Saloni Kumari | Apr 29, 2025 |
Why New Income Tax Regime is Profitable for Salaried Employees
As we all know, the new financial year has already started. If you are a salaried taxpayer, it is the best time to think about what income tax regime you should choose, as per the number of benefits offered in each. The new tax regime has been made more attractive this financial year with the introduction of concessional tax slabs into it. Hence, people this financial year are finding the new tax regime a better option.
One of the major reasons why the new tax regime is more beneficial than the old tax regime is that it charges lower tax rates. According to the new rules introduced in Budget 2025, individuals having an income of Rs. 24 Lakh and above are required to pay a maximum of 30% tax. If they are earning income between Rs. 20 lakh and Rs. 24 lakh, then they will need to pay tax of 25%.
If they are earning income between Rs. 16 lakh and Rs. 20 lakh, then they will need to pay tax of 20%. Those individuals having a salary between Rs. 12 lakh and Rs. 16 lakh need to pay 15% of tax. Those having a salary between Rs 8 lakh to Rs 12 lakh and Rs 4 lakh to Rs 8 lakh are required to pay the tax rates of 10% and 5% respectively. One benefit is that those people having income upto Rs. 4 Lakh are not required to pay any sort of tax.
On the other hand, in the old tax system, the 30% tax rate is applied sooner once your income goes over Rs. 10 lakh.
Finance Minister, Nirmala Sitharaman, in her speech of Budget 2025, said, “A taxpayer in the new regime with an income of 12 lakh will get a benefit of Rs 80,000 in tax (which is 100% of tax payable as per existing rates). A person having an income of Rs 18 lakh will get a benefit of Rs 70,000 in tax (30% of tax payable as per existing rates). A person with an income of Rs 25 lakh gets a benefit of Rs 1,10,000 (25% of his tax payable as per existing rates).“
Low tax rates are a big reason to be considered, which creates a major difference.
Around 72% of taxpayers have already picked the New Tax Regime while filing their tax returns for the Assessment Year 2024–25, according to a circular from the Ministry of Finance on August 2, 2024.
Now, since there’s no tax on income up to Rs. 12 lakh, the tax department (CBDT) expects more than 90% of taxpayers to switch to the new system. This shows that more and more people are moving toward the new tax option.
The new tax regime also gives a bigger standard deduction. Last year, it was increased from Rs. 50,000 to Rs. 75,000 for salaried people. In the old system, the deduction is still Rs. 50,000. This higher deduction helps reduce your taxable income further under the new regime.
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