How Much Tax Do I Save In New Regime?

In Budget 2025, presented by Union Finance Minister Nirmala Sitharaman on February 1, 2025, significant changes were introduced to the income tax regime, offering much-needed relief for middle-class and salaried taxpayers. The new tax slabs and higher tax exemption limits are set to benefit salaried employees, investors, and senior citizens, with a notable emphasis on reducing tax burdens. The government has also introduced a zero income tax for those earning up to ₹12 lakh and ₹12.75 lakh for salaried individuals benefiting from the basic standard deduction of ₹75,000. In this article, we explore how much you can save under the new income tax regime. 

Budget 2025: Key Updates on Income Tax

• The new income tax slab was introduced.
• Under the new regime, income up to ₹4 lakh is completely tax-free.
• Salaried taxpayers with income up to ₹12 lakh will not be required to pay any income tax.
• The annual limit for TDS deduction on rent has been increased from ₹2.4 lakh to ₹6 lakh.
• The tax deduction limit for senior citizens has been doubled to ₹1 lakh.

Income Tax Slab: Tax Slab under Old Regime for AY 2025-26

The tax slab under the Old tax regime for AY 2025-26 remains the same. In the table below, we have given slab and tax rates as per the old tax regime,

Income Tax Slab: Tax Slab under New Regime for AY 2025-26

Here is the revised income tax slab for AY 2025-26 proposed in the Union Budget 2025,

Also read: Budget 2025: Proposals related to Personal tax

Tax Savings under New Tax Regime - Breakdown

The new tax regime provides lower tax rates but removes most deductions, while the old tax regime allows deductions under various sections. Here’s a comparative tax calculation for an annual income of Rs 18 lakh under both regimes to understand the new income tax regime savings,

Calculation of Tax Liability Under the New Tax Regime

Gross Income: Rs 18,00,000

Standard Deduction: Rs 75,000

Taxable Income: Rs 18,00,000 - Rs 75,000 = Rs 17,25,000

Tax Calculation:

• 0 - 4 lakh: Nil
• 4 - 8 lakh: 5% of 4 lakh = Rs 20,000
• 8 - 12 lakh: 10% of 4 lakh = Rs 40,000
• 12 - 16 lakh: 15% of 4 lakh = Rs 60,000
• 16 - 17.25 lakh: 20% of 1.25 lakh = Rs 25,000

Total Tax: Rs 20,000 + Rs 40,000 + Rs 60,000 + Rs 25,000 = Rs 1,45,000

Cess (4%): Rs 1,45,000 × 4% = Rs 5,800

Total Tax Liability (New Regime): Rs 1,45,000 + Rs 5,800 = Rs 1,50,800

Calculation of Tax Liability Under the Old Tax Regime

Gross Income: Rs 18,00,000

Deductions:

• Standard Deduction: Rs 50,000
• Section 80C (Maximum): Rs 1,50,000
• Section 80D (Maximum): Rs 1,00,000
• Home Loan Interest (Section 24B): Rs 2,00,000

Total Deductions: Rs 50,000 + Rs 1,50,000 + Rs 1,00,000 + Rs 2,00,000 = Rs 5,00,000

Taxable Income: Rs 18,00,000 - Rs 5,00,000 = Rs 13,00,000

Tax Calculation:

• 0 - 2.5 lakh: Nil
• 2.5 lakh - 5 lakh: 5% of 2.5 lakh = Rs 12,500
• 5 lakh - 10 lakh: 20% of 5 lakh = Rs 1,00,000
• 10 lakh - 13 lakh: 30% of 3 lakh = Rs 90,000

Total Tax: Rs 12,500 + Rs 1,00,000 + Rs 90,000 = Rs 2,02,500

Cess (4%): Rs 2,02,500 × 4% = Rs 8,100

Total Tax Liability (Old Regime): Rs 2,02,500 + Rs 8,100 = Rs 2,10,600

Under the new tax regime, taxpayers earning Rs 18 lakh annually will have a total tax liability of Rs 1,50,800, whereas under the old tax regime, the tax liability amounts to Rs 2,10,600. This results in a new income tax regime savings of Rs 59,800, making it a more beneficial option for individuals who do not claim multiple deductions.

Learn more: Tax Savings Comparison Old and New Regime

Chart of New Income Tax Regime Savings

Let’s look at the tax rebate for different annual turnovers under new tax regime for a better understanding new income tax savings, 

Learn more: Budget 2025: Rationalisation of Certain Provisions of Income Tax Act

Other Tax Reliefs Proposed in Budget 2025

The Union Budget 2025 introduces several tax relief measures to reduce compliance burdens and provide financial ease to taxpayers. Key highlights include:

• Higher TDS Threshold on Rent: The TDS exemption limit on rent has been increased from ₹2.40 lakh to ₹6 lakh per annum, raising the monthly threshold from ₹20,000 to ₹50,000. This benefits small taxpayers and simplifies compliance.
• Increased Tax Deduction for Senior Citizens: The maximum tax deduction on interest income for senior citizens has been doubled from ₹50,000 to ₹1,00,000, offering greater financial relief to retirees.
• Higher TCS Threshold on Remittances: The threshold for Tax Collected at Source (TCS) on remittances under the Liberalized Remittance Scheme (LRS) has been raised from ₹7 lakh to ₹10 lakh, reducing the tax burden on foreign remittances.
• TCS Exemption for Education Loans: The government has removed TCS on remittances made for education purposes if the funds are sourced from loans provided by financial institutions, easing the financial strain on students studying abroad.

Conclusion

In conclusion, Budget 2025 introduces important changes to the income tax system, offering taxpayers more savings through new tax slabs and higher exemption limits. The budget provides zero income tax for individuals earning up to ₹12 lakh and ₹12.75 lakh for salaried workers, giving middle-class taxpayers significant relief. Other benefits include higher TDS thresholds, larger tax deductions for senior citizens, and exemptions on education loan remittances. The new tax regime allows taxpayers to pay less tax, leaving them with more money for their needs and future growth.

FAQs

1. What are the new income tax slabs under the Budget 2025? 

The new tax slabs for AY 2025-26 include tax rates of 0%, 5%, 10%, 15%, 20%, 25%, and 30%, with income up to ₹4 lakh being tax-free.

2. Who benefits from the new income tax regime in Budget 2025? 

The new tax regime provides relief for salaried employees, investors, and senior citizens, especially those with income up to ₹12 lakh.

3. What is the new standard deduction under the Budget 2025? 

The standard deduction has been increased to ₹75,000 as a tax savings for salaried individuals new regime.

4. Is income tax applicable for individuals earning up to ₹12 lakh under the new regime? 

No, individuals earning up to ₹12 lakh, including the standard deduction, will not be required to pay any income tax. It becomes an important tax savings for salaried individuals new regime.

5. How much can senior citizens save on taxes under the new regime? 

Senior citizens can benefit from a doubled tax deduction limit on interest income, increased to ₹1 lakh.

6. What changes have been made to TDS on rent in Budget 2025? 

The TDS threshold for rent has been raised from ₹2.4 lakh to ₹6 lakh per annum, which increases the monthly threshold to ₹50,000.

7. How does the tax liability compare between the old and new regimes? 

Taxpayers earning ₹18 lakh annually can save ₹59,800 under the new regime compared to the old regime, where the tax liability is higher.

8. How much income can be earned tax-free under the new tax regime? 

Income up to ₹4 lakh is completely tax-free under the new tax regime. This is one of the key tax savings under new tax regime.

9. What tax benefits do salaried employees with income of ₹8 lakh to ₹12 lakh get under the new regime? 

For an income of ₹8 lakh to ₹12 lakh, salaried employees can save ₹60,000, which is entirely tax-free.

10. Has the TCS threshold for foreign remittances changed in Budget 2025? 

Yes, the TCS threshold on remittances has been increased from ₹7 lakh to ₹10 lakh.

11. Are education loan remittances exempt from TCS under the new budget?

Yes, TCS has been removed for remittances made for education purposes when sourced from education loans.

12. How much can a person earning ₹16 lakh save in taxes under the new regime? 

A person earning ₹16 lakh can save ₹1,20,000 under the new tax regime, with the total tax payable after rebate being ₹1,20,000.

13. What is the new TDS deduction limit for senior citizens? 

The tax deduction limit for senior citizens has been doubled to ₹1 lakh, offering additional relief.

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