Exploring The Benefits Of India's New Tax Regime For FY 2025-26
Updated: 22-04-2025 at 12:32 PM
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The Government of India planned substantial reforms in the personal income tax framework during the Union Budget 2025 through a simplified new tax regime, which enhances purchasing power among the middle class. The new tax system gives taxpayers two options by combining adjusted rates and better rebates, and easier compliance standards. The guide presents a thorough examination of the features within the new tax system, alongside its system benefits and a selection method between antecedent and subsequent tax approaches.
Key Features Of The New Tax Regime
The new tax structure presents a simplified system which adopts modified income ranges alongside adjusted tax brackets:
| Annual Income Range (₹) | Applicable Tax Rate |
|---|---|
| Up to ₹3,00,000 | Nil |
| ₹3,00,001 – ₹6,00,000 | 5% |
| ₹6,00,001 – ₹9,00,000 | 10% |
| ₹9,00,001 – ₹12,00,000 | 15% |
| ₹12,00,001 – ₹15,00,000 | 20% |
| Above ₹15,00,000 | 30% |
The standard deduction has received an improvement under the new tax regime by increasing to ₹75,000 from the previous limit of ₹50,000 in the old system, which enhances tax savings for employees.
Also Read: Did You Get Form 16 From Your Employer? Check This Before Filing The ITR
What Are The Benefits Of Opting For The New Tax Regime?
Your selection of a tax regime directly affects the money saved after taxes. The following text explains why many taxpayers find the New Tax Regime to be appealing.
1. Simplified Tax Structure:
By removing various tax exemptions, the new tax structure provides easier calculation processes, which leads to simpler tax compliance systems.
2. Increased Take-Home Pay:
Taxpayers whose net income grows when tax rates decrease and multiple income brackets have higher thresholds can improve their buying capabilities.
3. Higher Rebate Under Section 87a:
Under Section 87a of the income tax scheme, the government raised the rebate amount to ₹60,000, making taxable income up to ₹12 lakh zero for qualified taxpayers.
4. Flexibility In Financial Planning:
Taxpayers now have enhanced freedom in using their funds since they no longer need to invest in specific tax-saving instruments to benefit from tax reductions.
5. Encouragement For Consumption:
The new tax system aims to boost economic development by growing consumer purchases using increased post-tax cash amounts.
Also Read: Filed ITR But Didn’t Get A Tax Refund Yet? Here’s How To Request A Reissue
What To Consider Before Switching?
One must evaluate their financial scenario before moving to the new tax system, despite its multiple benefits:
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Loss of Deductions: The new tax system denies access to Section 80c and 80d and HRA deductions, so taxpayers who use these deductions regularly risk facing higher taxes.
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Comparison with Old Regime: Taxpayers must utilise official computing tools to perform tax liability comparisons between the old and new tax systems, as per their financial data.
Conclusion
Taxpayers can use the new tax framework of FY 2025-26 to receive a more straightforward system with the potential for reduced tax obligations. One must analyse their financial situation extensively before choosing the new tax system because it involves weighing reduced tax rates against the loss of deductions. Financial advisors, along with available tools, can help people make decisions that match their financial targets.
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