Budget 2025: The Union Budget 2025 has introduced significant income tax relief under the new tax regime, eliminating tax liability for individuals earning up to ₹12.75 lakh per annum. The government has revised tax slabs, providing substantial benefits to salaried individuals, while the old tax regime remains unchanged.
Key Highlights of the New Tax Regime
Under Section 87A of the Income Tax Act, tax exemption has been extended up to ₹12 lakh. Here’s how tax relief is structured:
- 5% tax on income between ₹4 lakh – ₹8 lakh will now be waived.
- 10% tax on income between ₹8 lakh – ₹12 lakh is also exempted.
- Additionally, a standard deduction of ₹75,000 is granted to salaried individuals.
This means that an individual with a salary of ₹12.75 lakh per annum will not have to pay any income tax.
How no tax on 12 lakh income?
Finance minister Nirmala Sitharaman on Saturday gave a big relief to the middle class as she announced zero income tax for up to Rs 12 lakh under the new tax regime. For salaried employees, this nil tax limit will be Rs 12.75 lakh per annum, after taking into account a standard deduction of Rs 75,000
What is the new tax regime in budget 2025?
As per the rejig, for people earning more than ₹12 lakh per annum, there will be nil tax for income up to ₹4 lakh, 5 per cent for income between ₹4 and 8 lakh, 10 per cent for ₹8-12 lakh, 15 per cent for ₹12-16 lakh
Comparison: Old vs. New Tax Regime
Old Tax Regime
- Tax-Free Income: ₹2.5 lakh (basic exemption)
- Zero Tax for Income Up to ₹5 Lakh (under Section 87A)
- Higher Tax Slabs:
- 5% tax for income between ₹2.5 lakh – ₹5 lakh
- 20% tax for income between ₹5 lakh – ₹10 lakh
- 30% tax for income above ₹10 lakh
- Eligible for Tax Deductions such as investments in EPF, PPF, NPS, home loan interest, medical insurance, etc.
New Tax Regime(Budget 2025)
- Tax-Free Income Limit Increased to ₹3 Lakh
- Zero Tax on Income Up to ₹12 Lakh
- No Major Deductions Allowed
- Lower Tax Slabs
The new tax regime offers a simpler structure with lower tax rates but fewer deductions. However, those who invest in retirement funds, insurance, and home loans may find the old tax regime more beneficial.
Who Should Choose the Old Tax Regime?
The old tax regime is ideal for individuals who want to maximize savings through tax exemptions. If you invest in:
✅ EPF, PPF, Equity Linked(Budget 2025) Savings Schemes (ELSS)
✅ National Pension System (NPS), Senior Citizen Savings Scheme (SCSS)
✅ 5-Year Fixed Deposits (FD), Sukanya Samriddhi Yojana (SSY)
✅ Home Loan Interest (Section 24B), Health Insurance (Section 80D)
By leveraging these deductions, taxable income can be reduced significantly.
Example of Tax Savings
If your gross annual income is ₹10 lakh, you can:
- Invest ₹1.5 lakh under Section 80C → Taxable income becomes ₹8.5 lakh
- Claim ₹2 lakh home loan interest exemption (Section 24B) → Taxable income drops to ₹6.5 lakh
- Deduct ₹25,000 for health insurance (80D) → New taxable income: ₹6.25 lakh
- Additional ₹50,000 deduction via NPS (80CCD (1B)) → Final taxable income: ₹5.75 lakh
Thus, strategically investing can reduce your taxable income to the lowest possible bracket(Budget 2025).
Conclusion: Which Tax Regime Is Better?
✅ If you prefer a hassle-free tax structure with lower rates, opt for the new tax regime.
✅ If you want to maximize tax deductions through investments, the old tax regime is a better choice.
With the latest tax changes, salaried individuals now have more flexibility in choosing their tax plan