Opted for new tax regime? Here's a look at key benefits, what you can claim

India Today

06-05-2025

If you're planning to go for the new tax regime this year, you're probably wondering what I can still claim under it? Well, the new system does offer lower tax rates, but it also cuts down many of the deductions and exemptions that people often used to save on taxes.Still, it's not all bad. Let's walk through what's allowed, what's not, and whether it's worth switching.advertisementFIRST, WHAT IS THE NEW TAX REGIME?The government brought in the new tax regime to make things simpler for taxpayers. It gives you more tax slabs with lower rates, which means you may end up paying less tax. However, you lose out on most tax-saving deductions like HRA, LTA, and 80C investments.
In short, you get fewer options to lower your taxable income, but the rates themselves are lighter.Finance Minister, Nirmala Sitharaman, in her Budget 2025 speech said, 'Slabs and rates are being changed across the board to benefit all taxpayers. The new structure will substantially reduce the taxes of the middle class and leave more money in their hands, boosting household consumption, savings and investment.'LOWER TAX RATES UNDER THE NEW REGIMEUnder the old tax regime, the basic exemption limit is Rs 2.5 lakh, and the highest tax rate of 30% applies to income above Rs 10 lakh.advertisementCA (Dr) Suresh Surana stated, "Contrary to the 4 tax slab rates of the old tax regime, the new tax regime is wider in scope with its 7 tax slab with rates ranging from 5% to 30% with an exemption limit up to Rs. 4,00,000 and the highest tax rate of 30% is applicable on income above Rs. 24,00,000."
Credit: CA (Dr) Suresh Surana
SPECIAL REBATE UNDER SECTION 87A'Under the old tax regime resident individuals with total income up to Rs.5,00,000 would be subjected to a Nil effective tax rate by way of claiming full rebate u/s 87A of IT Act,' said Surana.'However, w.e.f. FY 2025-26, individuals opting for new tax regime can claim full tax rebate of upto Rs. 60,000 u/s 87A of IT Act for total income up to Rs.12,00,000,' he added.Under the new regime, you can now get a full tax rebate if your income is up to Rs 7 lakh. But from FY 2025–26, this rebate will be extended to Rs 12 lakh, giving a much-needed relief to middle-class taxpayers.AVAIL MARGINAL RELIEFadvertisementThe new tax regime also offers marginal relief under Section 87A. This helps people earning just over Rs 12 lakh by making sure they don't pay much more tax than someone earning Rs 12 lakh. It ensures they only pay tax on the extra amount, keeping things fair.According to Surana, 'Under the New Tax Regime, marginal relief u/s 87A ensures that individuals with income marginally exceeding Rs 12 lakhs are not subjected to a disproportionately high tax burden. It limits the additional tax payable to the exact amount by which the income exceeds the rebate threshold, thereby maintaining tax equity.'He explained that if a person earns slightly more than Rs 12 lakh, they will only be taxed on the extra amount, thereby maintaining a net income (post-tax) equal to that of an individual earning exactly Rs 12,00,000.LOWER SURCHARGE RATES FOR SUPER-RICHThe surcharge has also been reduced in the new regime. Earlier, those earning over Rs 5 crore had to pay a 37% surcharge, but now it's been cut to 25%, bringing the total tax rate down from 42.74% to 39%.INCREASED STANDARD DEDUCTIONThe government has increased the limit on standard deduction from Rs 50,000 to Rs 75,000.advertisementFAMILY PENSION DEDUCTION INCREASEDThe limit on maximum deduction under family pension has been increased from Rs. 15,000 to Rs. 25,000.INCLUSION OF EMPLOYER'S CONTRIBUTIONThe limit for claiming a deduction on your employer's contribution to the pension scheme (Section 80CCD(2)) has increased from 10% of your salary to 14%.DEDUCTION FOR CONTRIBUTIONS MADE TO THE NPS VATSALYAThe Finance Minister mentioned in her Budget 2025 speech that, 'It is proposed to extend the tax benefits available to the National Pension Scheme (NPS) under sub-section (1B) of section 80CCD of the Income-tax Act, 1961 to the contributions made to the NPS Vatsalya accounts, as applicable.'CAN YOU SWITCH BETWEEN REGIMES?Yes, if you're a salaried employee, you can switch between the old and new regime every year. You just need to tell your employer at the start of the financial year. If you don't, they'll deduct tax as per the new default regime.'Individual taxpayers can switch between the old and new tax regime on a year-on-year basis, whereas those individual taxpayers deriving any income from business or profession who have exercised the option of opting out of the new tax regime u/s 115BAC could exercise the option of opting back to the said new tax regime only once,' mentioned Dr Surana.advertisementMeanwhile, the new tax regime may suit you if you don't claim many deductions or prefer a simpler tax filing process. But if you have a home loan, insurance, or investments under 80C, the old regime might still save you more.However, at the end of the day, it's your money, so take a moment, do a quick comparison, and make the choice that fits your situation best.Must Watch