Budget 2025: What is the new tax policy? Or is the old tax policy?
Budget 2025: Since income tax slabs become more attractive, it seems that it is now very attractive for taxpayers to select a new tax system compared to the old tax system. Today, Finance Minister Nirmala Sitarman has announced a new tax slab in the Budget 2025 speech. These provide more tax savings to taxpayers.
What is the tax difference?
Wages up to Rs 12 lakh per year are not required to pay any income tax on the new tax system. Since the standard deduction of wages is Rs 75,000, there is no income tax of up to Rs 2.75 lakh.
- If your income is Rs. 2.75 lakhs, then the income tax paid by you in the new tax system is zero. At the same time, if you are on the old tax system, the income tax you paid is Rs 1.8 lakh.
- If the income is Rs 15.75 lakh, then the tax paid in the new tax system is Rs 1.05 lakh, while the tax burden on you will increase to Rs 2.7 lakh.
- Finally, your income is Rs.25.75 lakhs, but your tax expenditure on the new tax system is Rs 3.3 lakh and the old system is Rs. 5.7 lakhs.
- If the taxpayer does not have any other tax savings investment on the old tax system, the above tax will be paid. If tax savings invests, the tax burden will be reduced to that extent.
Slab in the old process
0-2.5 lakhs | Zero |
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2.5 to 5 lakhs | 5% above 2.5 lakhs |
5 lakh to 10 lakhs | 12.5k + 20% above 5 lakhs |
Above 10 lakhs | 1,12,500 + 30 percent up 10 lakhs |
Tax slab in new tax system
0-4 lakhs | Zero |
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4-8 lakhs | 5 percent |
8-12 lakhs | 10 percent |
12-16 lakhs | 15 percent |
16-20 lakhs | Accept it |
20- 24 lakhs | 25 percent |
Above 24 lakhs | 30 percent |
What experts say
The main difference between chronic and new tax system is that in the old policy, taxpayers are allowed to claim tax deduction for investments made in various savings equipment such as PPF, NSC, Insurance Premium and NPS. There are no such exceptions in the new tax system. Experts say that the new tax system is now providing high savings with certain special occasions. However, if one falls under high income and HRA and rental claims, the old approach is still better. For example, “If you have an annual income of Rs 40 lakh and HRA up to Rs 12 lakh, the old policy is still beneficial,” said CA Chirag Chauhan, a chartered accountant in Mumbai. “If your income is Rs 25 lakh in the old tax system, then you will pay a tax of Rs 4.4 lakh as tax.