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Salaried individuals earning up to Rs 12 lakh may soon no longer need old-regime deductions, as the new tax system offers near-zero tax.
This year could be your last chance to claim those benefits. (representative image)
If you are a salaried employee earning up to Rs 12 lakh annually, this year might be the last time you benefit from deductions under the old tax regime. Starting from the next financial year (FY 2025–26 / AY 2026–27), the new tax regime will make income up to Rs 12 lakh almost tax-free, reducing the need for old-regime tax planning.
Currently, you still have the option to choose between the old and new tax regimes when filing your Income Tax Return (ITR) for FY 2024–25 (AY 2025–26). The deadline to file is September 15 this year. But with new changes coming in, many salaried individuals may shift permanently to the new regime next year.
What You Get Under the Old Regime
The old tax regime allows you to claim several deductions and exemptions:
– House Rent Allowance (HRA)
– Leave Travel Allowance (LTA)
– Interest on home loan (Section 24b)
– Deductions under Sections 80C to 80U (This includes savings in PPF, ELSS, LIC, tuition fees, etc.)
These benefits help reduce your taxable income but come with documentation and planning.
What the New Regime Offers
The new tax regime has fewer deductions but higher income thresholds for rebates. Here is how it compares:
– Rebate under Section 87A: Rs 5 lakh (old) vs Rs 7 lakh (new)
– Standard deduction: Rs 50,000 (old) vs Rs 75,000 (new)
– Maximum rebate: Rs 12,500 (old) vs Rs 25,000 (new)
While some deductions like the standard deduction (Section 16) apply to both regimes, popular ones like HRA, LTA, and home loan interest are only available under the old regime.
Under the new structure, only limited benefits such as employer contribution to NPS (Section 80CCD(2)) and Agniveer Corpus Fund (80CCH(2)) are allowed. Most other tax-saving instruments under Section 80C are excluded.
What This Means for You
The government is encouraging taxpayers to switch to the simpler new regime, which is more straightforward but doesn’t reward investment-based tax savings.
For those earning up to Rs 12 lakh, the new system will result in little to no tax, even without claiming deductions. So, if you are filing your return this year using the old regime, make sure you make the most of it, as it could be the last year these tax breaks are available to you.
A team of writers and reporters decodes vast terms of personal finance and making money matters simpler for you. From latest initial public offerings (IPOs) in the market to best investment options, we cover al…Read More
A team of writers and reporters decodes vast terms of personal finance and making money matters simpler for you. From latest initial public offerings (IPOs) in the market to best investment options, we cover al… Read More
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