Tag: Sitharaman

Will your income tax slab and the income tax rate change after Union Budget 2025? The latest income tax slabs for financial year 2025-26 are eagerly awaited by the common man, middle class and salaried taxpayers. Will FM Nirmala Sitharaman make the new income tax regime more lucrative for the common salaried individual taxpayers? Will the income tax slabs under the new income tax regime be tweaked further? The question on which income tax regime is better for you – new income tax regime vs old income tax regime – is dependent on the latest calculations for FY 2025-26 based on the income tax slabs and income tax rates announced in the Union Budget 2025.

What are the current income tax slabs under the new tax regime?

Up to INR 3 lakh – Nil

INR 3,00,001 to INR 7,00,000 – 5%

INR 7,00,001 to INR 10,00,000 – 10%

INR 10,00,001 to INR 12,00,000 – 15%

INR 12,00,001 to INR 15,00,000 – 20%

Above INR 15,00,000 – 30%

Since the introduction of the new income tax regime a few years ago, the Narendra Modi government has introduced several changes in it to encourage its adoption. The new income tax regime is essentially a regime that doesn’t allow you major tax deductions and exemptions, but favours taxpayers in the form of lower tax rates and more rationalised income tax slabs. For example; under the new income tax regime, common exemptions and deductions such as Section 80C, Section 80D, Section 80G, Section 80TTA, HRA, LTA are not allowed. However, the tax rates are lower and the income tax slabs are different. Under the new income tax regime, the 30% income tax slab kicks in at an income level above Rs 15 lakh, unlike the old tax regime where 30% tax is applicable above Rs 10 lakh.

When the new income tax regime was first introduced, standard deduction was not a part of it. However, eventually a Rs 50,000 standard deduction was allowed, which was hiked to Rs 75,000 in last year’s Budget. It’s important to note that under the old income tax regime, the standard deduction continues to be Rs 50,000.

One common ask of salaried taxpayers is that FM Sitharaman should allow popular exemptions and deductions such as Section 80C, HRA, LTA and Section 80D under the new income tax regime to make it more lucrative.

With the new income tax regime becoming the default tax regime, personal tax experts also expect that the Modi government may eventually do away with the old income tax regime. While that may not happen this year, the path towards phasing out the old income tax regime may be outlined in this year’s Union Budget. Also, a simplified Direct Tax Code is likely to be tabled in the Budget Parliament session, which may find mention in FM Sitharaman’s Budget speech.