Budget 2025: Changes in Income Tax and Comparison of Both Regimes

The 2025 Budget has revised the income tax structure, increasing the exemption threshold to ₹12 lakh. For salaried individuals, this rises to ₹12.75 lakh with the standard deduction of ₹75,000. These adjustments alter tax liabilities compared to the 2024 framework, making the new regime more advantageous for certain income brackets.

Comparing the New and Old Regimes

• The new tax regime offers significant benefits for individuals earning up to ₹12.75 lakh, even when considering tax-saving deductions. For those exceeding this limit, the choice between regimes depends on investments in tax-saving instruments.
• For individuals earning ₹20 lakh or more (₹20.75 lakh for salaried employees), the new regime generally results in lower tax payments.
• If an individual earning ₹20 lakh invests ₹5.25 lakh in savings schemes, the old regime still leads to a higher tax liability of ₹2.4 lakh, compared to ₹2 lakh under the new system.
• The old regime may provide marginal benefits for incomes between ₹13.75 lakh and ₹15.75 lakh.
• For incomes above ₹24.75 lahks, the old regime is only beneficial if deductions (excluding the standard deduction) exceed ₹8 lakh.

Tax Savings for High Earners

• The impact of the revised tax structure varies for higher income groups:
• Earnings between ₹15 lakh and ₹25 lakh see tax savings ranging from ₹36,400 to ₹1.14 lakh under the new regime.
• At ₹30 lakh, the savings begin to decline, with a 10% reduction at ₹45 lakh and only 1.9% at ₹1 crore.
• For incomes exceeding ₹2 crore, tax savings under the new system are marginal at approximately 0.9%.

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