Budget 2025: According to Finance Ministry data, about 72 per cent of the 7.28 crore taxpayers in AY 2024-25 adopted the new tax regime while filing ITR. These figures are before the deadline of July 31, 2024. In contrast, only 28 per cent of taxpayers opted for the old tax regime
Union Budget 2025 is due within a month. The government may also introduce incentives to taxpayers in this budget to promote the new tax regime. After the policy announced in the July budget, the NDA 3.0 government is expected to take further steps to promote the new tax framework in the upcoming full budget. Discussions between the Prime Minister’s Office and leading economists have emphasized the need to promote fiscal measures to boost spending. In these discussions, several steps have been considered, from reducing income tax liability to increasing financial support for daily expenditure.
72% taxpayers adopted the new tax regime in AY 2024-25
Expectations of improvements in the new tax regime have increased, especially considering that the government is trying to make it more taxpayer-friendly. According to Finance Ministry data, about 72 per cent of the 7.28 crore taxpayers in the assessment year 2024-25 adopted the new tax regime while filing ITR. These figures are before the deadline of 31 July 2024. In contrast, only 28 per cent of taxpayers opted for the old tax regime.
It is estimated that the proportion of ITRs filed under the old tax regime will reduce even further, as the government is increasing the benefits of the new tax regime in every budget update. Here we have explained the changes made in the new tax regime from its inception till now.
The new tax regime was introduced in 2020
Finance Minister Sitharaman first introduced the new tax regime in her Budget speech on February 1, 2020. This alternative option for personal income tax was designed to be “simplified” with lower tax rates. However, opting for this new regime means that taxpayers will have to give up some deductions and exemptions available under the previous tax system.
In her announcement, Finance Minister Sitharaman emphasized that the Income Tax Act is very complex, containing many exemptions and deductions, which has become cumbersome for taxpayers. She said that it is often necessary to seek professional help to understand the current income tax laws.
The Finance Minister said that the implementation of the new tax system will lead to huge savings for taxpayers. For example, a person with an annual income of Rs 15 lakh, who does not avail any deductions, will now have to pay only Rs 1,95,000, whereas under the previous system he had to pay Rs 2,73,000.
He also said that adopting the new tax structure is not mandatory. “Taxpayers have the option to choose whether they want to adopt the new tax system or not. Those who are currently availing higher deductions and exemptions under the Income Tax Act can choose to continue using them and remain under the old regime,” he said. The new tax system introduced in Budget 2020 consists of six taxable slabs with no deductions or exemptions.
New tax regime slabs in Budget 2020
| Taxable Income Slab (Rs) | Tax Rates |
| 0-2.5 Lakh | 0 |
| 2.5-5 Lakh | 5% |
| 5-7.5 Lakh | 10% |
| 7.5-10 Lakh | 15% |
| 10-12.5 Lakh | 20% |
| 12.5-15 Lakh | 25% |
| Above 15 Lakh | 30% |
Union Budget 2021
There was no change in income tax rates for individuals and corporations. Tax exemption on interest income on employees’ contributions to provident funds was limited to Rs 2.5 lakh.
Union Budget 2022
The new tax regime in the Union Budget 2022 introduced lower income tax slab rates and an increase in the number of income tax slabs compared to the old regime. However, the new regime offers limited exemptions and deductions.
Union Budget 2023
There were no changes to the tax regime in the 2021 and 2022 budget speeches. However, during the 2023 budget speech, the Finance Minister outlined a clear direction for the future of the new tax regime, stating that it would be the default option going forward.
The new tax regime became the default option on the ITR e-filing portal from assessment year 2024-25. Taxpayers still have the option to choose the old regime, but they have to make their choice before filing their returns. To attract more taxpayers, the Finance Minister made the new tax regime more attractive with the below initiatives-
- No tax for individuals with income up to Rs 7 lakh
- Taxable slabs reduced to 5
- Basic tax exemption limit increased from Rs 2.5 lakh to Rs 3 lakh
- Rs 50,000 for salaried individuals and pensioners and Rs 15,000 for family pension
- Introduction of standard deduction of
- Maximum tax rate reduced from 42.74% to 39%
New tax regime stab and rates in Budget 2023Â
| Taxable Income Slab (Rs) | Tax Rate |
| 0-3 Lakh | Zero |
| 3-6 Lakh | 5% |
| 6-9 Lakh | 10% |
| 9-12 Lakh | 15% |
| 12-15 lakhs | 20% |
| Above 15 Lakh | 30% |
Union Budget 2024
Finance Minister Sitharaman announced a new tax regime to make it more attractive for salaried employees and pensioners in her Budget speech in 2024. She made changes to the tax slabs and rates, as well as increased the standard deduction limit for this group from Rs 50,000 to Rs 75,000.
In addition, under the new tax regime, private sector employees are now eligible to claim a deduction of up to 14% of their basic salary for investments made in the National Pension System (NPS). The standard deduction limit for family pension has been increased from Rs 15,000 to Rs 25,000 in the budget.
New tax regime slabs in Budget 2024
| Taxable Income Slab (Rs) | Tax Rate |
| 0-3 Lakh | Zero |
| 3-7 Lakh | 5% |
| 7 – 10 Lakh | 10% |
| 10-12 lakhs | 15% |
| 12-15 lakhs | 20% |
| Above 15 Lakh | 30% |
