Budget 2025: Ahead of Budget 2025, India will be celebrating 75 years of Republic Day on January 26, 2025. Republic Day marks the adoption of the Constitution of India, meaning the establishment of three pillars as Sovereign, Democratic and Republic state. That being said, there are host of tax incentives that are expected from Finance Minister Nirmala Sitharaman during her Budget 2025 speech, which could benefit and hence the living cost of lower to middle class society in the country. Here are key expectations of tax reliefs in Budget FY26, and also let’s understand the difference between new income and old income tax regime!

Sonal Badhan, Economist, Bank of Baroda said, “For the fiscal year 2025-26, Union budget will skilfully balance fiscal consolidation, and measures for advancing growth.”

Badhan added, ” In order to support growth, amidst slowing global growth scenario, government will focus on boosting consumption (both rural and urban). For this, enhanced spending on MGNREGA, PM KISAN, and PMAY can be expected. In addition, certain tax incentives may also be announced. Driving investment growth will be another focus area for the government. We thus expect Rs 1-1.5 lakh crore incremental increase in capex for the next year over the revised estimate for FY25.”

In terms of tax reliefs, Bank of Baroda economists expect the following:

1. To help sustain consumption growth, and lighten the burden of consumers due to elevated prices in recent years, the government may increase limits under standard deductions.

2. Savings under section 80C can be increased from Rs 1.5 lakh to Rs 2.5 lakh. The limit for additional savings under pension contribution may also be hiked.

3. Savings under 80D for health insurance premiums can be hiked from Rs 25,000 to Rs 50,000, given the rising cost of healthcare and insurance premiums.

4. Life insurance premiums can also be included under 80D exemption, to increase penetration.

5. To attract more taxpayers to adopt the new tax regime, the tax rate can be reduced for under the Rs 15 lakh income bracket.

6. To boost sustainable tourism, tax incentives for hotels/homestays adopting environment-friendly practices can also be expected.

7. Custom duties on raw materials may be reduced to correct the inverted duty structure. Automobile parts, textiles, machinery components and the IT hardware sector may benefit.

Currently, Indian salaried individuals have the option to pay taxes and seek benefits under the old and new regimes. However, as per the latest ClearTax data, in the ITR filing for Assessment Year FY24-25, a total of 7.28 crore taxpayers filed their income tax returns under the new regime. This data indicated about 72% of the taxpayers opted for the new tax regime compared to 28% who were still on the old tax regime.

Differences Between New Vs Old Tax Regimes, as per Income Tax Department:

As per the IT department, tax slabs and rates are different in old and new tax regimes. Various deductions and exemptions are allowed in the Old tax regime. The new regime offers lower rates of taxes but permits limited deductions and exemptions.

New Tax Regime Vs Old Tax Regime, Which Is Better?

The department’s FAQs report said the option to choose between two regimes may vary from person to person. It is advisable to do a comparative evaluation and analysis under both regimes and then choose as per requirement. Taxpayers can broadly estimate and compare tax liability under the new and the old tax regime using Income and Tax Calculator on the Income Tax Portal.

Calculate The Difference Between Old And New Tax Regime, as per Bajaj Finserv:

Annual Taxable Income Slabs	Old Tax Regime Slabs AY FY25-26	Surcharge	Annual Taxable Income Slabs	New Tax Regime Slabs AY FY25-26	Surcharge
Upto Rs 2,50,000	Nil	Nil	Upto Rs 3,00,000	Nil	Nil
Rs 2,50,001 To Rs 5,00,000	5% Above Rs 2,50,000	Nil	Rs 3,00,001 To Rs 7,00,000	5% On Income Above Rs 3,00,000	Nil
Rs 5,00,001 To Rs 10,00,000	Rs 12,500 + 20% Above Rs 5,00,000	Nil	Rs 7,00,001 To Rs 10,00,000	Rs 20,000 + 10% On Income Above Rs 7,00,000	Nil
Rs 10,00,001 To Rs 50,00,000	Rs 1,12,500 + 30% Above Rs 10,00,000	Nil	Rs 10,00,001 To Rs 12,00,000	Rs 50,000 + 15% On Income Above Rs 10,00,000	Nil
Rs 50,00,001 To Rs 100,00,000	Rs 1,12,500 + 30% Above Rs 10,00,000	10%	Rs 12,00,001 To Rs 15,00,000	Rs 80,000 + 20% On Income Above Rs 12,00,000	Nil
Rs 100,00,001 To Rs 200,00,000	Rs 1,12,500 + 30% Above Rs 10,00,000	15%	Rs 15,00,001 To Rs 50,00,000	Rs 1,40,000 + 30% On Income Above Rs 15,00,000	Nil
Rs 200,00,001 To Rs 500,00,000	Rs 1,12,500 + 30% Above Rs 10,00,000	25%	Rs 50,00,001 To Rs 100,00,000	Rs 1,40,000 + 30% On Income Above Rs 15,00,000	10%
Above Rs 500,00,000	Rs 1,12,500 + 30% Above Rs 10,00,000	37%	Rs 100,00,001 To Rs 200,00,000	Rs 1,40,000 + 30% On Income Above Rs 15,00,000	15%
			Above Rs 200,00,001	Rs 1,40,000 + 30% On Income Above Rs 15,00,000	25%

As per the new guidelines, it is mandatory for the employee to intimate the employer regarding his intended tax regime during the year. If the employee does not make an intimation, it shall be presumed that the employee continues to be in the default tax regime and has not exercised the option to opt out of the new tax regime. Thus, the employer shall deduct tax in accordance with the rates provided under section 115BAC.

New tax regime is the default tax regime imposed by the government.