Hey All,
In India, individuals can choose between two tax regimes while filing their income tax return. By default, the New Tax Regime is selected unless the taxpayer opts for the Old Tax Regime. As per the above image it clearly indicates that folks opting for new tax regime and who are in the 30% income tax slab can save a considerable amount i.e. there is more savings and less tax to be paid. In all I can say that the Union Budget 2025-26 has brought in bigger savings, lower tax, and more financial flexibility for taxpayers in India. I did expereince the same whiling filing my income tax returns for this fiscal year.
India - New & Old tax REGIME - Some Deep Dive
At the company level, my tax deductions were calculated based on the Old Tax Regime. However, while filing my return, I opted for the New Tax Regime, and to my surprise, I received an income tax refund. Though the new tax regime allows limited deductions & exemptionsit but can ultimately result in a higher net tax benefit for many taxpayers. Let us have a look at two tables i.e.
Allowed Deductions & Exemptions - New tax Regime
| Category | Section / Type | Allowed Under New Regime |
|---|---|---|
| Standard Deduction | — | ₹75,000 |
| Employer NPS | 80CCD(2) | Yes (up to 14% of Basic+DA) |
| Family Pension | — | Yes (₹25,000 or 1/3rd) |
| Home Loan Principal | 80C | ❌ No |
| Home Loan Interest (Self-Occupied) | 24(b) | ❌ No |
| Home Loan Interest (Let-Out) | 24(b) | ✅ Yes but is limited |
| Gratuity | — | ✅ Yes |
| Leave Encashment | — | ✅ Yes (₹25 lakh limit) |
| Capital Gains Reinvestment | 54 / 54EC / 54F | ✅ Yes |
Not Allowed deductions Under New Tax Regime
| Section | Deduction Type | Status |
|---|---|---|
| 80C | PPF, EPF, ELSS, LIC, Sukanya | ❌ Not Allowed |
| 80D | Health Insurance | ❌ Not Allowed |
| 80E | Education Loan Interest | ❌ Not Allowed |
| HRA | Rent Exemption | ❌ Not Allowed |
| 80G | Donations | ❌ Not Allowed |
| 80TTA / 80TTB | Savings Interest | ❌ Not Allowed |
| 80CCD(1)/(1B) | Employee NPS | ❌ Not Allowed |
What I can summarize based on my experince is that the New tax regime may have fewer investments & exemptions but then it is easy to file and overall when we see the benefits the new tax regime wins atleast for my case I could see the benefit. And for that reason for this fiscal year, 2025-2026 i had opted for the new tax regime that is simple and easy to file with no hassel. I believe the Indian government may further simplify tax laws, remove outdated provisions, and align the tax structure with modern economic needs. Hence, adopting the New Tax Regime appears to be the right way forward. Well this should be it for todays on post - "India - New & Old tax REGIME - Some Deep Dive...." Do share your views and experiences in the comments. Happy Investing and Saving.... Cheers
#newtaxregime #unionbudget #incometaxindia #incometax #oldtaxregime
Image Courtesy:: incometaxindiaofficial
Best Regards
Paras