Indian Taxpayers Save Over ₹1 Lakh Annually Under New Regime

New Tax Regime Delivers Substantial Savings

India's personal income tax framework saw a decisive shift under Union Budget 2025, moving toward higher take-home pay for middle-class taxpayers. The government's pivot from a deduction-heavy system to a simpler structure under the new tax regime is yielding tangible benefits, particularly for salaried individuals.

Budget 2025's Impact on Take-Home Pay

The biggest relief arrived with Budget 2025. Income up to ₹12 lakh is now effectively tax-free for individuals, extending to ₹12.75 lakh for salaried taxpayers after accounting for the standard deduction. This, coupled with revised tax slabs and an enhanced standard deduction, has considerably reduced the tax burden for earners across income brackets, including those making ₹20 lakh annually.

Old vs. New: A Clear Divide

While the old tax regime allowed numerous exemptions like HRA, LTA, and Section 80C investments, these deductions are largely forgone in the new regime. However, this trade-off is offset by a higher basic exemption limit, lower slab rates, and a significantly increased standard deduction of ₹75,000. The 30% tax rate now applies only beyond ₹24 lakh, a substantial increase from the previous ₹15 lakh threshold.

Rs 20 Lakh Earner Analysis

A detailed comparison for the financial year 2025-26 reveals that a salaried individual earning ₹20 lakh pays ₹1,92,400 in taxes under the new regime. This contrasts sharply with the ₹3,02,016 tax liability under the old regime, resulting in a direct tax saving of ₹1,09,616. This outcome holds true even when substantial deductions are relinquished.

Expert View on Tax Regime Shift

Amit Baid, Head of Tax at BTG Advaya, noted that Budgets 2024 and 2025 were a turning point, making the middle class "feel seen." He highlighted that tax savings are now visible monthly, providing much-needed relief amidst rising expenses. Anita Basrur, Partner at Sudit K Parekh & Co LLP, confirmed the structural changes, including the raised tax-free income limit and the new 30% rate threshold.

Budget 2026 Expectations

As Union Budget 2026 approaches, taxpayer expectations are more focused on simplification and certainty than outright rate cuts. Hopes include increasing the standard deduction to ₹1 lakh, raising the 30% tax threshold to ₹35 lakh, and potentially allowing key deductions under the new regime. Streamlining TDS compliance and reducing litigation are also key areas of anticipation.