Tax savings 2025-26: Tax savings for taxpayers with Rs 15 lakh, Rs 20 lakh, Rs 30 lakh salaries; check details

Income tax savings: Finance Minister Nirmala Sitharaman's recent announcement of substantial rebates for middle-income taxpayers under the new tax regime has sparked interest among the middle class on how they can optimise their tax savings. The Budget 2025 has implemented changes to the new tax regime (NTR) to provide relief to the middle class, amounting to Rs 1 lakh crore, while maintaining the old tax regime (OTR) unchanged. The budget now exempts income tax on annual earnings up to Rs 12 lakh (previously Rs 7 lakh), benefiting over one crore taxpayers and reducing the tax burden on others. 

With lower tax rates and minimal deductions, the new regime has been structured to simplify taxation, while the old regime continues to offer tax benefits through multiple exemptions and deductions. Central Board of Direct Taxes (CBDT) Chairman Ravi Agarwal told Business Today on Monday that around 95-97 per cent of the taxpayers would join the new tax regime from the current 74-75 per cent. He said currently there are 8-8.5 crore taxpayers.  

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Let's check tax savings for different salary and tax brackets

1. Rs 15 lakh annual income

New Tax Regime Calculation:

Gross Income: Rs 15 lakh
Standard Deduction: Rs 75,000
Taxable Income: Rs 15,00,000 - Rs 75,000 = Rs 14,25,000

Tax Calculation:
0-4 lakh: Nil
4 lakh - 8 lakh: 5% of 4 lakh = Rs 20,000
8 lakh - 12 lakh: 10% of 4 lakh = Rs 40,000
12 lakh - 14.25 lakh: 15% of 2.25 lakh = Rs 33,750

Total tax: Rs 20,000 + Rs 40,000 + Rs 33,750 = Rs 93,750

Cess (4%): Rs 93,750 × 4% = Rs 3,750

Total Tax Liability: Rs 93,750 + Rs 3,750 = Rs 97,500.

Old Tax Regime calculation:

Gross Income: Rs 15,00,000

Deductions:

Standard Deduction: Rs 50,000
Section 80C (Max): Rs 1,50,000
Section 80D (Max): Rs 1,00,000
Home Loan Interest (Section 24B): Rs 2,00,000

Total Deductions: Rs 50,000 + Rs 1,50,000 + Rs 1,00,000 + Rs 2,00,000 = Rs 5,00,000

Taxable Income: Rs 15,00,000 - Rs 5,00,000 = Rs 10,00,000

Tax under Old Tax Regime:
0-2.5 lakh: Nil
2.5 lakh - 5 lakh: 5% of 2.5 lakh = Rs 12,500
5 lakh - 10 lakh: 20% of 5 lakh = Rs 1,00,000

Total tax: Rs 12,500 + Rs 1,00,000 = Rs 1,12,500

Cess (4%): Rs 1,12,500 × 4% = Rs 4,500

Total Tax Liability (Old Regime): Rs 1,12,500 + Rs 4,500 = Rs 1,17,000

Therefore, under New Tax Regime taxpayers earning Rs 15 lakh per annum will pay Rs 97,500 vs Rs 1,17,000 under Old Ta Regime. Therefore, savings of Rs 19,500.

2. Rs 20 lakh income

Under the new tax regime, the tax liability is calculated as follows:

Income from 0 to 4 lakh: Nil tax
Income from 4 lakh to 8 lakh: 5% of 4 lakh = Rs 20,000
Income from 8 lakh to 12 lakh: 10% of 4 lakh = Rs 40,000
Income from 12 lakh to 16 lakh: 15% of 4 lakh = Rs 60,000
Income from 16 lakh to 19.25 lakh: 20% of 3.25 lakh = Rs 65,000

The total tax to be paid is Rs 20,000 + Rs 40,000 + Rs 60,000 + Rs 65,000 = Rs 1,85,000.

Additionally, a Cess of 4% is levied on the total tax amount, which amounts to Rs 1,85,000 x 4% = Rs 7,400.

Therefore, the total tax liability under the new regime comes out to be Rs 1,85,000 + Rs 7,400 = Rs 1,92,400.

Under the old tax regime, the calculation is as follows:

Gross Income: Rs 20 lakh

Deductions:

Standard Deduction: Rs 50,000
Section 80C (Max): Rs 1,50,000
Section 80D (Max): Rs 1,00,000
Home Loan Interest (Section 24B): Rs 2,00,000
Total Deductions: Rs 5,00,000
Taxable Income: Rs 15,00,000

Tax under Old Tax Regime:
0-2.5 lakh: Nil
2.5 lakh - 5 lakh: 5% of 2.5 lakh = Rs 12,500
5 lakh - 10 lakh: 20% of 5 lakh = Rs 1,00,000
10 lakh - 15 lakh: 30% of 5 lakh = Rs 1,50,000

Total tax: Rs 2,62,500
Cess (4%): Rs 10,500
Total Tax Liability (Old Regime): Rs 2,73,000

Therefore, under the revised new tax slabs of the New Tax Regime, those earning Rs 20 lakh per annum stand to benefit, saving a significant amount of Rs 80,600 annually in taxes compared to the Old Tax Regime.

3. Rs 24 lakh annual income

Tax Liability under the New Regime:

Gross Income: Rs 24 lakh
Standard Deduction: Rs 75,000
Taxable Income: Rs 24,00,000 - Rs 75,000 = Rs 23,25,000

Tax Breakdown:
0-4 lakh: Nil
4 lakh - 8 lakh: 5% of 4 lakh = Rs 20,000
8 lakh - 12 lakh: 10% of 4 lakh = Rs 40,000
12 lakh - 16 lakh: 15% of 4 lakh = Rs 60,000
16 lakh - 20 lakh: 20% of 4 lakh = Rs 80,000
20 lakh - 23.25 lakh: 25% of 3.25 lakh = Rs 81,250

Total Tax Calculation:
Total tax: Rs 20,000 + Rs 40,000 + Rs 60,000 + Rs 80,000 + Rs 81,250 = Rs 2,81,250
Cess (4%): Rs 2,81,250 × 4% = Rs 11,250

Total Tax Liability under New Regime:
Total Tax Liability: Rs 2,81,250 + Rs 11,250 = Rs 2,92,500.

Under the Old Tax Regime:

Gross Income: Rs 24 lakh

Deductions:

Standard Deduction: Rs 50,000
Section 80C (Maximum): Rs 1,50,000
Section 80D (Maximum): Rs 1,00,000
Home Loan Interest (Section 24B): Rs 2,00,000

Total Deductions: Rs 5,00,000

Taxable Income: Rs 19,00,000

Tax under Old Tax Regime:
0-2.5 lakh: Nil
2.5 lakh - 5 lakh: 5% of 2.5 lakh = Rs 12,500
5 lakh - 10 lakh: 20% of 5 lakh = Rs 1,00,000
10 lakh - 19 lakh: 30% of 9 lakh = Rs 2,70,000

Total tax: Rs 3,82,500

Cess (4%): Rs 15,300

Total Tax Liability (Old Regime): Rs 3,97,800

The new tax system appears to be more beneficial for individuals with an annual income of up to Rs 24 lakh, as the updated tax slabs and structure introduced in Budget 2025 will result in savings of Rs 1,05,300 compared to the previous regime.

4. Rs 30 lakh annual income

Taxes under New Regime:

Gross Income: Rs 30 lakh
Standard Deduction: Rs 75,000
Taxable Income: Rs 29,25,000

Tax under New Tax Regime:
0-4 lakh: Nil
4 lakh - 8 lakh: 5% of 4 lakh = Rs 20,000
8 lakh - 12 lakh: 10% of 4 lakh = Rs 40,000
12 lakh - 16 lakh: 15% of 4 lakh = Rs 60,000
16 lakh - 20 lakh: 20% of 4 lakh = Rs 80,000
20 lakh - 24 lakh: 25% of 4 lakh = Rs 1,00,000
24 lakh - 29.25 lakh: 30% of 5.25 lakh = Rs 1,57,500
Total tax: Rs 4,57,500
Cess (4%): Rs 18,300

Total Tax Liability (New Regime): Rs 4,75,800

Under the Old Tax Regime:

Gross Income: Rs 30 lakh

Deductions:

Standard Deduction: Rs 50,000
Section 80C (Maximum): Rs 1,50,000
Section 80D (Maximum): Rs 1,00,000
Home Loan Interest (Section 24B): Rs 2,00,000

Total Deductions: Rs 5,00,000

Taxable Income: Rs 25,00,000

Tax Calculation under Old Tax Regime:
0-2.5 lakh: Nil
2.5 lakh - 5 lakh: 5% of 2.5 lakh = Rs 12,500
5 lakh - 10 lakh: 20% of 5 lakh = Rs 1,00,000
10 lakh - 25 lakh: 30% of 15 lakh = Rs 4,50,000

Total Tax: Rs 5,62,500

Cess (4%): Rs 22,500

Total Tax Liability (Old Regime): Rs 5,85,000

Individuals earning an annual income of Rs 30 lakh will benefit from greater savings under the New Tax Regime following the latest revision in income tax slabs. The estimated total savings amount to approximately Rs 1,09,200 compared to the Old Tax Regime.