New Tax regime of 2025
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Saturday, 2025-02-01
In the Union Budget presented on February 1, 2025, Finance Minister Nirmala Sitharaman unveiled significant reforms to India's tax structure, aiming to bolster economic growth and provide relief to the middle class. The most notable change is the complete tax exemption for individuals earning up to ₹12 lakh annually under the new tax regime. This move is expected to increase disposable income, thereby stimulating consumption and savings.
The revised tax slabs under the new regime are as follows:
- Income up to ₹4 lakh: Nil
- ₹4 lakh to ₹8 lakh: 5%
- ₹8 lakh to ₹12 lakh: 10%
- ₹12 lakh to ₹16 lakh: 15%
- ₹16 lakh to ₹20 lakh: 20%
- ₹20 lakh to ₹24 lakh: 25%
- Above ₹24 lakh: 30%
Additionally, salaried employees are entitled to a standard deduction of ₹75,000 under the new regime, further enhancing their tax savings.
In contrast, the old tax regime remains unchanged, with the following slabs:
- Income up to ₹2.5 lakh: Nil
- ₹2.5 lakh to ₹5 lakh: 5%
- ₹5 lakh to ₹10 lakh: 20%
- Above ₹10 lakh: 30%
Taxpayers can choose between the old and new regimes based on their financial situations. The new regime offers lower tax rates but limits exemptions and deductions, while the old regime provides various deductions under sections like 80C, 80D, and others. It's advisable to assess which regime aligns better with one's financial goals.
These tax reforms are part of the government's broader strategy to invigorate the economy by enhancing consumer spending and investment. By reducing the tax burden on the middle class, the government anticipates a surge in demand across various sectors, potentially leading to job creation and economic expansion.
In summary, the 2025 tax reforms present a more taxpayer-friendly structure, especially for middle-income groups. Individuals should carefully evaluate both tax regimes to determine which offers greater benefits based on their income and eligible deductions.