New Tax Regime: The financial year 2025-26 is set to commence on April 1, marking the conclusion of the previous fiscal year 2024-25. With the arrival of the new year, changes in the tax system are implemented, necessitating certain actions before the fiscal year ends on March 31 to avoid future complications.

During the central budget presented in July, Finance Minister Nirmala Sitharaman introduced the new tax regime. In the budget for 2025-26, she announced that individuals earning up to ₹12 lakh would not be subject to income tax.

Moreover, modifications have been made to the tax slabs under this regime. Specifically, a 5% tax applies to income between ₹4 lakh and ₹8 lakh, while a 10% tax is levied on income ranging from ₹8 lakh to ₹10 lakh. For income between ₹12 lakh and ₹16 lakh, a 15% tax is applicable, followed by a 20% tax for income between ₹16 lakh and ₹20 lakh, and a 25% tax for income from ₹20 lakh to ₹24 lakh.

It is crucial to note that several tax deductions, including those under sections 80C, 80D, and home loan deductions, are not available in the new tax regime. However, the exemption from tax on income up to ₹12 lakh is a significant advantage of this system.

Taxpayers currently have the option to choose between the new and old tax regimes, which can often lead to confusion.

Individuals are permitted to switch from the new tax regime to the old one. For instance, if you utilized the old tax regime for your income tax in the financial year 2024-25, you can opt for the new tax regime in the upcoming financial year 2025-26, and vice versa.

To benefit from the tax exemption on income up to ₹12 lakh, you must select the new tax regime, as this benefit is not available under the old tax system.

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