Finance Minister Nirmala Sitharaman has provided significant tax relief to the middle class, salaried individuals, and common taxpayers in the Union Budget 2025. With the new tax regime now offering zero tax liability on incomes up to ₹12.75 lakh, a large section of middle-class earners has welcomed the change.
All revisions in tax slabs and rates for the financial year 2025-26 apply exclusively to the new tax regime. This raises a key question for salaried taxpayers: Should they switch to the new regime, or does the old system—offering higher exemptions and deductions—still hold an advantage?
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So, which tax regime is more beneficial after Budget 2025?
According to EY, taxpayers should start by calculating the total deductions and exemptions they can claim under the old regime. If their gross income exceeds ₹24.75 lakh, the new tax regime is preferable only if their deductions and exemptions (excluding the standard deduction) are below ₹8 lakh.