[Opinion] Is It Time to Bid Good Bye to the Old Personal Tax Regime?

Mayank Mohanka – [2025] 171 taxmann.com 81 (Article)

Our hon’ble FM Smt. Nirmala Sitharaman, today on February 1, 2025, presented her eighth Union Budget presentation in a row. In her Budget speech, FM acknowledged the admirable energy and ability of the middle class in nation building. She also remarked that the Government is committed to keeping an ear to the ground and a finger on the pulse, and responding, while balancing the nation-building efforts. The proposed amendments in the Finance Bill 2025, aim at substantially reducing the taxes of the middle class and leave more money in their hands, boosting household consumption, savings and investment. FM also informed that the draft of the new Income Tax Bill will also be introduced in the upcoming week. Balancing the Capex Outlay of Rs. 10.18 lac crores, the fiscal deficit is estimated to be pegged at 4.4& of GDP in fiscal 2025-26.

With a view to simplify the complex maze of plethora of deduction claims of the individuals and HUF taxpayers, the Government of India, introduced the New Personal Tax/Alternative Tax Regime, w.e.f. FY 2020-21 and onwards with reduced tax rates under a new section 115BAC of the Income Tax Act.

The compulsory requirement of foregoing of the majority of the available specified deductions by the individuals and HUFs opting for the new personal tax regime viz. deductions u/s 80C, 80D, 80E, 80G, 80QQB, 80TTA, 80TTB, 80CCD(1)/(1B), HRA u/s 10(13A), interest on housing loan in respect of self-occupied property u/s 24(b), made the said new regime unpopular and with a very few takers.

In order to make the new regime more appealing to the taxpayers, several significant amendments in the new personal tax regime u/s 115BAC, have been introduced in gradual phases in the Finance Acts of 2023, 2024 and now in the Finance Bill 2025.

Click Here To Read The Full Article