Income Tax Budget 2025: Will FM Sitharaman scrap old regime as new one gains popularity? Experts weigh in
Income Tax Budget 2025: No official plans exist to abolish the old tax regime, but discussions continue. While the new tax structure offers lower rates, many taxpayers prefer the old system's deductions.
Will the old tax regime be scrapped? No official announcements indicate that the government will abolish the old tax regime. However, discussions about its future have been ongoing. The new tax regime was introduced in the 2020 Union Budget, offering lower tax rates but without the exemptions and deductions available under the old one.
Many taxpayers still like the old tax system because of its deductions and exemptions, such as those under Sections 80C, 80D, and others, even though the new tax regime has become more popular since it is more straightforward.
Section 80C of the Income Tax Act provides deductions up to ₹1.5 lakh on investments in life insurance premiums, the principal repayment of home loans, and other savings instruments like the Public Provident Fund (PPF).
Section 80D allows deductions for premiums paid on medical insurance policies for self, family, and parents, helping taxpayers reduce their taxable income.
Will Modi Govt do away with old income tax regime?
“Looking at the biased attitude of the government towards the new tax regime, the increasing number of people opting for it and the fact that the limits of various deductions available under the old regime have not been enhanced after the introduction of new tax regime, do not get shocked if the finance minister altogether scraps the old tax regime,” Mumbai-based tax and investment expert Balwant Jain said.
He noted that since the government wants you to report your actual income, which is the basis of the new tax regime, it will likely happen sooner rather than later.
However, the outright abolition of the old tax regime demands a holistic approach to how it will affect the existing investment and retirement planning patterns. “The government has to rein in simplicity and instrumentality because tax-saving instruments must work for the middle class.
Suppose the 2025 Budget were to effect a phase-out of the old regime. In that case, it should also, most critically, ensure that motivation to undertake significant financial planning is preserved through the provision of incorporating certain key deductions into the new format,” said Siddharth Maurya, Founder & Managing Director of Vibhavangal Anukulakara Private Limited.
The simpler structure of the new regime, comprising lower rates as well as minimal deductions, coincides with the government’s view of having a straightforward tax regime. On the other hand, the old regime is still of importance to the significant taxpayers who have invested in tax-saving instruments, said Gaurav Singh Parmar, Associate Director, Fincorpit Consulting.
Even though the government has not made any formal declaration regarding ending the previous tax system, continuing conversations indicate that it is not impossible, particularly given the current system's increasing popularity. According to experts, if the government decides to phase out the previous tax system, it must ensure that essential deductions are included in the new structure to keep people motivated to plan their finances, especially middle-class people.
Will the old tax regime be scrapped? No official announcements indicate that the government will abolish the old tax regime. However, discussions about its future have been ongoing. The new tax regime was introduced in the 2020 Union Budget, offering lower tax rates but without the exemptions and deductions available under the old one.
Many taxpayers still like the old tax system because of its deductions and exemptions, such as those under Sections 80C, 80D, and others, even though the new tax regime has become more popular since it is more straightforward.
Section 80C of the Income Tax Act provides deductions up to ₹1.5 lakh on investments in life insurance premiums, the principal repayment of home loans, and other savings instruments like the Public Provident Fund (PPF).
Section 80D allows deductions for premiums paid on medical insurance policies for self, family, and parents, helping taxpayers reduce their taxable income.
Will Modi Govt do away with old income tax regime?
“Looking at the biased attitude of the government towards the new tax regime, the increasing number of people opting for it and the fact that the limits of various deductions available under the old regime have not been enhanced after the introduction of new tax regime, do not get shocked if the finance minister altogether scraps the old tax regime,” Mumbai-based tax and investment expert Balwant Jain said.
He noted that since the government wants you to report your actual income, which is the basis of the new tax regime, it will likely happen sooner rather than later.
However, the outright abolition of the old tax regime demands a holistic approach to how it will affect the existing investment and retirement planning patterns. “The government has to rein in simplicity and instrumentality because tax-saving instruments must work for the middle class.
Suppose the 2025 Budget were to effect a phase-out of the old regime. In that case, it should also, most critically, ensure that motivation to undertake significant financial planning is preserved through the provision of incorporating certain key deductions into the new format,” said Siddharth Maurya, Founder & Managing Director of Vibhavangal Anukulakara Private Limited.
The simpler structure of the new regime, comprising lower rates as well as minimal deductions, coincides with the government’s view of having a straightforward tax regime. On the other hand, the old regime is still of importance to the significant taxpayers who have invested in tax-saving instruments, said Gaurav Singh Parmar, Associate Director, Fincorpit Consulting.
Even though the government has not made any formal declaration regarding ending the previous tax system, continuing conversations indicate that it is not impossible, particularly given the current system's increasing popularity. According to experts, if the government decides to phase out the previous tax system, it must ensure that essential deductions are included in the new structure to keep people motivated to plan their finances, especially middle-class people.
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