Union Budget 2025 | Old tax regime continues, but most are likely to shift to new regime

New Delhi: A significant increase in rebates under the new tax regime with income up to Rs 12.75 lakh becoming tax-free is likely to virtually bring the curtain down on the old tax regime, even though the government announced that the options would remain open for the taxpayers to choose between the two.

“The scheme (old tax regime) is available, but we expect that almost everyone will shift now (to the new tax regime),” said Finance Secretary Tuhin Kanta Pandey at a post-Budget press conference.

He said nearly 75 per cent of taxpayers had already moved to the new tax regime. As per the official data, 8.18 crore income tax returns were filed in the current financial year till December 31.

Speaking at the press conference, Finance Minister Nirmala Sitharaman emphasised that the old tax regime would continue.

The government has gradually made the new tax regime, introduced in 2020-21, attractive by lowering tax rates and enhancing rebates.

In 2023, the “nil tax” slab under the new tax regime was enhanced to Rs 7 lakh from Rs 5 lakh.

In the 2025-26 Union Budget, Sitharaman announced to further raise this to Rs 12 lakh.

Apart from this, a standard deduction of Rs 75,000 is also provided to salaried persons.

This means a salaried person with an income of up to Rs 12.75 lakh will have zero tax liability under the new tax regime.

However, the finance minister has not announced any relief for taxpayers opting for the old tax regime.

Sitharaman said nearly 1 crore people would be required to pay no tax due to the increase in the nil tax slab from Rs 7 lakh to Rs 12 lakh.

The nil tax is due to tax rebates. Otherwise, the basic exemption is Rs 4 lakh.

She said the rebates provided in the income tax would put more money in people's pockets.

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Union Budget 2025 | Nirmala Sitharaman, as Finance Minister, presented her record 8th Union Budget this time. While inflation has burnt a hole in the pockets of 'aam janata', the Modi govt gave income tax relief for those making up to Rs 12 lakh per year in salaried income. Track the latest coverage, live news, in-depth opinions, and analysis only on Deccan Herald. Also follow us on WhatsApp, LinkedIn, X, Facebook, YouTube, and Instagram.