Income Tax Update: If you are an income tax payer, this news can prove to be very important for you. Let us tell you that through the government, the new tax regime is continuously being made more better than the old tax regime. This has been introduced as a simple and default option for taxpayers. The new income tax system has been made more efficient with the changes made in the Union Budget 2025. At the same time, the Central Government has also proposed to increase the limits of many important allowances and tax exemptions in the Income Tax Rules 2026. This draft has been opened to the general public till 22 February 2026.
Apart from this, if this is approved in the Parliament, then the employees who opted for the old tax system are expected to get significant relief. Now the question is arising that under the old tax system, one can pay less tax on salaries up to Rs 15 lakh, Rs 20 lakh and Rs 25 lakh as compared to the new system. Let us know about it in detail.
There may be an increase in these allowances
According to the draft, there is a plan to increase the limit of some allowances. In this, the tax exemption limit for loans available at interest-free or concessional rates can be increased from Rs 20,000 to Rs 2 lakh. It is suggested to increase the limit of children’s education allowance from Rs 100 to Rs 3,000 per month and hostel allowance from Rs 300 to Rs 9,000 per month. It is proposed to increase the tax exemption on free meals from Rs 50 to Rs 200 per meal and the limit on gift vouchers from Rs 5,000 to Rs 15,000 annually. Also, 50% relaxation in House Rent Allowance (HRA) is now suggested to be implemented in cities like Bengaluru, Hyderabad, Pune and Ahmedabad as well.
How much tax will be charged on 15 lakh salary
According to tax experts, these increased allowances can reduce the tax liability of employees under the old tax system. This will bring more money into your hands even without increasing your salary. For example, if an employee fully avails the allowances and 80C and 80D deductions, the tax on a salary of Rs 15 lakh will be around Rs 41,496, which is much lower than Rs 97,500 in the new tax system. Similarly, on a salary of Rs 20 lakh, there can be an extra saving of around Rs 63,856 and on a salary of Rs 25 lakh, there can be an extra saving of around Rs 66,456.
If these proposals are implemented, then employees with salary above Rs 15 lakh can turn to the old tax system. Proper tax planning will enable salaried employees to save a lot on their tax liability and retain more money.
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