Budget 2025: As the budget approaches, taxpayers are eagerly awaiting a possible income tax notification, which is expected to provide relief to individuals earning up to Rs 15 lakh per annum. Here’s a breakdown of the current tax bands under the new and old tax systems to help you understand what they mean.
New Tax Plan (FY 2024-25)
Introduced in Budget 2020, the New Tax Regime offers lower tax rates with fewer exemptions and deductions:
- Up to Rs 3,00,000: Nil
- Rs 3,00,001 – Rs 7,00,000: 5 per cent
- Rs 7,00,001 – Rs 10,00,000: 10 per cent
- Rs 10,00,001 – Rs 12,00,000: 15 per cent
- Rs 12,00,001 – Rs 15,00,000: 20 per cent
- Above Rs 15,00,000: 30 per cent
This regime is the current one. However, taxpayers must waive the HRA, LTA, and Section 80C and 80D exemptions. Standard deduction benefits have been retained, with a cap of Rs 75,000 for salaried employees and Rs 25,000 for family pensioners.
Old Tax Regime (Financial Year 2024-25)
The old tax system retains higher rates but allows for tax deductions and exemptions:
- Up to Rs 2,50,000: Nil
- Rs 2,50,001 – Rs 5,00,000: 5 per cent
- Rs 5,00,001 – Rs 10,00,000: 20 per cent
- Above Rs 10,00,000: 30 per cent
The limit for senior citizens (60-80 years) is Rs 3,00,000, while for super senior citizens (80+ years), it is Rs 5,00,000.
Key deductions available under the old tax regime:
- Section 80C: Tax saving up to Rs 1.5 lakh through investments like PPF, ELSS, LIC Premium.
- Section 80D: Health insurance premium deduction.
- Section 24(b): Interest on home loans is reduced up to Rs 2,00,000.
- HRA and LTA exemptions.
Which tax plan should you choose?
Your financial information determines the best regime. The new tax system suits low-income investors, while the old tax system benefits taxpayers leveraging deductions and exemptions.
With the budget announcement on February 1, 2025, all eyes are on Finance Minister Nirmala Sitharaman for potential tax reforms.
Also read | Top 5 SBI mutual funds offering up to 30 per cent returns in 5 years: A guide for investors
