Budget 2025 Income Tax Expectations

Since Finance Minister Nirmala Sitharaman introduced the new income tax regime with lower rates and minimal deductions, taxpayers have been curious about the fate of the old regime. Introduced as an optional system from FY 2020-21, the new regime simplifies tax payments by offering lower rates without the complexity of deductions and exemptions.

Changes have been made to make the new regime more appealing, such as increasing the standard deduction for taxable salary to Rs 75,000 in Budget 2024. Additionally, the employer’s contribution to the NPS is now deductible up to 14% of specified salary, up from 10%.

New vs Old Tax Regime: Latest Income Tax Slabs & Rates

Under the new regime, income tax slabs and rates have been adjusted to benefit the taxpayer. For instance, incomes up to Rs 3 lakh are tax-free, with progressive rates applied up to 30% for incomes above Rs 15 lakh. The old regime, however, still offers advantages for those with higher exemptions and deductions.

Will the Old Regime Be Phased Out Soon?

From FY 2023-24, the new tax regime became the default, with the option to opt out for the old regime. Experts believe the government may continue to encourage the adoption of the new regime while maintaining both systems during a transition period. The possibility of a gradual phase-out of the old regime is discussed, with potential announcements in the upcoming Budget 2025.