The Union Budget 2025-26 continues to offer taxpayers the choice between the old and new tax regimes, each with distinct benefits. Finance Minister Nirmala Sitharaman reaffirmed the government’s push toward the new tax regime while retaining the old one for those who benefit from deductions and exemptions.

The old tax regime is based upon a progressive slab structure with tax rates ranging from 5 per cent to 30 per cent, depending on income levels. 

It is beneficial for taxpayers who want to claim various deductions under Section 80C (PPF, ELSS, EPF, life insurance), Section 80D (health insurance), and HRA for salaried individuals. These deductions help in reducing taxable income, making the old regime suitable for those who actively invest in tax-saving instruments.

Advertisment

Also read: Union Budget 2025: Nirmala Sitharaman's focus on Bihar sparks meme fest online

The new tax regime, introduced in Budget 2020 and revised in Budget 2023, provides lower tax rates but removes most exemptions and deductions.

However, it includes benefits such as a full tax rebate for individuals earning up to Rs 7 lakh under Section 87A. Additionally, a zero-tax liability now applies to those earning up to Rs 12 lakh, if they utilise standard deductions and the rebate effectively. 

This is because under the revised structure, individuals earning up to Rs 7 lakh do not pay tax, and those earning up to Rs 12 lakh can benefit from deductions like the Rs 50,000 standard deduction, further reducing their taxable income.