Old vs new (simplified): Which income tax regime will help you save more on tax outgo?

Budget 2024 has ensured that the new, simplified income-tax regime is now better than before.

Tax-payers now have more incentives to switch to the new, simplified regime, only those who avail of significantly higher deductions will find the old tax regime attractive.

Finance Minister Nirmala Sitharaman liberalised income tax slabs under the simplified regime further, besides hiking the standard deduction from Rs 50,000 to Rs 75,000.

Essentially, salaried employees would be better off switching to the new, simplified tax regime unless they are claiming deductions of up to Rs 2 lakh on home loan interest or are eligible for hefty house rent allowance (HRA). Without either of the two, the old tax regime doesn't make much sense

Will Budget 2025 scrap the old, with-exemptions tax regime?

With the Central government making the new and minimal exemptions regime more appealing to taxpayers over the years, many have shifted away from the old regime that provided several exemptions over the years. According to finance ministry data, 72 percent of taxpayers switched to the new tax regime in financial year 2023-24.

Budget 2024 sweetened the deal further in July 2024, when Union finance minister Nirmala Sitharaman rejigged the income tax slabs under the new, minimal exemptions tax regime and increased the standard deduction from Rs 50,000 to Rs 75,000. She also hiked the tax break on employers’ contribution to employees’ National Pension System (NPS) from 10 percent to 14 percent

In contrast, the tax slabs, rates and standard deduction under the old tax regime were left unchanged.

Was it a prelude to phasing out the old regime?

Unlikely, feel experts. “I do not believe the government will scrap the old tax regime in Budget 2025. For most tax-payers, the new regime will result in lower tax outgo, especially post Budget changes in July 2024. However, a section of tax-payers might still find the old structure to be more beneficial. The government will not tinker with the old regime keeping such tax-payers’ interests in mind,” says Karan Batra, founder of tax consultancy firm Chartered Club.

Ghaziabad DM orders Bank Officers to Approve Loans under Govt Scheme

Ghaziabad District Magistrate (DM) Indra Vikram Singh adopted a strict approach to ensure the approval of loans under the Chief Minister’s Youth Entrepreneur Development Campaign. During a review meeting on Thursday evening at the Vikas Bhawan auditorium, he ordered that no bank officer would be allowed to leave the premises until loans were sanctioned.

This stern directive was not just a warning but was strictly enforced. The impact was immediate—between 5 pm and 9 pm, loans of ₹5 lakh each were approved for 98 entrepreneurs. Only after these approvals were completed were the bank officers permitted to leave the auditorium.

After exiting the meeting, bank officers expressed their relief. One officer remarked, “Today was a very tough day for us.”

DM Reacts to Slow Progress

The DM’s frustration grew when he reviewed the loan approval status at 5 pm. It was revealed that against the target of approving loans for 500 entrepreneurs by January 2024, only 50 loans had been approved so far—just 10% of the goal. Adding to the DM’s ire was the fact that, despite a warning issued during a meeting seven days earlier, only 37 loans had been approved in the intervening week.

Industry Deputy Commissioner Srinath Paswan informed the DM that applications had been pending with banks for more than seven days. A total of 403 applications had been forwarded to banks after completing all formalities, but approvals remained delayed.

Immediate Action Taken

In response, DM Singh ordered that no bank officer would be allowed to leave until loan approvals were processed. This directive led to 98 loans being sanctioned between 5 pm and 9 pm, bringing the total approved loans to 148.

The DM’s decisive action has sent a clear message to banking officials about the urgency of meeting the campaign’s targets and supporting young entrepreneurs.

Government Approves stake sale in 5 Public Sector Banks

In a significant move, the Indian government has approved a ₹10,000 crore fundraising plan for five public sector banks (PSBs). According to a report by CNBC-TV18, the fundraising will be carried out through the Qualified Institutional Placement (QIP) route.

Banks Involved in the Fundraising

The five banks selected for this initiative include:

• Bank of Maharashtra
• Indian Overseas Bank (IOB)
• Punjab & Sind Bank
• UCO Bank
• Central Bank of India

The fundraising is expected to begin in small tranches, starting from the fourth quarter of the financial year 2025 (Q4 FY2025).

Stake Sale via Offer for Sale (OFS) Route

In addition to the QIP, the Department of Investment and Public Asset Management (DIPAM) has been authorized to sell stakes in these banks through the Offer For Sale (OFS) route.

This step is part of the government’s strategy to meet the 25% minimum public shareholding norm for public sector banks by August 2026. These banks currently fall under the administrative control of the Department of Financial Services.

Government’s Current Ownership in the Banks

As of December 2024, the Indian government holds a majority stake in these five banks. The shareholding details are as follows:

• Bank of Maharashtra: 79.6%
• Punjab & Sind Bank: 98.25%
• Indian Overseas Bank (IOB): 96.38%
• UCO Bank: 95.39%
• Central Bank of India: 93.08%

These figures are based on the latest shareholding pattern available on the Bombay Stock Exchange (BSE).

Financial Impact

The government’s excess stake in these banks, based on current market prices, is estimated to be worth nearly ₹50,000 crore.

Objective

This dual fundraising strategy through QIP and OFS aims to:

• Infuse additional capital into these banks.
• Achieve compliance with public shareholding norms.
• Strengthen the financial stability of the public sector banking system.

The move underscores the government’s focus on boosting financial health and improving governance in public sector banks.

Good News! 8th Pay Commission Approved for Central Government Employees, Salary will increase

evaluating and recommending changes to the pay scales, benefits, and allowances of central government employees. These commissions are typically constituted every decade to account for economic changes like inflation, ensuring fair compensation.

The 7th Pay Commission, which came into effect in 2016, resulted in an expenditure increase of ₹1 lakh crore for FY 2016-17. The upcoming pay adjustments are expected to have a similarly significant financial impact.

Announcement Timing

The approval of the 8th Pay Commission comes just days ahead of the Union Budget 2025-26, scheduled to be presented by Finance Minister Nirmala Sitharaman on February 1, 2025. This timing underscores the government’s commitment to addressing employee welfare while gearing up for the upcoming fiscal year.

What’s Next?

The 8th Pay Commission will begin its work soon, with the appointed chairman and members tasked with evaluating current pay structures and making recommendations. The report is expected to be submitted before January 2026, laying the groundwork for improved salaries and pensions for millions of government employees and retirees.

IDBI Bank Privatisation May Extend to Next Financial Year

The financial bids for the strategic sale of IDBI Bank are expected to be submitted by March 2025. However, the finalization of the transaction may extend into the next financial year, according to sources.

The government plans to sell a 60.72% stake in IDBI Bank, including 30.48% (₹21,690 crore at current prices) from the government and 30.24% from LIC, along with management control. Bidders include Fairfax India Holdings, Emirates NBD, and Kotak Mahindra Bank.

The Reserve Bank of India (RBI) issued the ‘fit and proper’ certification to shortlisted bidders in December. The due diligence process began late due to holiday leaves. Bidders now have access to IDBI Bank’s data room to assess financial information and address questions. The next step is finalizing the Share Purchase Agreement (SPA) with regulatory approvals.

If a bank wins the bid, it must comply with RBI norms, allowing promoters to hold only one banking license. Sufficient time will be given for this process.

IDBI Bank has shown financial improvement, exiting the RBI’s Prompt Corrective Action (PCA) framework in March 2021. It has consistently reported profits:

• FY21: ₹1,359 crore
• FY22: ₹2,439 crore
• FY23: ₹3,645 crore
• FY24: ₹5,634 crore

The government may miss its ₹50,000 crore disinvestment target for this financial year. However, strong dividends from the RBI and central public sector enterprises (CPSEs) have boosted non-tax revenues and ensured financial stability.

Economist says Bank Mergers may create Monopoly

Flawed Collateral Valuation

Tantri also pointed out systemic flaws in the way collateral is valued in India’s banking system. He criticized the assumption that collateral guarantees loan safety. “People think giving Rs 100 as security and Rs 80 as a loan is safe. But in case of default, that Rs 100 collateral often sells for Rs 50 or 40. It’s not as secure as it appears,” he remarked.

Impact of NBFC Closures

He further raised concerns about the government’s policies toward Non-Banking Financial Companies (NBFCs), many of which have faced closures. “We’re shutting down NBFCs and merging banks, making them larger. This reduces access to credit for small businesses and individuals,” he added.

Call for Reform

Tantri warned that the current approach to credit could have long-term consequences for India’s economic growth and innovation. “If we don’t improve our credit infrastructure, we will stifle growth and create monopolies. Entrepreneurship needs easy access to credit to thrive,” he concluded.