With the introduction of several tax benefits married couples can strategically maximize their tax savings, as announced by Finance Minister Nirmala Sitharaman in Budget 2025 under the new tax regime. Via a combination of both old and new tax regimes based on individual financial situations, this could be performed.
Through the following examples let us comprehend the same.
Scenario 1: Couples Earning Income Less than INR 12 lakh
In such a case the new tax regime may prove to be more beneficial.
If both spouses earn under Rs 12 lakh, then they can legally pay zero tax by choosing the new regime individually.
The spouse with the deductions must choose the old regime and the spouse with fewer deductions must go with the new regime.
Scenario 2: For Couples Exceeding INR 12 Lakh Earning
When a couple earns more than Rs 12 lakh, the choice of tax regime depends upon deductions.
Tax experts explained that in such a case, the couple ought to determine which regime offers lower tax liability for each spouse considering their income structure and deductions.
For example, Mr X earns Rs 14 lakh annually, with deductions amounting to Rs 4.5 lakh, while Mrs X earns Rs 9 lakh per year and has fewer tax deductions. In such a case, Mr X must choose the old tax regime, while Mrs X should consider the new tax regime.
As the 87A Tax rebate(proposed to be enhanced to Rs. 60,000 vide Budget 2025) is available only for incomes up to Rs. 12 lakh (exclusive of Rs. 75,000 Standard Deduction), those earning beyond Rs. 12.75 lakh may not benefit from it in the new tax regime. Therefore, the old tax regime may be more profitable if they have significant deductions under Sections 80C (Rs. 1.5 lakh), 80D (Health Insurance), 24(b) (Home Loan Interest), HRA, and NPS contributions.
If they do not claim many deductions then the new tax regime with its lower tax rates and higher exemption limit may be chosen.
Scenario 3: Each Spouse Earns INR 20 Lakh Annually Both Select Different IT Regime
Let us consider a couple where both the husband and wife earn Rs 20 lakh a year. Mr .X chooses for the new tax regime, and Mrs. X proceeds with the old tax regime.
Tax experts cited that while the new tax regime furnishes lower tax rates, it does not propose advantages of deductions under Section 80C (LIC, ELSS, PPF), Section 80D (health insurance), HRA, home loan interest, etc. Therefore, this regime would be perfect for those with minimal tax-saving investments.
Mr X is needed to file Rs 2.08 lakh, under the new tax regime with 20% tax being payable upon income between Rs 16,00,001 to Rs 20,00,000.
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Opposite to that Mrs X who secures an identical income chooses for the old income tax regime. But it has higher tax rates it permits for deductions like Rs 1.5 lakh under 80C, Rs 50,000 under 80D, and Rs 2 lakh under HRA. Notwithstanding these deductions, the total tax liable to get filed by Mrs X is Rs 2.92 lakh.
Conclusion: The new tax regime proposes lower rates, and easiness it does not have deductions, which makes it effective for those with lower tax-saving investments. The old regime provides the advantage to the people with the tax saving investments after the higher rates. The choice is laid on a individual's financial strategy and eligibility for deductions.
The spouse with the deductions may regard the old tax regime while the person with the lower or no tax deductions may choose for the new regime. Married couples could save more if their opted tax regime aligns with their tax savings and financial objectives.