Mumbai, January 14: Ahead of the Union Budget 2025, all eyes are on Finance Minister Nirmala Sitharaman as reports suggest the possibility of tax relief for salaried employees. There is growing speculation that the upcoming budget could introduce cuts in income tax rates, particularly for individuals earning up to INR 15 lakh annually. With inflation impacting living costs, such a move would provide much-needed financial relief to the middle class. Tax cuts could also stimulate greater consumption, a key factor for economic recovery amidst slower growth. As we await the official announcements, understanding the current income tax structure is essential for taxpayers across the country.

In India, income tax is governed by two distinct regimes: the Old Tax Regime (OTR) and the New Tax Regime (NTR). The OTR allows individuals to claim exemptions like housing rental and insurance, whereas the NTR offers lower tax rates but eliminates such exemptions. As the Union Budget 2025 approaches, the key question is whether these regimes will undergo further revisions or if new relief measures will be introduced. For individuals across various income brackets, understanding the tax slabs under both regimes will be crucial in planning their finances for the upcoming financial year.  Income Tax Relief for Salaried Employees: Will Nirmala Sitharaman Cut Tax Rates for Those Earning up to INR 15 Lakh in Union Budget 2025?

Income Tax Slabs and Rates Under Old Tax Regime

Under the Old Tax Regime (OTR), taxpayers can claim various exemptions and deductions, including those for housing rent and insurance premiums, making it ideal for individuals with significant expenses in these areas. The tax rates under this regime are structured progressively:

Income Tax Slabs and Rates Under New Tax Regime

In contrast, the New Tax Regime (NTR), introduced in 2020, offers lower tax rates but does not allow exemptions or deductions. This regime is designed to simplify tax filing and make it more straightforward for taxpayers. The tax rates under the NTR are as follows:

  • 5% for income between INR 3 lakh and INR 7 lakh

  • 10% for income between INR 7 lakh and INR 10 lakh

  • 20% for income between INR 12 lakh and INR 15 lakh

  • 30% for income above INR 15 lakh The NTR is currently the default system, and taxpayers need to opt for the OTR by filing a form. Although this regime does not offer deductions, it may benefit individuals without significant exemptions or expenses.

As taxpayers evaluate their options between the Old and New Tax Regimes, it is essential to consider their personal financial situation, including deductions, exemptions, and expenses. While the OTR offers more opportunities for saving through exemptions, the NTR provides simplicity with lower tax rates and no complex paperwork. With the upcoming Union Budget 2025 expected to introduce potential tax relief, particularly for middle-income earners, taxpayers should stay informed on any updates or changes to the existing tax structure.

(The above story first appeared on LatestLY on Jan 14, 2025 11:31 AM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).