2025 Budget: New Tax Regime Cuts Taxes but Removes Key Deductions
The 2025 Budget has made the new tax regime more attractive by eliminating income tax for individuals earning up to ₹12 lakh annually. As a result, more taxpayers are expected to shift from the old tax system. The Central Board of Direct Taxes (CBDT) Chairman, Ravi Agrawal, stated that 90% of taxpayers may adopt the new regime, up from the current 75%.
Under the new tax regime, taxpayers will no longer be eligible for deductions available in the old system, including those for Public Provident Fund (PPF), National Savings Certificate (NSC), Equity-Linked Savings Scheme (ELSS), and Senior Citizens Savings Scheme (SCSS). Additionally, exemptions under Section 80C, Section 80D, and other tax-saving provisions will not apply.
Key Tax Benefits No Longer Available
The shift to the new tax regime removes several key tax-saving benefits individuals previously utilized. Section 80C investments, which include tax deductions for contributions to ELSS, PPF, NSC, SCSS, Sukanya Samriddhi Yojana (SSY), life insurance premiums, and the repayment of the principal amount of a home loan, will no longer be available. Similarly, Section 80D deductions for medical insurance premiums, which were capped at ₹25,000 for individuals and ₹50,000 for senior citizens, will not be applicable. Contributions to pension funds under Section 80CCC will also no longer qualify for deductions. Other exemptions, such as house rent allowance (HRA) and home loan interest deductions, are also excluded from the new regime.
According to CA Pratibha Goyal, partner at PD Gupta & Company, the only available deductions under the new tax regime are the standard deduction and employer contributions to the National Pension System (NPS).
Investment Considerations Beyond Tax Benefits
Tax-saving instruments are recommended financial options for individuals even though they do not provide tax benefits under the current tax regime. According to Siddharth Alok, AVP Investments at Epsilon Money, he believes investment decisions should emphasize returns over tax savings benefits. The investment stability of PPF and SSY remains reliable without any deduction benefits.
The key goal of allocating funding to tax-saving investments does not depend on tax deductions according to Sridharan S who founded Wealth Ladder Direct. These investors now have the opportunity to select alternative investment products that correspond better to their specific financial requirements.
Financial professionals recognize tax-saving investment tools as essential for training people to save in a disciplined manner. The schemes operated by Alekh Yadav at Sanctum Wealth deliver steady profits and extended advantages through compounding returns.
