How much tax will salaried save on income after Budget 2025?

Salaried people will be able to save up to Rs 1,14,400 in income tax thanks to the new income tax bands that are envisaged under the new tax regime in Budget 2025. The income tax savings are based on the assumption that, under the new tax regime, an individual is only claiming a standard deduction of Rs 75,000. By claiming a deduction on his employer's National Pension System (NPS) payment, a salaried individual can save more money on taxes.

The proposed increased income tax slabs under the new tax regime will result in additional tax savings for salaried employees, according to this EY analysis. Under the new tax system, it is presumed that he or she will claim a standard deduction of Rs 75,000.

Gross taxable income	Current income tax payable	Proposed income tax payable	Income tax saved after Budget 2025
Rs 12,75,000	Rs 83,200	0	Rs 83,200
Rs 15,00,000	Rs 1,30,000	Rs 97,500	Rs 32,500
Rs 16,00,000	Rs 1,53,400	Rs 1,13,100	Rs 40,300
Rs 20,00,000	Rs 2,78,200	Rs 1,92,400	Rs 85,800
Rs 24,75,000	Rs 4,26,400	Rs 3,12,000	Rs 1,14,400
Rs 25,00,000	Rs 4,34,200	Rs 3,19,800	Rs 1,14,400

As per analysis, taxpayers opting for the new tax regime in the current FY 2024-25 will save more in the upcoming FY 2025-26 due to changes proposed in the income tax slabs under the new tax regime.

Budget 2025 has made significant changes to income tax slabs under the new tax regime while keeping the tax slabs unchanged in the old tax regime. This demonstrates that the government wants to encourage wider adoption of the new tax regime to ease the burden on both the taxpayers and the income tax authorities. The proposed changes will provide much needed tax relief to the lower and middle income bracket taxpayers. Now a salaried taxpayer whose net taxable income is Rs 12 lakh will pay NIL tax due to the enhanced tax rebate proposed in the Budget 2025. Even those taxpayers who fall in 30% tax bracket will now save taxes of Rs.1,14,400 (including cess) due to recalibration of the income tax slabs. For FY 2023-24, about 72% of the taxpayers opted for new tax regime. With the proposed changes in Budget 2025, it is expected that even a higher percentage of individual taxpayers will opt for new tax regime going forward."

Income Tax Calculator for 2025-26

Individuals opting for old tax regime

Individuals opting for the old tax regime will now have to claim minimum deductions/exemptions of up to Rs.8.5 lakh (including standard deduction of Rs.50,000) in a financial year. This amount of deduction is necessary so that the individual pays the same amount of tax under the old and proposed new tax regime.

Gross taxable income	Income tax payable under old tax regime	Proposed income tax under new tax regime	Deductions to pay same tax in both tax regimes
Rs 12,75,000	Nil	Nil	Rs 7,75,000
Rs 15,00,000	Rs 97,500	Rs 97,500	Rs 5,93,750
Rs 16,00,000	Rs 1,13,100	Rs 1,13,100	Rs 6,18,750
Rs 20,00,000	Rs 1,92,400	Rs 1,92,400	Rs 7,58,333
Rs 24,75,000	Rs 3,12,000	Rs 3,12,000	Rs 8,50,000
Rs 25,00,000	Rs 3,19,800	Rs 3,19,800	Rs 8,50,000

If the salaried taxpayer claims lower deductions than the amounts mentioned above, then he will pay more tax in old tax regime as compared to new tax regime.

In the last budget, an individual taxpayer was required to claim the minimum deduction of Rs 4,83,333 to ensure that the tax payable in both the tax regimes remains the same. This includes standard deduction of Rs 50,000 under the old tax regime.

Hitesh Sharma, Partner, Vialto Partners, says, "The proposed amendments are likely to give a significant boost to taxpayers opting for the new tax regime (NTR). With the tax-free income limit now raised to Rs.12 lakh (Rs.12.75 lakh for salaried individuals) and revised slabs reducing overall tax liability, middle-class income group stand to gain the most. In FY 2023-24, 72% of taxpayers had already opted for NTR, up from 66% in the previous year. While this trend is likely to continue, taxpayers who benefit from deductions (such as HRA, home loans and investments) may still prefer the old tax regime. The proposed amendments would increase the spendable income and encourage tax filing compliance; however, it could also possibly contribute to discouraging investments in savings schemes."

Income Tax Calculator for 2025-26