New Tax Regime: The financial year 2024-25 is nearing its conclusion, with the new financial year 2025-26 set to commence on April 1. If you have yet to fulfill your tax obligations, you have until March 31, 2025, to do so.
Choice between New Tax Regime and the Old Tax Regime
Taxpayers currently have the choice between the New Tax Regime and the Old Tax Regime, which can often lead to confusion. Individuals are permitted to transition from the New Tax Regime to the Old Tax Regime. For instance, if you utilized the Old Tax Regime for your income tax in the financial year 2024-25, you may opt for the New Tax Regime in the upcoming financial year 2025-26, and vice versa.
The New Tax Regime
The New Tax Regime was introduced by the Union Finance Minister, Nirmala Sitharaman, during the Union Budget presented in July. In the budget for 2025-26, she announced that individuals would not be taxed on income up to Rs 12 lakh under the New Tax Regime. Additionally, modifications have been made to the tax slabs within this regime. Specifically, a 5 percent tax applies to income ranging from Rs 4 lakh to Rs 8 lakh, while a 10 percent tax is levied on income between Rs 8 lakh and Rs 10 lakh, and a 15 percent tax on income from Rs 12 lakh to Rs 16 lakh. Furthermore, a 20 percent tax is required for income between Rs 16 lakh and Rs 20 lakh, and a 25 percent tax for income from Rs 20 lakh to Rs 24 lakh.
Features
It is important to note that under the New Tax Regime, many tax deductions are not available, including those under sections 80C, 80D, and for home loans. However, the advantage of not paying tax on income up to Rs 12 lakh is exclusive to this regime.
To avoid taxation on income up to Rs 12 lakh, you must choose the New Tax Regime, as this benefit is not offered under the Old Tax Regime.