New Financial Year, New Plan: When To Keep Investing In Tax-Saving Products Even Under New Regime

With recent changes in Budget 2025, tax planning could be simpler, but choosing between the new and old tax regimes requires careful consideration. Given that the new regime will be better for most of you, should you discontinue your tax-saving investments?

- Anuradha Mishra

As the calendar rolls over to April 2025, a new financial year begins, bringing new opportunities for taxpayers to review their financial goals. Tax planning is one of the most important parts of this process, as it helps you to make smart financial decisions to align with your goals and future security.

The tax structure in India has seen major changes in recent years, with the government gradually pushing for a simplified tax system. In Union Budget 2020, the government introduced the new tax regime (NTR), and consecutive Budgets have sought to make it more attractive than the old tax regime (OTR), though OTR trumped NTR in a lot of cases until FY25 because of the tax deductions it offered on investments in certain instruments.

This year, the story may be different. If you are choosing NTR for FY2025-26, do not make the mistake of discontinuing your existing investments in tax-saving instruments that still fit into your overall plan. Read on to figure out which regime is right for you, and the instruments you must keep investing in even if you opt for NTR.

NEW REGIME SHINES

Until FY24-25, OTR trumped NTR for most income groups, given the wide array of deductions and exemptions. However, for FY26, the Budget 2025 announcements have flipped the tables. Now, NTR is more attractive than OTR in most cases.

Budget 2025 has increased the tax rebate and revised income tax slabs under NTR, effectively making salaries up to ₹12 lakh tax-free (see Budget 2025 Changes). Unless you avail of steep deductions of more than ₹7 lakh, you will not be able to break even with NTR (see When Should You Opt For OTR?).