ITR Filing: What changed in income tax last year? Understand the math behind the old vs. new tax regimes before filing your ITR..

ITR Filing: What changed in income tax last year? Understand the math behind that. Significant changes to the income tax system have been introduced following the Central Government's Union Budget 2025, impacting millions of taxpayers filing returns for the 2025-26 financial year. Notably, the new tax regime has been made more attractive, offering expected relief to the middle class.

**No tax on income up to ₹12 lakh**
The biggest advantage of the new tax system is that the tax liability on an annual income of up to ₹12 lakh can effectively be zero. This has been made possible through an increased rebate (under Section 87A) and the standard deduction. For salaried individuals, this limit can effectively reach around ₹12.75 lakh after accounting for the ₹75,000 standard deduction.

**New Tax Regime Slabs (FY 2025-26)**
The government has structured the new tax regime into 7 slabs:

*   ₹0 – ₹4 lakh: No tax
*   ₹4 – ₹8 lakh: 5%
*   ₹8 – ₹12 lakh: 10%
*   ₹12 – ₹16 lakh: 15%
*   ₹16 – ₹20 lakh: 20%
*   ₹20 – ₹24 lakh: 25%
*   Above ₹24 lakh: 30%

The objective of this structure is to simplify taxation and lower tax rates.

**What about the old tax regime?**
While the old tax system has fewer slabs, it offers various deductions:

*   Up to ₹2.5 lakh: No tax
*   ₹2.5 – ₹5 lakh: 5%
*   ₹5 – ₹10 lakh: 20%
*   Above ₹10 lakh: 30%

It allows for deductions such as Section 80C, HRA, and home loan interest, which can help reduce the overall tax liability.

**New vs. Old: Which is better?** New Tax Regime:
* Lower tax rates
* Simplified process
* However, most exemptions are not available
Old Tax Regime:
* Higher deductions and exemptions
* But higher tax rates

According to experts, the old system can be beneficial for those with significant investments and tax-saving avenues, whereas the new system is proving better for those with lower investment levels.

If your income is around ₹12 lakh and you do not invest heavily, the new tax regime could be more beneficial for you. Conversely, if you fully utilize deductions under Section 80C, HRA, and other exemptions, the old system might still be the better option.e old vs. new tax regimes before filing your ITR..

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