Old Tax Regime is Dead!!
The new tax regime was first introduced in the financial year 2020-21 and since then the Government have made all the efforts to make the new tax regime more attractive as compared to the old tax regime. Budget 2025 has put a final nail in the coffin of the old tax regime, well, almost!! The budget has ensured that the thresholds required to benefit from old tax regimes are so high that very few will be able to benefit from them.
The following table gives an example of the difference in taxes between the old and new tax regimes for various income levels and deductions required to ensure the old tax regime is beneficial.
|
Income Level |
Old Tax Regime |
New Tax Regime |
Tax Savings in New Regime |
Deductions in Old Tax Regime to break-even |
|
16,00,000 |
2,92,500 |
1,20,000 |
1,72,500 |
5,75,000 |
|
20,00,000 |
4,12,500 |
2,00,000 |
2,12,500 |
7,08,333 |
|
25,00,000 |
5,62,500 |
3,30,000 |
2,32,500 |
7,75,000 |
|
30,00,000 |
7,12,500 |
4,80,000 |
2,32,500 |
7,75,000 |
|
35,00,000 |
8,62,500 |
6,30,000 |
2,32,500 |
7,75,000 |
|
40,00,000 |
10,12,500 |
7,80,000 |
2,32,500 |
7,75,000 |
|
45,00,000 |
11,62,500 |
9,30,000 |
2,32,500 |
7,75,000 |
|
50,00,000 |
13,12,500 |
10,80,000 |
2,32,500 |
7,75,000 |
Note: For the calculation purpose, education cess and surcharge is not considered.
For example, a person earning Rs 25 Lakhs pays Rs 5,62,000 in taxes under the old tax regime and Rs 3,30,000 in taxes under the new tax regime, saving Rs 2,32,500 in taxes under the new regime. If the total deductions claimed (HRA, LTA, interest on home loan, 80C, etc) are more than Rs 7,75,000, then only he benefits from the old tax regime. Otherwise, the new tax regime remains beneficial.
By: Vishal Shah, SEBI Registered Investment Advisor and founder of Bachhat
Feb 2, 2025
Disclaimer: This is not a financial advice and the readers should reach out to registered investment advisors for any financial advice. Registration granted by SEBI, membership of BASL and certification from National Institute of Securities Markets (NISM) in no way guarantee performance of the intermediary or provide any assurance of returns to investors. Investment in securities market are subject to market risks. Read all the related documents carefully before investing.)
For a comprehensive guide on this topic, read our blog: Budget from the lens of financial planning. It provides detailed information and expert insights you won’t want to miss!