Is This the Government’s Final Push to Abandon the Old Tax Regime?

Aakhir Tak – In Shorts:

1. The Finance Minister announced in Budget 2025-26 that individuals earning up to Rs 12 lakh will pay no income tax, but only if they opt for the new tax regime.
2. This relief is only available to taxpayers who choose the new tax regime, leaving no benefits for those sticking to the old system.
3. The new tax regime requires less paperwork, making it more attractive to taxpayers.
4. The government is taking significant steps to phase out the old tax system and promote the new one.
5. Is this the end of the old tax regime? This question is on every taxpayer’s mind.

Aakhir Tak – In Depth:

The Appeal of the New Tax Regime:

In Budget 2025-26, Finance Minister Nirmala Sitharaman declared that individuals earning up to Rs 12 lakh annually would pay no tax under the new income tax regime. This is a major move by the government to encourage taxpayers to shift to the new system. While many taxpayers have welcomed this change, there is a lingering question: is this the final blow to the old tax regime?

Comparing the Old and New Tax Regimes:

The government introduced the new tax regime in 2020, which is designed to be simpler and require less paperwork. Unlike the old tax system, which offers various exemptions and deductions (such as 80C and 80D), the new system does not require taxpayers to submit proofs of investment. This makes it a much more convenient option, as it saves time and effort for the taxpayers.

Which Tax System Is More Beneficial?

For individuals with a higher income, the old tax regime provided the opportunity for significant savings through deductions on investments, but these benefits may no longer be as substantial under the current system. In contrast, the new tax regime offers substantial tax relief with reduced tax slabs and rebates, making it a more attractive option for many.

What Are the Implications for the Future?

One of the key concerns surrounding the new tax regime is whether the government will phase out the old system entirely. While the government has not officially made any statements about scrapping the old regime, the steps taken in Budget 2025-26 suggest that this might be the beginning of the end for the old tax structure. If the old tax regime is abolished, it could negatively impact smaller investment schemes that are currently tied to tax deductions, forcing individuals to rethink their savings strategies.

Aakhir Tak – Key Takeaways to Remember:

1. The Budget 2025-26 offers significant tax relief under the new income tax regime.
2. There will be no tax for incomes up to Rs 12 lakh under the new regime.
3. The old tax regime still allows for deductions on investments, but the new system does not.
4. The future of the old tax regime remains uncertain, with no official statement from the government yet.

Aakhir Tak Editor-in-Chief

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