The Modi government in the Union Budget 2025-26 announced major changes in tax slabs and rates to benefit all taxpayers under the New Tax Regime.
Under the new tax system, now there will be no tax on income up to Rs 12.75 lakh, including standard deduction of Rs 75,000.
After these changes in tax slabs and rates, many taxpayers have either switched or are planning to switch to the New Tax Regime. There is also a common misconception among many income tax filers that they can be benefitted from the changes announced in the budget when they file their next income tax return (ITR).
Are the changes announced in the recent budget applicable for 2025 ITR filing?
The changes in slabs and tax rates may sound relieving, but these new provisions will not be applicable when you file your tax return in July this year.
The reason is this year you will file a tax return for the financial year 2024-25, which is called the assessment year (AY) 2025-26. That is, this year you will have to follow the same old tax slabs and deduction rules. If your income is above the taxable limit, you can reduce your tax liability by taking advantage of the exemptions and deductions available in the old tax system. The last date to invest for this is 31 March 2025.
If you still want to take advantage of the old tax system, you can avail the deduction by investing till 31 March 2025. But if you have opted for the new tax system, you will not get the benefit of these deductions.
Popular investment options under the old tax system
Tax saving investments under Section 80C:
You can claim deduction on investments up to Rs 1.5 lakh.
ELSS (Equity Linked Savings Scheme) – Tax saving fund linked to the stock market
Sukanya Samriddhi Yojana (SSY) – Investment scheme for daughters
Public Provident Fund (PPF) – Safe and tax-free returns
National Savings Certificate (NSC) – Investment with guaranteed returns
Senior Citizen Savings Scheme (SCSS) – Better interest rates for senior citizens
Life Insurance – Both protection and tax saving
5-Year Post Office Term Deposit
5-Year Tax-Saving Fixed Deposit
Section 80D: Deduction on Health Insurance
Deduction on health insurance premium up to Rs 25,000 is available. If you are a senior citizen, this limit is Rs 50,000. Some deduction is also available on expenses related to the treatment of disabled dependents.
Get additional exemption by investing in NPS
If you invest in the National Pension System (NPS), you can avail an additional deduction of Rs 50,000 under section 80CCD(1B). This deduction is over and above the limit of Rs 1.5 lakh under 80C.
Apart from this, if you have sold a residential property or other capital asset, the option of reinvestment is also available to save long term capital gains tax.
Which tax system is better for you?
While the old tax system offers tax exemption on investments, the new tax system is simpler with lower tax slabs. If you are confused about which option will be better for you, you can compare both the tax regimes using the income tax calculator.
In short: If you want to save tax in the financial year 2024-25, then this is the right time to invest under the old tax rules. But from 2026, the rules of the new tax system will come into effect, due to which the structure of your tax liability may change.