It’s that time of the year again.
Your HR just sent that dreaded email: "Please submit your Investment Proofs and Tax Regime Selection."
If you are staring at your payroll portal right now wondering which tax option to click, you are not alone. Every single year, we all face this confusion. We call our friends, check random websites, and usually just end up more confused than when we started.
But for the financial year 2025-26, the answer is actually much simpler than it used to be. The government really wants you to move to the New Tax Regime, and they have made it very hard to say no.
The Magic Number is 12.75 Lakhs
Let’s cut straight to the most important part. If your annual salary is 12.75 Lakhs or less, you can stop worrying right now. You should almost certainly pick the New Tax Regime.
Why is this specific number so important? Under the latest budget rules, the government gives a full tax rebate for income up to 12 Lakhs. When you add the standard deduction of 75,000 rupees on top of that, it means a salaried person earning up to 12.75 Lakhs pays absolutely zero tax. You don't need to invest a single rupee in insurance or PPF to claim this. You just select the New Regime and your tax liability becomes zero.
The Joy of Zero Paperwork
The best part of the New Regime is not actually the money. It is the lifestyle change.
Think about the usual January madness. You are running around trying to find rent receipts. You are calling your landlord for their PAN number. You are digging through emails to find that one LIC premium receipt you paid six months ago. It is stressful and annoying.
With the New Tax Regime, that entire headache disappears. You do not need to submit any proofs to your HR. No rent receipts, no investment proofs, no tuition fee bills. You keep your full salary in your bank account and spend or invest it exactly how you want. You are no longer forced to lock your money into schemes just to satisfy the taxman.
When Does the Old Regime Actually Make Sense?
You might be thinking that the Old Regime must be good for someone, right? It is, but only for a very specific type of person.
The Old Regime is designed for people who have very high fixed expenses that are eligible for tax deductions. You should only consider the Old Regime if you are paying a large Home Loan EMI and also paying a very high rent.
To make the Old Regime beat the New Regime, you generally need to show total deductions of more than 4.25 Lakhs. This is a huge amount. You would need to completely max out your Section 80C limit of 1.5 Lakhs, pay a lot of interest on a home loan, and pay a high amount of rent every month.
If you are just a regular salaried person who rents a modest apartment and puts some money in Provident Fund, the Old Regime will likely cost you more money.
The Simple Verdict
For 90 percent of us, the New Tax Regime is the winner this year. It puts more cash in your hand every month and saves you from the paperwork struggle at the end of the year. Unless you have a massive home loan and high rent, do yourself a favor and keep it simple this year.
You can watch this video to see a visual breakdown of how the zero tax limit works for your salary.
I selected this video because it clearly explains the "Zero Tax on 12 Lakh" rule which is the core benefit of the New Regime for FY 2025-26.
Final Thoughts
At the end of the day, choosing a tax regime shouldn't feel like a punishment. The shift towards the New Tax Regime is designed to make our lives easier, not harder. For the first time in years, the government is offering a way to pay zero tax without forcing you to buy insurance you might not need. While the Old Regime still has its place for those with heavy financial commitments like home loans, most salaried employees will find the New Regime to be a breath of fresh air. Take a quick look at your numbers, make the switch if it makes sense, and enjoy a stress-free financial year.
Disclaimer
The information provided in this blog post is for general informational and educational purposes only and does not constitute professional financial or tax advice. Tax laws and slab rates are subject to change and individual financial situations can vary significantly. I strongly recommend consulting with a qualified Chartered Accountant or tax advisor before making any final tax-related decisions.
By HR Mit - A HR Professional
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