The Indian government’s revised tax regime, effective April 1, 2025, introduces significant changes in rebates, tax slabs, and deductions for salaried individuals. With tax-free income increasing to ₹12 lakh for non-salaried individuals and ₹12.75 lakh for salaried taxpayers, the new structure aims to simplify tax calculations. This comparison of the old, existing new, and proposed new tax regimes highlights income tax liabilities for different salary levels, helping taxpayers assess the most beneficial option for their financial planning.
The Indian government is set to implement the proposed new tax regime starting April 1, 2025, bringing significant changes to income tax calculations. With taxpayers having the option to choose between the old, existing new, and proposed tax regimes, understanding the tax liability under each becomes crucial.
The Three Tax Regimes Explained
1. Existing New Tax Regime (FY 2024-25)
- Taxation starts from Rs 3 lakh income.
- After applying a tax rebate of Rs 25,000 (Section 87A), income up to Rs 7 lakh remains tax-free.
- Salaried individuals receive a standard deduction of Rs 75,000, effectively increasing their tax-free income.
- Tax Slabs:
- 15% for income between Rs 10-12 lakh.
- 20% for income between Rs 12-15 lakh.
- 30% tax rate for income above Rs 15 lakh.
2. Old Tax Regime
- Provides tax-free income up to Rs 5 lakh with a rebate of Rs 12,500.
- 20% tax rate for income exceeding Rs 5 lakh.
- 30% tax rate for income above Rs 10 lakh.
- Allows deductions under Section 80C, making it beneficial for taxpayers with investments and exemptions.
3. Proposed New Tax Regime (Effective April 2025)
- Income up to Rs 12 lakh is tax-free for non-salaried individuals.
- Maximum tax rebate limit increased from Rs 25,000 to Rs 60,000.
- Salaried individuals receive a Rs 75,000 standard deduction, making their tax-free income Rs 12.75 lakh.
- Marginal relief applies to those just above the tax-free threshold to limit their tax liability.
Comparing Tax Liabilities Across Income Levels
| Annual Income | Existing New Tax Regime (Rs) | Old Tax Regime (Rs) | Proposed New Tax Regime (Rs) |
| Rs 7.50 lakh | 0 | 54,600 | 0 |
| Rs 13 lakh | 88,400 | 1,95,000 | 26,000 |
| Rs 15 lakh | 1,30,000 | 2,57,400 | 97,500 |
| Rs 22.5 lakh | 3,56,200 | 4,91,400 | 2,53,500 |
| Rs 30 lakh | 5,90,200 | 7,25,400 | 4,75,800 |
| Rs 37.5 lakh | 8,24,200 | 9,59,400 | 7,09,800 |
What Does This Mean for Taxpayers?
- Low-income earners (up to Rs 7.50 lakh): The proposed new tax regime provides complete tax exemption.
- Middle-income earners (Rs 13-15 lakh): The proposed regime offers significant tax savings compared to both existing new and old regimes.
- High-income earners (above Rs 22.5 lakh): The proposed tax regime still offers savings, but the benefits narrow as income increases.
Key Takeaways
- The proposed tax regime provides higher tax-free limits and relief for marginal increases in income.
- While the old tax regime allows deductions, the new and proposed regimes offer a straightforward, no-exemption approach.
- Taxpayers should evaluate their financial situation, investment benefits, and liabilities before selecting the best-suited regime.
With tax season approaching, choosing the right tax regime can result in significant savings. Consult with a tax expert to optimize your tax planning under the new system.
