Outdated tax regime vs new tax regime with revised slabs: What to decide on in 2025-26?
The brand new revenue tax regime will function the revamped tax slabs from April 1, 2025 onwards, with people not requiring to pay any tax if their revenue doesn’t exceed ₹12 lakh.
Nonetheless, that is provided that the individual chooses the brand new regime. Some individuals go for the outdated tax regime because of the slew of deductions and exemptions it presents in sure circumstances.
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Regardless of this, a lot of those that use the outdated regime could take into account switching to the brand new one because the Union Finances 2025 has considerably introduced down the slab charges for incomes as much as ₹24 lakh.
What are the deductions out there within the outdated tax regime?
a) Worker’s contribution to the Workers Provident Fund beneath Part 80C.
b) Exemption on depart journey allowance (LTA) as much as a sure extent.
c) Exemption on home lease allowance (HRA) if residing on a rented house.
d) Employer’s contribution to the Nationwide Pension System (NPS) beneath Part 80CCD (2).
e) Meals coupon vouchers comparable to Sodexo of ₹2,200 monthly or yearly of ₹26,400.
f) Different investments and bills beneath Part 80C.
g) Deduction of ₹50,000 for NPS funding beneath Part 80CCD (1b).
h) Part 80D deduction for medical health insurance premium paid for self, household and fogeys.
i) Part 80TTA deduction on curiosity earned from financial savings account.
Instances of incapacity, donations to exempted establishments and so forth can even enable for deductions.
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What in regards to the new tax regime?
The brand new tax regime presents restricted deductions, however has a typical deduction from wage revenue and Deduction beneath Part 80CCD (2) for the employer’s contribution to NPS.
On high of this, phone and conveyance reimbursements are exempt from tax beneath each tax regimes, just like automobile leasing.
Which tax regime is finest?
The tax regime to decide on totally will depend on the taxpayer’s supply of revenue and eligibility for deductions.
The employer’s contribution to the Nationwide Pension System (NPS) account shall be completely different within the two regimes, with as much as 10 per cent of the essential wage within the outdated tax regime being allowed as a deduction beneath Part 80CCD (2).
Alternatively, 14 per cent of the essential wage is allowed as a Part 80CCD(2) deduction within the new tax regime.
In circumstances the place taxpayers have restricted technique of claiming deductions or exemptions, the brand new tax regime with the revised tax slab will certainly supply greater tax saving for the monetary yr 2025-26.
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Equally those that have exhausted their choices for deductions and exemptions can swap to new tax regime, as it’ll each save extra revenue tax and in addition hold issues problem free since there isn’t any want to rearrange proofs and data for claiming deductions and exemptions.
