Understanding ITR Filing for FY 2025-26: Tax Savings Tips
Before filing your income tax return for FY 2025-26 (Assessment Year 2026-27), taxpayers must evaluate whether the new or old tax regime will result in a lower tax liability. The government has set the new tax regime as the default option, but experts advise against a blanket approach. The best choice varies based on individual income levels and the exemptions and deductions available.
Tax Regimes Overview
The new tax regime features lower slab rates but removes most exemptions and deductions. In contrast, the old tax regime allows for various benefits, such as House Rent Allowance (HRA), deductions under Section 80C, health insurance premiums under Section 80D, and housing loan benefits. Taxpayers should carefully consider their financial situation before deciding which regime to adopt.
Latest Income Tax Slabs FY 2025-26
The income tax slabs for FY 2025-26 differ significantly between the two regimes. Under the new regime, the slabs are as follows:
- 0-4 lakh: Nil
- 4-8 lakh: 5%
- 8-12 lakh: 10%
- 12-16 lakh: 15%
- 16-20 lakh: 20%
- 20-24 lakh: 25%
- Above 24 lakh: 30%For the old regime, the slabs are:
- 0-2.5 lakh: Nil
- 2.5-5 lakh: 5%
- 5-10 lakh: 20%
- Above 10 lakh: 30%The basic exemption limit is higher in the old regime for senior citizens and super senior citizens. The new regime offers a higher basic exemption limit of Rs 4 lakh for individuals up to 60 years of age, along with a standard deduction of Rs 75,000.
Choosing Between New and Old Regime
According to Parizad Sirwalla, Partner and Head – Global Mobility Services, Tax, KPMG in India, the new tax regime is appealing for many taxpayers. Individuals with taxable income up to Rs 12.75 lakh may have no tax liability after accounting for standard deductions and available rebates. The new regime also benefits those with incomes exceeding Rs 5 crore, where the surcharge is capped at 25%, compared to 37% under the old regime.
However, taxpayers with significant deductions and exemptions should not automatically favor the new regime. The effectiveness of each regime depends on the deductions claimed. For instance, an individual with a salary of Rs 25 lakh may find their tax liability under both regimes to be similar if they are eligible for deductions totaling around Rs 7.75 lakh. If deductions exceed this amount, the old regime may be more advantageous.
Taxpayers should compute their tax liabilities under both regimes before filing their ITR. The choice of regime should be based on individual circumstances, as what works for one taxpayer may not be suitable for another. If opting for the old regime, it is crucial to file the tax return by the due date of July 31, 2026, as late filings will default to the new regime.
Observer Voice is the one stop site for National, International news, Sports, Editor’s Choice, Art/culture contents, Quotes and much more. We also cover historical contents. Historical contents includes World History, Indian History, and what happened today. The website also covers Entertainment across the India and World.
