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Comprehensive Guide to Income Tax Regimes in India: Old, New, and Proposed (2025-26)
Optimize Your Tax Savings with Updated Slabs, Deductions, and Calculations
Introduction
Understanding India’s income tax regimes is critical for maximizing savings. With the 2025-26 budget introducing a proposed regime, taxpayers now have three options: the Old Regime, New Regime (2023-24), and Proposed Regime (2025-26). This article compares all three, calculates tax liability for a ₹32.36 lakh salary, and identifies the most beneficial option.
1. Old Tax Regime (FY 2023-24)
Key Features:
- Deductions/Exemptions: HRA, LTA, Section 80C (₹1.5L), 80D (₹50k), home loan interest (₹2L), and standard deduction (₹50k).
- Tax Slabs:
- Up to ₹2.5L: 0%
- ₹2.5–5L: 5%
- ₹5–10L: 20%
- Above ₹10L: 30%
Calculation for ₹32.36L Salary:
| Component | Deduction (₹) |
|---|---|
| Gross Salary | 32,36,800 |
| Standard Deduction | 50,000 |
| Section 80C | 1,50,000 |
| Section 80D (Health) | 50,000 |
| Section 24(b) (Home Loan) | 2,00,000 |
| NPS (80CCD(1B)) | 50,000 |
| Professional Tax | 2,500 |
| Taxable Income | 27,34,300 |
Tax Liability:
- Up to ₹2.5L: ₹0
- ₹2.5–5L: ₹12,500
- ₹5–10L: ₹1,00,000
- Above ₹10L: ₹5,20,290 (30% of ₹17.34L)
- Total Tax: ₹6,32,790 + 4% cess (₹25,311) = ₹6,58,100
2. New Tax Regime (FY 2023-24)
Key Features:
- Deductions: Only ₹50k standard deduction.
- Tax Slabs:
- Up to ₹3L: 0%
- ₹3–6L: 5%
- ₹6–9L: 10%
- ₹9–12L: 15%
- ₹12–15L: 20%
- Above ₹15L: 30%
Calculation for ₹32.36L Salary:
| Component | Deduction (₹) |
|---|---|
| Gross Salary | 32,36,800 |
| Standard Deduction | 50,000 |
| Taxable Income | 31,86,800 |
Tax Liability:
- Up to ₹3L: ₹0
- ₹3–6L: ₹15,000
- ₹6–9L: ₹30,000
- ₹9–12L: ₹45,000
- ₹12–15L: ₹60,000
- Above ₹15L: ₹5,06,040 (30% of ₹16.86L)
- Total Tax: ₹6,56,040 + 4% cess (₹26,242) = ₹6,82,282
3. Proposed Tax Regime (2025-26)
Key Changes:
- Standard Deduction: Increased to ₹75,000.
- Tax Slabs:
- Up to ₹4L: 0%
- ₹4–8L: 5%
- ₹8–12L: 10%
- ₹12–16L: 15%
- ₹16–20L: 20%
- ₹20–24L: 25%
- Above ₹24L: 30%
Calculation for ₹32.36L Salary:
| Component | Deduction (₹) |
|---|---|
| Gross Salary | 32,36,800 |
| Standard Deduction | 75,000 |
| Taxable Income | 31,61,800 |
Tax Liability:
- Up to ₹4L: ₹0
- ₹4–8L: ₹20,000
- ₹8–12L: ₹40,000
- ₹12–16L: ₹60,000
- ₹16–20L: ₹80,000
- ₹20–24L: ₹1,00,000
- Above ₹24L: ₹2,28,540 (30% of ₹7.61L)
- Total Tax: ₹5,28,540 + 4% cess (₹21,142) = ₹5,49,682
Comparison of Tax Liability
| Regime | Tax Payable (₹) | Savings vs. Old Regime |
|---|---|---|
| Old (2023-24) | 6,58,100 | – |
| New (2023-24) | 6,82,282 | -₹24,182 |
| Proposed (2025-26) | 5,49,682 | ₹1,08,418 |
Key Takeaways
- Old Regime (2023-24): Best if you can maximize deductions (e.g., home loan, investments).
- New Regime (2023-24): Suitable for those with minimal deductions.
- Proposed Regime (2025-26): Most beneficial due to revised slabs and higher standard deduction, saving ₹1.08L vs. the old regime.
FAQs
Q: Can I claim deductions in the proposed 2025-26 regime?
A: No, only the ₹75,000 standard deduction is allowed.
Q: Which regime should I choose?
A: If the proposed regime is implemented, it offers the lowest liability. For FY 2023-24, the old regime is better for high earners with deductions.
Q: Are HRA/LTA available in the new regime?
A: No. The new and proposed regimes exclude most exemptions.
Conclusion
The proposed 2025-26 regime simplifies taxes and offers significant savings for ₹32.36L earners. However, always evaluate deductions under the old regime to optimize savings. Consult a tax advisor for personalized planning.
