Do you keep a keen watch on the budget and tax news every year? Are you someone who waits for these announcements, hoping for lower tax rates and new deductions? Well, 2025 has brought some key changes, and whether you’re a salaried professional or a business owner, these updates will likely affect how much tax you pay and how you can save.
Every year, tax planning feels like a puzzle—should you stick with the old tax regime, or does the new one finally make sense for you? Are you making the most of deductions, or are you unknowingly paying more tax than you need to? The truth is, a well-planned tax strategy can significantly reduce liabilities while helping you grow your wealth.
Let’s break down the latest tax slabs, the key changes in Budget 2025, and what they mean for your financial planning this year.
Understanding the tax slabs for 2025
Taxpayers in India can choose between two tax regimes—the new tax regime and the old tax regime. The choice depends on your financial goals, as each comes with its own benefits and limitations.
New tax regime
The new tax regime was introduced to simplify taxation by offering lower tax rates but removing most deductions and exemptions. Here’s what you need to know:
- Lower tax rates across slabs compared to the old regime.
- No deductions for investments under sections like 80C (PPF, ELSS), 80D (health insurance), and HRA.
- Standard deduction of ₹50,000 is now available for salaried individuals and pensioners.
- Ideal for those who don’t claim multiple deductions and prefer a straightforward tax structure.
Old tax regime
The old tax regime follows the traditional system of taxation and offers various deductions and exemptions to help reduce taxable income. Key features include:
- Higher tax rates compared to the new regime.
- Allows deductions under 80C, 80D, 80E, and HRA, making it beneficial for those with significant investments and expenses.
- Best suited for individuals who actively invest in tax-saving instruments like EPF, PPF, NPS, and home loans.
Here’s a quick comparison:
| Factor | New tax regime | Old tax regime |
| Tax rates | Lower | Higher |
| Deductions allowed | No | Yes (80C, 80D, HRA, etc.) |
| Standard deduction | ₹50,000 | ₹50,000 |
| Best suited for | Individuals with fewer investments | Individuals with high tax-saving investments |
If you prefer lower tax rates with minimal paperwork, the new regime may work for you. But if you regularly invest in tax-saving instruments, the old regime could save you more in the long run.
Maximising tax benefits with deductions
Understanding deductions is key to lowering your tax liability. The government offers multiple tax-saving options under Sections 80C, 80D, 80E, and more, allowing you to reduce taxable income and keep more of what you earn.
- Utilising Section 80C deductions
Section 80C is one of the most popular tax-saving sections, allowing deductions up to ₹1,50,000 per year. But are you using it wisely? Here’s how you can make the most of it:
Eligible investments and expenses:
- Employee Provident Fund (EPF) – Contributions to EPF are tax-exempt.
- Public Provident Fund (PPF) – Long-term savings with tax-free returns.
- Equity-Linked Savings Scheme (ELSS) – Mutual funds with high return potential and a 3-year lock-in.
- National Pension System (NPS) – Additional tax benefits beyond 80C.
- Life insurance premiums – Premiums paid for policies covering self, spouse, or children.
- Home loan principal repayment – Tax benefits on home loan EMI principal.
- Tuition fees – Fees paid for up to two children’s education.
Tip: Instead of maxing out 80C with just one investment, diversify across ELSS, PPF, and NPS for a balanced portfolio.
- Health insurance and Section 80D benefits
Medical expenses can take a toll on your finances, but Section 80D helps reduce that burden by allowing deductions on health insurance premiums.
Deductions for self, family, and parents
- ₹25,000 deduction for self, spouse, and children.
- ₹50,000 for senior citizen parents.
- ₹5,000 for preventive health check-ups within the overall limit.
Tip: Even if you pay for your parents’ health insurance, you can claim the deduction under 80D, reducing your taxable income further.
- Exploring additional deductions
Apart from 80C and 80D, there are other ways to save tax.
Section 80E – Interest on education loans
- No upper limit on deduction.
- Can be claimed for higher education loans for self, spouse, children, or legal guardian.
Section 80G – Donations to charitable institutions
- 50% to 100% deduction depending on the organisation.
- Online donation proof required for claiming benefits.
Tip: If you’re supporting a cause, make sure to donate to approved institutions for tax benefits.
- Standard deduction for salaried individuals
The standard deduction is a flat deduction available to all salaried individuals and pensioners.
How much can you claim?
- ₹50,000 per year across both tax regimes.
- No proof or documentation required—it’s an automatic deduction.
Tip: The standard deduction benefits all salaried individuals, whether they opt for the old or new tax regime.
- Leave encashment exemption
If you have unused leave days at retirement or resignation, you may be eligible for tax exemptions under leave encashment rules.
Key benefits
- Government employees – Fully exempt from tax.
- Non-government employees – Exemption up to ₹25 lakh under the new limit set in Budget 2023.
Tip: If you’re switching jobs or retiring soon, consider timing your leave encashment to maximise tax benefits.
Tax planning for investments
Ever feel like taxes eat up a big chunk of your earnings? The good news is, you can legally reduce your tax burden while growing your wealth—if you invest wisely. The government rewards smart investors by offering tax breaks on certain financial instruments.
So, where should you invest in 2025 to save on taxes? Let’s look at three tried-and-tested options that cut down your tax liability and help you build a solid financial future.
- Equity-Linked Savings Scheme (ELSS)
ELSS is ideal for individuals looking for high-return potential while also benefiting from tax savings.
- ELSS is a type of mutual fund that provides tax deductions under Section 80C.
- It has the shortest lock-in period among tax-saving investments at three years.
- Returns are market-linked, meaning they can be high but come with some risk.
- Long-term capital gains (LTCG) above ₹1 lakh are taxed at 10 percent.
- Public Provident Fund (PPF)
PPF is best suited for risk-averse investors looking for stable, guaranteed returns along with tax benefits.
- Contributions qualify for deductions under Section 80C.
- It has a 15-year lock-in period, ensuring long-term financial security.
- Interest earned and maturity proceeds are completely tax-free.
- National Pension System (NPS)
NPS is ideal for individuals looking to build a retirement corpus while enjoying tax deductions beyond the 80C limit.
- Contributions up to ₹50,000 can be deducted over and above Section 80C.
- The funds are invested in a mix of equity, corporate bonds, and government securities.
- At maturity, 40 percent of the corpus is tax-free, while the rest is used to buy an annuity.
Tax planning for small businesses and corporates
Running a business and keeping a check on overpaying taxes is tough. But there are plenty of ways to legally reduce your tax burden. Let’s explore how businesses can optimise their tax planning in 2025.
Deductions and incentives for businesses
- Depreciation benefits – Businesses can claim depreciation on assets like machinery, vehicles, and office equipment under Section 32, reducing taxable income.
- Startup tax benefits – Eligible startups can claim a 100 percent tax exemption on profits for the first three years under Section 80-IAC.
- R&D tax deductions – Companies engaged in research and development can claim deductions under Section 35.
- Employee benefits deductions – Payments towards employee Provident Fund (PF), gratuity, and insurance premiums are deductible.
Tax-saving strategies specific to business entities
- Expense deductions – Salaries, rent, travel expenses, and utility bills incurred for business purposes can be deducted.
- Optimising GST input tax credit – Businesses can claim GST paid on purchases to reduce overall tax liability.
- Choosing the right business structure – Sole proprietorships, partnerships, and private limited companies have different tax liabilities. Selecting the right structure can optimise tax savings.
- Timely advance tax payments – Paying advance tax on time prevents penalties and ensures smoother cash flow management.
Tax-saving insurance policies
Another way to reduce tax liabilities is by investing in insurance plans that offer tax benefits. While most people see insurance as just a safety net for their family, it can also be a smart tax-saving tool. Popular tax-saving insurance options are:
- Life insurance policies (Section 80C) – Premiums paid for term insurance, endowment plans, and ULIPs qualify for deductions up to ₹1.5 lakh.
- Health insurance (Section 80D) – Premiums for self and family allow deductions of up to ₹25,000, increasing to ₹50,000 for senior citizens.
- Unit Linked Insurance Plans (ULIPs) – Offer market-linked returns with 80C deductions and tax-free maturity benefits.
- Pension plans (Section 80CCC) – Contributions towards annuity plans qualify for deductions under Section 80CCC, providing retirement security.
Key takeaways
- Choose the right tax regime – Compare the new and old tax regimes to see which offers the most savings based on your income and deductions.
- Maximise deductions – Utilise Section 80C, 80D, 80E, and 80G to lower taxable income.
- Invest smartly – Consider ELSS, PPF, and NPS for long-term tax-efficient wealth creation.
- Plan business taxes efficiently – Leverage deductions, GST input credits, and business expense claims to reduce corporate tax liability.
- Use insurance for tax savings – Life and health insurance policies provide financial protection along with tax benefits.
- Avoid common tax mistakes – Missing deductions, poor investment choices, and lack of planning can increase tax liability.
Plan your taxes with Satguru Wealth
Navigating tax laws and maximising savings can be complex, but the right strategy can make all the difference. Satguru Wealth offers expert tax planning and investment planning services to help you optimise tax benefits while staying compliant.
Get in touch today for personalised tax solutions designed to help you save more and grow your wealth.
Frequently asked questions
- How often can you switch from the old tax regime to the new tax regime and vice versa?
Salaried individuals can choose between the old and new tax regimes every financial year. However, business owners and professionals with income from a business or profession can switch only once after opting for the new regime.
- Which tax-saving investment is best for long-term wealth creation?
PPF and NPS are ideal for low-risk investors seeking stable, long-term growth, while ELSS suits those comfortable with market fluctuations and aiming for higher returns.
- Can I claim deductions under Section 80C if I opt for the new tax regime?
No, the new tax regime does not allow deductions under 80C, 80D, HRA, and other exemptions, except for the standard deduction of ₹50,000.
- What are the tax benefits for small businesses and startups under Budget 2025?
Eligible startups can claim a 100% tax exemption for three years under Section 80-IAC. Businesses can also benefit from deductions on depreciation, employee expenses, and R&D investments.
- Is life insurance maturity amount taxable?
If the annual premium is less than 10% of the sum assured, the maturity proceeds are tax-free under Section 10(10D). If the premium exceeds this limit, the payout is taxable.
- Can I claim both 80D and 80C deductions in the same financial year?
Yes, Section 80C (₹1.5 lakh limit) and Section 80D (health insurance premium benefits) are separate deductions and can be claimed together.
