How much tax will I save the new regime?

Introduction

In the Budget 2025, presented by Union Finance Minister Nirmala Sitharaman on February 1, 2025, major reforms were introduced to the income tax system, aimed at providing significant relief to middle-class and salaried taxpayers. The updated tax slabs and increased exemption limits are designed to benefit salaried employees, investors, and senior citizens by easing their tax liabilities. Notably, the government has implemented zero income tax for individuals earning up to ₹12 lakh, and up to ₹12.75 lakh for salaried taxpayers who avail the standard deduction of ₹75,000. This article delves into how much you can save under the new income tax regime

Budget 2025: Important Income Tax Updates

A new income tax slab has been introduced.
Income up to ₹4 lakh is now fully exempt from tax under the new regime.
Salaried individuals earning up to ₹12 lakh will not have to pay any income tax.
The annual threshold for TDS on rent payments has been raised from ₹2.4 lakh to ₹6 lakh.
The tax deduction limit for senior citizens has been increased to ₹1 lakh, doubling the previous amount

Income Tax Slabs: Old Regime for AY 2025-26

The tax slabs under the Old Tax Regime for AY 2025-26 remain unchanged. The table below outlines the income ranges and corresponding tax rates for different age groups:

Income Range (₹)	Individuals Below 60 Years & HUF	Individuals Aged 60 to 80 Years	Individuals Above 80 Years
Up to ₹2,50,000	NIL	NIL	NIL
₹2,50,001 – ₹3,00,000	5%	NIL	NIL
₹3,00,001 – ₹5,00,000	5%	5%	NIL
₹5,00,001 – ₹10,00,000	20%	20%	20%
Above ₹10,00,000	30%	30%	30%

Income Tax Slabs: New Regime for AY 2025-26

The Union Budget 2025 introduced the revised income tax slabs for AY 2025-26 as follows:

Income Range (₹)	Tax Rate (%)
Up to ₹4,00,000	Nil (0%)
₹4,00,001 – ₹8,00,000	5%
₹8,00,001 – ₹12,00,000	10%
₹12,00,001 – ₹16,00,000	15%
₹16,00,001 – ₹20,00,000	20%
₹20,00,001 – ₹24,00,000	25%
Above ₹24,00,001	30%

Tax Savings Under the New Tax Regime – Detailed Breakdown

The new tax regime offers lower tax rates but eliminates most deductions, while the old tax regime allows various deductions. To understand the potential savings, let’s compare the tax liabilities for an annual income of ₹18 lakh under both regimes.

Tax Calculation Under the New Tax Regime

Gross Income: ₹18,00,000
Standard Deduction: ₹75,000
Taxable Income: ₹18,00,000 – ₹75,000 = ₹17,25,000

Tax Breakdown:

₹0 – ₹4,00,000: Nil
₹4,00,001 – ₹8,00,000: 5% of ₹4,00,000 = ₹20,000
₹8,00,001 – ₹12,00,000: 10% of ₹4,00,000 = ₹40,000
₹12,00,001 – ₹16,00,000: 15% of ₹4,00,000 = ₹60,000
₹16,00,001 – ₹17,25,000: 20% of ₹1,25,000 = ₹25,000

Total Tax: ₹20,000 + ₹40,000 + ₹60,000 + ₹25,000 = ₹1,45,000
Cess (4%): ₹1,45,000 × 4% = ₹5,800

Total Tax Liability (New Regime): ₹1,50,800

Tax Calculation Under the Old Tax Regime

Gross Income: ₹18,00,000

Deductions:

Standard Deduction: ₹50,000
Section 80C (Max): ₹1,50,000
Section 80D (Max): ₹1,00,000
Home Loan Interest (Section 24B): ₹2,00,000
Total Deductions: ₹5,00,000

Taxable Income: ₹18,00,000 – ₹5,00,000 = ₹13,00,000

Tax Breakdown:

₹0 – ₹2,50,000: Nil
₹2,50,001 – ₹5,00,000: 5% of ₹2,50,000 = ₹12,500
₹5,00,001 – ₹10,00,000: 20% of ₹5,00,000 = ₹1,00,000
₹10,00,001 – ₹13,00,000: 30% of ₹3,00,000 = ₹90,000

Total Tax: ₹12,500 + ₹1,00,000 + ₹90,000 = ₹2,02,500
Cess (4%): ₹2,02,500 × 4% = ₹8,100

Total Tax Liability (Old Regime): ₹2,10,600

Chart of Tax Savings Under the New Income Tax Regime

To better understand the tax benefits under the new tax regime, here’s a comparison of tax liabilities and rebates for different income levels:

Income (₹)	Proposed Tax (New Regime)	Rebate Benefit	Total Benefit	Tax After Rebate (New Regime)	Previous Tax (Old Slab)	Tax After Rebate (Old Slab)
₹8,00,000	₹20,000	₹10,000	₹20,000	₹0	₹20,000	₹0
₹9,00,000	₹30,000	₹10,000	₹30,000	₹0	₹30,000	₹0
₹10,00,000	₹40,000	₹10,000	₹40,000	₹0	₹40,000	₹0
₹11,00,000	₹50,000	₹15,000	₹50,000	₹0	₹50,000	₹0
₹12,00,000	₹60,000	₹20,000	₹60,000	₹0	₹60,000	₹0
₹16,00,000	₹1,20,000	₹50,000	₹50,000	₹1,20,000	₹1,60,000	₹1,20,000
₹20,00,000	₹2,00,000	₹90,000	₹90,000	₹2,00,000	₹2,50,000	₹2,00,000
₹24,00,000	₹3,00,000	₹1,10,000	₹1,10,000	₹3,00,000	₹3,50,000	₹3,00,000
₹50,00,000	₹10,80,000	₹1,10,000	₹1,10,000	₹10,80,000	₹14,00,000	₹13,50,000

Other Tax Reliefs Proposed in Budget 2025

The Union Budget 2025 brings several tax relief measures aimed at easing compliance and providing financial support to taxpayers. Key highlights include:

Higher TDS Threshold on Rent: The TDS exemption limit on rent payments has been increased from ₹2.40 lakh to ₹6 lakh per year, raising the monthly threshold from ₹20,000 to ₹50,000. This change benefits small taxpayers and simplifies compliance requirements.
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 enhanced 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: TCS will no longer be applicable on remittances made for educational purposes if the funds are sourced from loans provided by financial institutions, easing the financial pressure on students studying abroad

About the Author

Rohan

Dinesh Pandiyan is an expert content writer specializing in business registration, tax regulations, trademark laws, and company compliance. His insightful articles provide clear, practical guidance that helps businesses effectively navigate and overcome complex legal and regulatory challenges

June 26, 2025