Some important changes have been announced for the new tax regime in Budget 2025. Its purpose is to provide relief to the middle class people. Finance Minister Nirmala Sitharaman has proposed to increase the basic exemption limit to Rs 4 lakh and has increased the income limit to Rs 12 lakh for exemption under Section 87A of Income Tax.
Along with this, no tax will have to be paid on income up to Rs 12 lakh from salary. In fact, with the standard deduction of 75,000, those with income of Rs 12.75 lakh annually will not have to pay any tax. This will provide relief to millions of taxpayers whose income is less than Rs 12.75 lakh.
However, what if you earn more than 12.75 lakh rupees, what? Should you still choose the option of new income tax regime or to turn to the old income tax regime? We are presenting you here this time:
When should you choose the option of new tax regime?
The new tax regime is better for such taxpayers:
1) Those who have income of 12 lakh or more or are entitled to complete exemption under section 87A.
2) Income tax is not eligible for any discount under section 80C (provident fund, PPF, Life Insurance or Housing Loan Payment) or 80D (Medical Insurance Premium) of Income Tax.
3) Easy tax filing process wants and does not want to get caught in the complaint of Compliance.
If you do not want to claim much discounts and adopt an easy process of tax filing, then the new tax regime can be beneficial for you.
When should you choose the option of old tax regime?
Old tax regime is more suitable for those who claim more discounts, for example
1) Section 80C: PF, PPF, contribution to life insurance premium, payment of housing loans etc.
2) Section 80D: Medical Insurance Premium for yourself and family
3) House Rent Allowance (HRA) and Leave Travel Allowance (LTA).
4) Home loan interest
Taxpayers have the option to reduce their taxable income to a great extent in the old tax regime, provided they are eligible to make maximum advantage of such discounts.