7 months ago
Budget 2025: Tax Regimes and Investments
The Union Budget 2025 introduced changes to the tax regimes in India.
The new tax regime offers zero tax for incomes up to Rs 12 lakh, which can be beneficial for young professionals and senior citizens with modest incomes.
However, it does not cover long-term capital gains from equities, which are taxed at 12.5 percent on amounts exceeding Rs 1.25 lakh.
The old tax regime, on the other hand, provides deductions under Section 80C and 80TTB, which can be advantageous for those with higher interest income or specific deductions.
The Senior Citizens Savings Scheme (SCSS) remains attractive for safety and steady income, but its tax efficiency depends on individual income levels and the chosen tax regime.
Young earners and senior citizens should review their tax regime annually as their income and commitments grow.
The new tax regime offers zero tax for incomes up to Rs 12 lakh, but does not cover long-term capital gains from equities.
The old tax regime provides deductions under Section 80C and 80TTB, which can be beneficial for those with higher interest income.
The SCSS interest rate stands at 8.2 percent per annum for Q4 FY 2025–26, with TDS applying if interest exceeds Rs 1 lakh in a financial year.
Senior citizens have higher basic exemption limits under the old tax regime, with Rs 3 lakh for those aged 60-79 years and Rs 5 lakh for those aged 80+ years.
Young professionals and senior citizens should review their tax regime annually as their income and commitments grow.
- Who
- Young professionals, first-time earners, and senior citizens
- What
- Changes in tax regimes and their impact on investments and take-home pay
- Where
- India
- When
- Effective from April 1, 2025 (FY 2025-26 / AY 2026-27)
- Why
- To understand the tax implications and benefits of different investment options and tax regimes
New Tax Regime Supporters
Old Tax Regime Supporters
Tax Benefits for Lower Income
New Tax Regime Supporters
The new tax regime offers zero tax for incomes up to Rs 12 lakh, making it beneficial for those with modest incomes, including senior citizens.
Old Tax Regime Supporters
The old tax regime provides deductions under Section 80C and 80TTB, which can result in lower tax bills for those with higher interest income or specific deductions.
Investment in Equities
New Tax Regime Supporters
The new tax regime does not penalize equity investments as capital gains are taxed only beyond Rs 1.25 lakh at a rate of 12.5 percent.
Old Tax Regime Supporters
The old tax regime allows for more deductions and exemptions, which can be advantageous for those with significant investments in traditional savings instruments.
Key facts
- Zero Tax Threshold
- Income up to Rs 12 lakh is tax-free under the new regime.
- Standard Deduction
- Rs 75,000 standard deduction for salaried individuals.
- Long Term Capital Gains Tax
- 12.5 percent on amounts exceeding Rs 1.25 lakh.
- SCSS Interest Rate
- 8.2 percent per annum for Q4 FY 2025–26.
- Section 80TTB Deduction
- Up to Rs 50,000 on interest income for senior citizens under the old regime.
- Section 80C Deduction
- Up to Rs 1.5 lakh for SCSS investments under the old regime.
- TDS Threshold for SCSS
- TDS applies if interest exceeds Rs 1 lakh in a financial year.
- Basic Exemption Limit for Seniors
- Rs 3 lakh for senior citizens (60-79 years) and Rs 5 lakh for super senior citizens (80+ years) under the old regime.
Timeline
Ministry seeks trade input to simplify tax laws.
Government's latest Income Tax Bill sparks call for suggestions.
Ministry acts on Budget 2025's tax simplification goal.
New tax regime introduced, zero tax for incomes up to Rs 12 lakh.
Long-term equity gains exempt from new regime.
Quotes
Deepika Mathur
Executive Director at Deloitte India
“Equity oriented long term capital gains are taxable only beyond Rs 1.25 lakh and at a special rate of 12.5 percent. Given this preferential structure, it would not be accurate to say the middle class is being penalised for investing in equities.”
NDTV
“If total income is Rs 11 lakh comprising Rs 9.75 lakh of salary and Rs 1.25 lakh of long term capital gains, there would still be no tax payable, as the gains do not exceed the exemption limit.”
NDTV
Sources
What workforce newbies need to look out for in the Budget
Your income tax queries: Private sector employees need to pay tax on leave encashment
Under Rs 12 Lakh And Investing In Stocks? The Budget's Zero-Tax Pitch Has A Catch
Budget 2026: Forget Slab Cuts. The Real Tax Savings Are Hiding Here
Senior citizen taxation: What changed for elders on SCSS investments after Budget 2025
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