new tax regime 2025: On February 1st, Finance Minister Nirmala Sitharaman announced zero tax on income up to ₹12 lakhs under the new tax regime. Along with this, changes were also made to the tax slabs, reducing the tax burden on taxpayers. These changes are expected to increase the popularity of the new tax regime. The Finance Minister’s budget speech, which lasted 1 hour and 14 minutes, included several major announcements aimed at providing relief to the middle class.
Before the budget, there was speculation that the government might make income up to ₹10 lakhs tax-free. However, the Finance Minister surprised everyone by announcing zero tax on income up to ₹12 lakhs. Despite this, there was no mention of the old tax regime during the entire budget speech. This has raised questions about whether the old regime will be phased out.
Government’s Focus on the New Tax Regime
Moneycontrol spoke to several tax experts on this issue. Most believe that the government will not formally abolish the old tax regime but will let it fade away gradually. The government’s strategy over the past few budgets indicates a shift towards making the new tax regime more attractive. In the 2023, 2024, and 2025 Union Budgets, the government has introduced measures to promote the new tax regime.
72% of Taxpayers Are Using the New Regime
The government’s efforts seem to be paying off. According to data from the Income Tax Department, 72% of individual taxpayers who filed their income tax returns (ITR) for 2023-24 opted for the new tax regime. This shows a growing interest among taxpayers in the new system. The new tax regime was introduced in 2020, but it did not gain much traction in the first couple of years.
Declining Interest in the Old Regime
The Finance Minister’s changes to the tax slabs in the new regime have made it more attractive, reducing the tax burden on taxpayers. This means that interest in the new regime is likely to grow further in the future. As more taxpayers switch to the new regime, the relevance of the old regime will gradually diminish.
What Will Happen to Home Loan Borrowers?
However, the old regime still benefits those who have taken home loans. Taxpayers with home loans can avail of tax deductions, which significantly reduce their tax liability. Many people take home loans not only to buy a house but also to save on taxes. Tax experts believe that the old regime will continue to remain relevant for such individuals.
Conclusion
The government is clearly focused on promoting the new tax regime, but the old regime remains relevant for those with home loans and other deductions. In the future, as more taxpayers adopt the new regime, the old regime may gradually phase out.