Relief from revised income tax slabs: Should you switch to new tax regime? | Mint

The government’s latest tax overhaul of income tax slabs in Budget 2025 is aimed at introducing a more streamlined tax system, providing relief to the harried middle-class salaried taxpayer. But does this necessarily mean better savings for taxpayers? Or does it merely mark a shift away from traditional deductions, which the old tax regime is synonymous with, without offering significant financial gains? Let’s try to break it down.

What’s New In The New Tax Regime?

The government has promised a simpler, more transparent tax system, weeding out legal jargon and cumbersome provisions. The new tax structure is designed to be:

Easier to understand. In other words, fewer complexities, fewer exemptions.

predictable. In other words, a clear slab-based taxation with easy-to-calculate tax savings.

Faster compliance. In other words, reduced paperwork and fewer deductions to calculate (don’t call that CA yet).

Also Read: Your Budget 2025 Guide: Income tax slabs, rates, and key benefits. All your queries answered

However, nothing is ever simple. And simplicity usually comes with trade-offs. While the new tax regime offers lower tax rates, it removes many popular deductions, forcing taxpayers to weigh the trade-off between reduced complexity and potential savings.

Are You Really Saving ? Old vs. New Regime Breakdown

The government claims the new tax regime will put more money in people’s hands, but is that really true? Let’s compare:

Who Wins Under The New Tax Regime?

Those with fewer deductions—salaried individuals with no major tax-saving investments.

People looking for simplicity over tax planning.

Who Wins Under The Old Tax Regime?

Individuals with significant deductions from HRA, home loan interest, and 80C investments.

Business owners and freelancers who rely on expense deductions.

So The Big Question: Should You Switch? Key Factors to Consider:

If you prefer simplicity:

The new regime works if you don’t claim many deductions and prefer a straightforward tax system.

Salaried employees who have not bothered to invest much might benefit from lower tax slabs.

Also Read: Income Tax Budget 2025 LIVE

If you rely on deductions:

If you claim home loan interest, LIC premiums, EPF, NPS, or tuition fees, the old regime may still offer better savings.

Those planning for long-term wealth building through tax-saving instruments might be better off sticking with the old system.

If you are in a higher tax bracket:

The higher your income, the greater the potential tax savings under the new regime.

Individuals earning ₹12 lakh to ₹25 lakh could see major benefits.

The Final Verdict: Who Should Make the Switch?

Switch to the new regime if:

You don’t want the hassle of managing multiple deductions.

You are in a higher tax bracket and benefit from lower slab rates.

You prefer immediate liquidity over long-term tax savings.

Stick to the old regime if:

You rely on major deductions like HRA, home loan interest, and 80C savings.

You are comfortable with tax planning and want to maximise exemptions.

You want to build wealth through tax-efficient investments.

Here is the bottom line: The new regime isn’t a one-size-fits-all solution. While it’s a cleaner, leaner tax structure, it might not work for those heavily invested in tax-saving instruments. Run the numbers, check your deductions, and decide if switching is truly beneficial for you.