New Tax Regime 2025: How Much Tax Can You Save? Here's a Simple Way to Find Out

The start of the financial year brings with it an important decision for salaried employees—which income tax regime to choose: the old or the new one. If you’re a salaried individual, you must inform your employer’s finance department about your preferred regime by mid-April. The chosen regime will then determine the monthly TDS (Tax Deducted at Source) from your salary.

🆕 What’s New in the 2025 Tax Regime?

The new income tax regime, effective from April 1, 2025, offers simplified tax slabs and a higher basic exemption limit, making it attractive for many taxpayers, especially those who don’t claim multiple deductions.

Here are the key highlights of the updated new tax regime:

• No tax on income up to ₹4 lakh.

• Zero tax liability for annual income up to ₹12 lakh after rebates.

• Revised tax slabs ensure lower tax rates, even for higher incomes.

• No need to claim deductions like HRA, 80C, or home loan benefits.

💡 Who Should Choose the New Tax Regime?

The new system is especially beneficial for individuals who do not claim multiple exemptions and deductions. According to a Deloitte India analysis, a person earning ₹24 lakh annually would benefit from the old regime only if they claim deductions worth ₹8 lakh or more—which is not easy for many taxpayers.

Hence, if you do not have large investments or deductions, the new tax regime might help you save more and file taxes with less paperwork.

📊 New Tax Regime: Latest Tax Slabs for FY 2025–26

• ₹0 to ₹4 lakh – 0% Tax

• ₹4 lakh to ₹8 lakh – 5% Tax

• ₹8 lakh to ₹12 lakh – 10% Tax

• ₹12 lakh to ₹16 lakh – 15% Tax

• ₹16 lakh to ₹20 lakh – 20% Tax

• ₹20 lakh to ₹24 lakh – 25% Tax

• Above ₹24 lakh – 30% Tax

🧮 Tax Calculation Example (Income: ₹20 lakh)

Let’s understand how tax will be calculated under the new regime for a ₹20 lakh annual salary.

1. Standard deduction of ₹75,000 is subtracted →
   Taxable income = ₹19.25 lakh

2. Apply slab rates:

   • ₹0 to ₹4 lakh – No tax

   • ₹4 to ₹8 lakh – 5% of ₹4 lakh = ₹20,000

   • ₹8 to ₹12 lakh – 10% of ₹4 lakh = ₹40,000

   • ₹12 to ₹16 lakh – 15% of ₹4 lakh = ₹60,000

   • ₹16 to ₹19.25 lakh – 20% of ₹3.25 lakh = ₹65,000

3. Total tax before cess = ₹1.85 lakh

4. 4% cess on ₹1.85 lakh = ₹7,400

5. Final tax payable = ₹1,92,400

You can easily replicate this method using your own income figure and apply the respective slab rates.

✅ Final Takeaway

Choosing between the old and new tax regimes boils down to how much you invest and how many deductions you claim. If you don’t maximize tax-saving investments, the new regime could reduce your tax burden while simplifying compliance. Don’t forget to do a quick tax calculation before informing your HR!