BUDGET & YOU: NEW REGIME BEATS OLD IN FY26

Lower tax slabs and nil tax on incomes up to 12 lakh has not only provided relief to middle-class families but also rendered the old tax regime irrelevant for most of them. The government also renewed its focus on senior citizens

- Nidhi Sinha

On the morning of February 1, 2025, when Union Minister of Finance Nirmala Sitharaman posed before the gates of Parliament for the customary photographs, it was much less cold in Delhi than the same day last year. While Delhi welcomes early spring this year, the finance minister's (FM's) announcements also marked fresh beginnings for the middle class of India. It managed to make the new tax regime more attractive than the old tax regime for all income groups and provided relief to senior citizens and those stuck in stressed projects, among others.

Says Poorva Prakash, partner, Deloitte India, "At the heart of the Budget proposals, there is a significant easing of tax burden for the middle-class. The Budget proposes to revamp tax slabs and rates across the board, under the new tax regime, while no change has been proposed in the tax slabs and rates under the old tax regime."

Let's look at the main changes that matter to you.

Income Tax Relief

By now, all of you would know that there is no tax applicable on incomes up to ₹12 lakh, other than income such as capital gains on which a special rate is applicable. This will effectively mean a limit of ₹12.75 lakh, including the standard deduction of ₹75,000 for the salaried. The ₹12 lakh limit is up from ₹7 lakh, which was announced in 2023 for the new tax regime.

Says Parveen Kumar, partner direct tax, Dewan P N Chopra & Co: "According to the earlier tax rate under the new regime, taxpayers having income up to ₹7 lakh were paying nil tax after taking a rebate of ₹25,000 under Section 87A of the Income-tax Act, 1961. Now that rebate has been increased, taxpayers having income up to ₹12 lakh (excluding special rate income) will pay nil tax, thus saving ₹80,000."