Which Regime is More beneficial New/ Old: Budget 2025

Which Regime is More beneficial New/ Old: Budget 2025

The Most Asked Question after Budget 2025 i.e Question: Which Regime is More Beneficial, New or Old ?

Answer: If you have deductions u/s 80C, 80D and Interest on Home Loan u/s 24 and Your Income was taxable at NORMAL rate of tax then Old Regime is Never Beneficial to you, it means in most of the such cases New Regime is Always Beneficial. Old Regime is beneficial in some cases like Reasoned about tax regimes comparison, Here’s a quick summary of the analysis:

• General Scenario: If you claim deductions under sections 80C, 80D and/or home loan interest under section 24, and your income is taxed at the normal rates, then the New Regime usually comes out ahead.
• When the Old Regime Wins:When your net taxable income (after deductions) is around or below INR 5,00,000/-—especially if you have special income like business income or STCG—the Old Regime can be more beneficial. This is mainly due to the 87A rebate.
• Example 1:
  • Income Composition:
    • Business Income: INR 4,00,000/-
    • STCG after 23rd July: INR 1,00,000/-
    • Total Taxable Income: INR 5,00,000/-
  • Tax Calculation:
    • Old Regime:
      • Base Tax: INR 27,500
      • 87A Rebate: INR 12,500
      • Tax Payable: INR 15,000
      • Cess @ 4%: INR 600
      • Total Tax: INR 15,600
    • New Regime:
      • Base Tax: INR 20,000
      • Cess @ 4%: INR 800
      • Total Tax: INR 20,800
• Example 2:
  • Income Composition:
    • Business Income: INR 6,00,000/-
    • STCG after 23rd July: INR 1,00,000/-
    • Deductions:
      • 80C: INR 1,50,000/-
      • 80D: INR 50,000/-
    • Net Taxable Income: INR 5,00,000/-
  • Tax Calculation (similar to Example 1):
    • Old Regime: Total Tax = INR 15,600
    • New Regime: Total Tax = INR 20,800
• Conclusion:
  • New Regime: Generally more beneficial if you don’t have significant deductions or if your taxable income is above the INR 5,000,000/- threshold.

• • Old Regime: Can be beneficial when your net taxable income is around or below INR 5,00,000/- (after deductions) due to the impact of the 87A rebate.
  • if there is a special income and total taxable income after deductions, if any is up to INR 5,00,000/-, then due to availability of rebate u/s 87A in Old old regime, the old regime is beneficial in such cases but if income was taxable an a normal rate then in most of the cases, New new regime is Beneficial

Financial and Tax Reforms

• Global Capability Centres (GCCs): A national guidance framework will be offered to help states promote GCCs and enhance their growth.
• Centralized KYC System: A centralized system will be introduced to streamline the Know Your Customer process across financial institutions.
• Jan Vishwas 2.0 Bill: This bill aims to decriminalize over 100 provisions in existing laws to reduce legal complexities.
• Grameen Credit Score: Banks will be required to maintain a credit score for self-help groups to facilitate better financial access and support.
• Insurance FDI Increase: Foreign Direct Investment in the insurance sector will be hiked from 74% to 100% to attract more foreign investment.

Fiscal Measures

• The fiscal deficit is projected at 4.4% of GDP. The government proposes the removal of seven tariff rates, leaving only eight remaining, to simplify the tax structure.

Tax Reforms

• Income Tax Reforms: The new income tax bill will retain nearly half of the existing provisions and introduce personal income tax reforms focusing on the middle class. It will also rationalize the Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) regime by reducing the number of rates and adjusting thresholds.
• TCS and TDS Adjustments: The threshold limit for TCS on Liberalized Remittance Scheme (LRS) remittances has been increased from ₹7 lakh to ₹10 lakh. The TDS threshold limit on rent has been raised to ₹6 lakh. Additionally, TCS on sales has been removed.
• Transfer Pricing Scheme: A scheme will be introduced for determining the arm’s length price of international transactions for a block period of three years to streamline transfer pricing and provide an alternative to yearly examinations.
• National Savings Scheme: Tax exemption will be provided on withdrawals made by individuals on or after August 29, 2024.
• Charitable Trusts Compliance: The compliance burden for small charitable trusts and institutions will be reduced by increasing their registration period from five years to ten years.
• Self-Occupied Properties: Taxpayers will be allowed to claim the annual value of two self-occupied properties as nil without any conditions.

Key Documents for your Full Read, the Budget 2025

The Union Budget 2025-2026, presented by Finance Minister Nirmala Sitharaman on February 1, 2025, encompasses several key documents that provide comprehensive insights into the government’s financial plans and policies. Here are the primary documents for your reference:

1. Finance Bill 2025: This bill outlines the legal amendments required to implement the budget’s financial proposals. Finance Bill 2025

2. Finance Minister’s Speech: The speech delivered by the Finance Minister during the budget presentation, detailing the government’s economic agenda and key initiatives. Finance Minister’s Speech

3. Memorandum Explaining the Provisions in the Finance Bill: This document provides detailed explanations of the provisions included in the Finance Bill. Memorandum Explaining the Provisions in the Financial Bill

4. Key to Budget Document, 2025: A guide that explains the structure and components of the budget documents, aiding in their understanding.Key to Budget Document, 2025

5. Budget Highlights (Key Features): A summary of the main features and initiatives proposed in the budget. Budget Highlights (Key Features)

6. Expenditure Budget (Full): A comprehensive account of the government’s expenditure across various ministries and departments. Expenditure Budget (Full)