close
close

Old Tax System: Time to let go after a budget for 2025 changes?

Old Tax System: Time to let go after a budget for 2025 changes?

Union budget 2025 was introduced Main changes in the new income tax systemIt makes him more attractive for middle -class taxpayers.

The tax -free income limit has been raised to 12 LAKH RS, and with a standard deduction of RS 75,000 RS is currently the limit of exclusion of the RS 12.75 Lakh.

However, the old tax system has not been changed, which led many to questioning Is it still useful for taxpayers.

New tax system and an old tax system

In the past, many taxpayers preferred an old tax system because he allowed them to apply for deductions In the case of expenses such as rent for a house, interest on a housing loan and investments in programs such as Public Provident Fund (PPF) and Provident Fund (EPF).

The new tax system, introduced in 2020, offered lower tax rates, but no deductions. Initially, it was not so popular because many taxpayers relied on deductions to reduce tax burdens.

But thanks to the latest changes in the 2025 budget, the new regime has become much more attractive.

According to the new tax system, people who earn up to 12 LAKH will pay zero tax. Even people earning above 12 Lakh will benefit from lower tax rates compared to the old regime.

The old regime remains useful only for taxpayers who have high deductions, such as interest on a housing loan or large tax -saving investments.

Old tax system losing significance?

Tax experts believe that the government is pushing taxpayers towards a new tax system, which makes the old almost unnecessary.

Ankit Jain, a partner at Ved Jain & Associates, said: “In the case of new tax discs, the old tax system becomes almost irrelevant. People who earn up to 12 LAKH naturally decide on a new system because it does not apply to tax. Even for not applying. People earning above 12 lakh, new tax rates make it more beneficial.

Pallav Pradiumn Narang, a partner at CNK, pointed out that the new regime is simpler and avoids problems with tax -saving investments.

“With a tax -free limit raised to 12 LAKH, the old tax system seems to be disappearing. It is unlikely to add people with rent.

The government explained that it wants more people to go to a new tax system. While the new system was initially optional, constant changes to make it more beneficial, suggest that it can become a default system in the future.

“The increase in tax -free limit from 7 LAKH RS to 12 LAKH as part of the new tax system shows the government’s strong pursuit of taxpayers from the old system. Because the old regime has not seen any new deductions or releases, its significance decreases quickly, ‘said Nisarg Desai, partner of Gandhi Law Associates.

Published on:

February 4, 2025