Sun Feb 02 12:11:35 UTC 2025: ## New Tax Regime Sweeps Away Old System, Leaving Few Behind

**NEW DELHI** – India’s new tax regime, significantly revamped this year, is poised to become the dominant choice for taxpayers, according to tax and investment expert Balwant Jain. While the old regime hasn’t been entirely scrapped, Jain argues that its days are numbered, likening it to being placed “on a ventilator.”

The new regime, applicable to all individuals, Hindu Undivided Families (HUFs), and other entities regardless of residency, offers a simplified structure with increased basic exemption limits (from ₹3 lakh to ₹4 lakh). A common misconception is that income up to ₹12 lakh is tax-free. While a rebate under Section 87A makes income up to ₹12 lakh (₹12.75 lakh for salaried individuals) tax-free for resident individuals, this doesn’t apply to non-residents or other entities. Income from sources like capital gains and lottery winnings remains taxable regardless of the overall income.

Jain explains that while the old regime’s basic exemption limit remains at ₹2.5 lakh, the benefits of deductions under sections like 80C, 80D (mediclaim), HRA (house rent allowance), and LTA (leave travel allowance) are often outweighed by the lower tax rates in the new regime. The higher rebate under Section 87A in the new regime (₹60,000 vs. ₹12,500 in the old) further diminishes the appeal of the old system.

He predicts that only a small percentage (2-5%) of taxpayers, primarily high-earning salaried individuals claiming substantial HRA benefits in major cities, will find the old regime advantageous. Even for those with incomes exceeding ₹5 crore, the new regime’s capped surcharge (25%) is more favorable than the old regime’s (37.5%).

Jain concludes that the revised new tax regime is likely to be adopted by 95-98% of taxpayers, making the old regime largely obsolete.

Read More