New Vs Old Tax Regime: Finance Minister Nirmala Sitharaman has announced important changes for the salaried class in Budget 2025. Under the new tax region, now no tax will have to be paid on annual income up to Rs 12 lakh.

With this move, the new tax structure has become more attractive for middle-class taxpayers. In the financial year 2023-24, about 74 percent of taxpayers selected the new tax regime. After the new changes, it is expected that in the next financial year, about 90 percent of taxpayers will choose the new regime.

Most people will choose the new tax regime-

There are two tax systems in India: new and old. Under the new tax system, there is an income tax exemption of up to Rs 50 lakh, while under the old tax system, there is an income tax exemption of up to Rs 20 lakh. According to Chairman Ravi Agarwal, the tax difference has increased in the old tax system. It is expected that fewer people will go to the old tax system.

Benefit of more deductions and exemptions-
The tax slab is lower in the new tax regime, but it does not provide the benefit of more deductions and exemptions. Therefore, if you have invested money in schemes like PPF, NPS, and Sukanya Samriddhi, then you would like to leave the new regime and file returns in the old regime.

Facility to claim HRA-
Some employees get House Rent Allowance (HRA) of up to Rs 1 lakh every month. For this, it is wise to file returns under the old tax regime. In the capital Delhi, an employee can get HRA of up to 50% of the basic salary. For example, with a basic salary of Rs 50,000, one can get HRA of up to Rs 25,000. By claiming this, exemption can be obtained under income tax.

If you are in a higher tax bracket...

When your annual income is more than Rs 24 lakh and you fall in the 30 percent tax bracket, then the tax rate is the same as in the old tax regime. As the income increases, the difference in saving decreases. Therefore, filing returns under the new tax regime may not be very beneficial for you.

If you are still confused about which regime will be right for you, then you are advised to use the income tax calculator given on the website of the Income Tax Department, which shows the calculation of tax under both regimes. You can select the tax regime accordingly.

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