from ₹7 lakh to ₹12 lakh, effectively exempting individuals earning up to ₹12 lakh from paying any income tax.
2. Standard Deduction for Salaried Individuals
A standard deduction of ₹75,000 is now available under the new tax regime, increasing the non-taxable income threshold to ₹12.75 lakh for salaried employees.
3. Revised Income Tax Slabs (Post Budget 2025)
| Income Range | Old Regime Tax Rate | New Regime Tax Rate (2025) |
|---|---|---|
| Up to ₹4,00,000 | Nil | Nil |
| ₹4,00,001 to ₹8,00,000 | 5% | 5% |
| ₹8,00,001 to ₹12,00,000 | 20% | 10% |
| ₹12,00,001 to ₹20,00,000 | 30% | 15% |
| Above ₹20,00,000 | 30% | 20% |
💡 Impact: The new tax regime reduces the tax burden significantly, offering savings across various income brackets.
Tax Savings Comparison: Old vs. New Tax Regime
Income up to ₹12,00,000
🔹 Old Regime
- Assuming maximum deductions (₹2,50,000 under 80C, 80D, HRA, etc.), the taxable income would be ₹9,50,000.
- Total Tax Payable: ₹1,02,500
🔹 New Regime (Post Budget 2025)
- With the ₹12 lakh rebate, the total tax payable is ₹0.
- Tax Savings: ₹1,02,500 🎉
Income of ₹15,00,000
🔹 Old Regime
- After maximum deductions, taxable income: ₹12,50,000
- Total Tax Payable: ₹1,87,500
🔹 New Regime (Post Budget 2025)
- Tax calculation:
- ₹4,00,001 to ₹8,00,000: 5% = ₹20,000
- ₹8,00,001 to ₹12,00,000: 10% = ₹40,000
- ₹12,00,001 to ₹15,00,000: 15% = ₹45,000
- Total Tax Payable: ₹1,05,000
- Tax Savings: ₹82,500 🎉
Income of ₹20,00,000
🔹 Old Regime
- After deductions, taxable income: ₹17,50,000
- Total Tax Payable: ₹3,37,500
🔹 New Regime (Post Budget 2025)
- Tax calculation:
- ₹4,00,001 to ₹8,00,000: 5% = ₹20,000
- ₹8,00,001 to ₹12,00,000: 10% = ₹40,000
- ₹12,00,001 to ₹20,00,000: 15% = ₹1,20,000
- Total Tax Payable: ₹1,80,000
- Tax Savings: ₹1,57,500 🎉
Conclusion: Should You Opt for the New Tax Regime?
The Union Budget 2025 has made the new tax regime more attractive, especially for middle and high-income earners who don’t heavily rely on deductions. The higher rebate, reduced tax rates, and a simplified structure make it a beneficial option for many taxpayers.
Who Should Choose the New Regime?
✔ Salaried individuals with minimal deductions
✔ High-income earners benefiting from lower tax rates
✔ Those seeking a simpler and hassle-free tax filing process
Who Might Stick to the Old Regime?
✔ Individuals with high deductions (HRA, 80C, 80D, Home Loan Interest)
✔ Businesses or self-employed professionals with eligible tax exemptions
💡 Final Thought: The new tax regime is now the default, but taxpayers can choose based on their financial goals. Evaluating total tax liability under both regimes is the best way to maximize tax savings!
🚀 Stay updated on tax reforms! Need expert tax planning? Contact TAX COMPUTE today!