Paying income tax every year can be burdensome for many, but did you know that, under the new tax rules, you may qualify to pay zero tax? The latest updates in India’s tax policies provide an opportunity for taxpayers to reduce their tax liabilities, potentially to zero, with proper planning. Finance Minister Nirmala Sitharaman’s 2025 Budget announcement revealed a significant change in the tax system that could benefit many taxpayers. Here’s what you need to know about the new regime and how you can benefit from it.
Two Tax Regimes to Choose From
As of now, taxpayers have the option to choose between two tax regimes: the old one and the new one. The old tax regime allows various deductions and exemptions like house rent, insurance, home loan interest, and investments under Section 80C. These provisions help in reducing the taxable income.
On the other hand, the new tax regime simplifies things by offering lower tax rates, but it does not include the same deductions. Its primary goal is to make tax filing easier and less time-consuming.
New Regime: Lower Rates and Higher Tax-Free Limits
The new tax regime, especially for the financial year 2025-26, introduces a more favorable condition for many taxpayers. One of the key highlights of the new regime is the increase in the tax-free limit. As per the 2025 Budget, taxpayers earning up to Rs 12 lakh per year will not have to pay any income tax. For salaried individuals, an additional benefit is the increase in the standard deduction from Rs 50,000 to Rs 75,000. This means that salaried taxpayers can now enjoy zero tax on income up to Rs 12.75 lakh under the new regime.
Old Regime: Still Beneficial for Many
Despite the appeal of the new regime, the old tax regime continues to have its own set of advantages, particularly for individuals who have substantial tax-saving investments or expenses. It also offers an age-based tax-free income limit. For individuals under 60, income up to Rs 2.5 lakh is exempt from tax. For senior citizens aged between 60 and 79, this limit is Rs 3 lakh, and for super senior citizens aged 80 or older, the limit rises to Rs 5 lakh.
Which Tax Regime Should You Choose?
Deciding which tax regime works best for you depends largely on your personal financial situation. If you have numerous tax-saving investments, home loans, or insurance policies, the old regime could be more beneficial. However, if you prefer a simplified tax filing process with fewer forms and less paperwork, the new regime might be a more attractive option. Additionally, if your income is below Rs 12 lakh, the new regime offers a higher tax-free limit and a lower tax burden. Before filing your return, take the time to evaluate both options. With careful planning, it’s possible to legally avoid paying income tax and save more money for what truly matters.
