Budget 2025: How the New Tax Regime Helps Salaried People Save More

The Budget 2025 has introduced a revised new tax regime that allows salaried individuals to save up to ₹1,14,400 in income tax. This saving is calculated based on a standard deduction of ₹75,000. However, you can save even more if you claim a deduction on your employer’s contribution to the National Pension System (NPS).

Old Tax Regime Stays the Same

The government has not changed the tax slabs in the old tax regime. If you choose the old tax regime, you must claim deductions and exemptions of at least ₹8.5 lakh (including a ₹50,000 standard deduction) to match the tax benefits of the new regime.This ₹8.5 lakh is with limits such as ₹1.5 lakh under Sec. 80C or ₹2 lakh for Housing Loan interest.

Comparison of Tax Under Both Regimes

What This Means for Salaried Individuals

• If you claim fewer deductions than those mentioned above, you will pay more tax under the old regime.
• Many central and state government employees and salaried tax payers may not have enough deductions to match the old regime benefits.
• Most salaried taxpayers are expected to shift to the new regime since it offers simpler and lower tax rates.

Impact on Savings and Investments

The new tax regime increases take-home salary and encourages tax compliance. However, it might also reduce interest in traditional savings schemes since fewer deductions are available. Over time, even though the old regime remains an option, it may lose popularity and fade away naturally.