**Budget 2025: Will the Old Tax Regime be Abolished?**
As we eagerly await the unveiling of the Budget 2025, the burning question on everyone’s mind is: will the old tax regime be abolished, ushering in a new era of tax structure in India? The answer to this remains shrouded in uncertainty, leaving taxpayers on edge about what changes may lie ahead.
**The Current Tax Landscape: Old vs New Regime**
Currently, India’s income tax framework presents two distinct regimes: the old regime, brimming with exemptions and deductions, and the new tax regime, boasting simplified, lower tax rates but limited benefits. The new Income-Tax (I-T) regime, rolled out from the financial year 2020-21 for individual taxpayers, has become the default option, unless taxpayers choose otherwise.
The Finance Act of 2024 sweetened the deal for the new regime, offering concessional slab rates for incomes up to Rs 15 lakh with revamped brackets. Under the new regime, taxpayers can avail a rebate under Section 87A of up to Rs 25,000 if their total income stays under Rs 7 lakh, while the old regime permits a rebate of up to Rs 12,500 for incomes under Rs 5 lakh.
**The Battle of Deductions and Exemptions**
While the new regime presents its advantages, it comes with a catch – the inability to claim various deductions and exemptions. For salaried employees, this translates to missing out on tax benefits like House Rent Allowance, Leave Travel Allowance, and deductions under Chapter VI-A for investments such as EPF.
**Tax Slab Rates Comparison**
Let’s break down the tax slab rates under both regimes to see how they stack up:
Income slab (in Rs) | Old tax regime (%) | Income slab (in Rs) | New tax regime (%)
— | — | — | —
Up to 2,50,000 | Nil | Up to 3,00,000 | Nil
2,50,001 – 5,00,000 | 5% | 3,00,001 – 7,00,000 | 5%
5,00,001 – 7,50,000 | 20% | 7,00,001 – 10,00,000 | 10%
7,50,001 – 10,00,000 | 20% | 10,00,001 – 12,50,000 | 30%
10,00,001 – 12,00,000 | 15% | 12,50,001 – 15,00,000 | 30%
Above 15,00,000 | 30% | Above 15,00,000 | 30%
**Expert Insights: The Need for Deduction Expansion**
Tax experts are calling for a more inclusive approach in the new tax regime, advocating for deductions that cater to essential needs like medical expenses. According to Kinjal Bhuta, a chartered accountant, deductions for Mediclaim premiums and health check-ups should be extended to all taxpayers, regardless of the regime chosen.
**Ensuring Equity for Differently Abled Individuals**
Another critical aspect highlighted by tax professionals is the need to extend deductions to differently abled individuals. Vishesh Sangoi, a partner at DPS & Co, emphasizes the importance of deductions under section 80U for disabled individuals, pointing out the unique financial challenges they face. By excluding these deductions in the new regime, the tax system risks overlooking the specific needs of this segment of the population.
In a world where tax laws can seem complex and overwhelming, it’s crucial to remember the human impact behind these numbers and regulations. As we navigate the intricacies of Budget 2025, let’s strive for a tax system that not only promotes financial stability but also upholds principles of fairness and inclusivity.
