How the New Taxation Slabs Can Affect Your Savings and Investments?

The 1st of April 2025 marks a turning point for how individuals across income levels will need to think about their money. With the revised tax slabs now active, what may seem like small rate changes on paper can lead to larger shifts in how savings grow, how investments are taxed and how much disposable income truly stays with you. These updates don’t just affect tax outgo—they can quietly influence financial habits, investment timing and even the way people approach long-term goals. This article looks at how these changes could play out in real life.

First, let us look at the old regime.

As you can see, in the previous tax regime, income up to Rs. 3 lakhs was tax-free. Thanks to a rebate, even those earning up to Rs. 7 lakhs didn’t have to pay any tax. Beyond that, taxes began at 10% for income above Rs. 7 lakhs and moved up through higher brackets.  

FY 2024-25 (AY 2025-26)
Income Slab	Income Tax Rate
Up to Rs. 3 lakhs	Nil
Rs. 3 lakhs to Rs. 6 lakhs	5%
Rs. 6 lakhs to Rs. 9 lakhs	10%
Rs. 9 lakhs to Rs. 12 lakhs	15%
Rs. 12 lakhs to Rs. 15 lakhs	20%
More than Rs. 15 lakhs	30%

In the new taxation slab, if you’re salaried, your income can go up to Rs. 12.75 lakhs without paying any tax. This is because you get a standard deduction of Rs. 75,000 and a rebate under Section 87A of up to Rs. 60,000. Even if your income is just a little over the limit, you’re only taxed on the extra amount, not the full income.

FY 2025-26 (AY 2026-27)
Income Slab	Income Tax Rate
Up to Rs. 4 lakhs	Nil
Rs. 4 lakhs to Rs. 8 lakhs	5%
Rs. 8 lakhs to Rs. 12 lakhs	10%
Rs. 12 lakhs to Rs. 16 lakhs	15%
Rs. 16 lakhs to Rs. 20 lakhs	20%
Rs. 20 lakhs to Rs. 24 lakhs	25%
More than Rs. 15 lakhs	30%

How will this change affect your savings and investments?

When tax slabs change, it doesn’t just affect how much you pay the government—it also changes how much you get to keep, save and grow. A small shift in tax liability can influence everything from your monthly SIPs to your emergency fund and long-term goals. That’s why it’s important to understand not just the new rates, but also how to calculate income tax under the regime you’ve chosen. Here’s how the new changes might reflect in your savings and investment behaviour:

1. More in hand means more to save

With higher rebate limits and standard deductions, many people will find themselves paying less tax. This extra money each month can go straight into savings or be redirected into short-term goals.

2. Reduced need for tax-saving investments

Since deductions like 80C are not available in the new regime, you won’t need to invest just to save tax. This gives you the freedom to pick options based on returns and liquidity, not just tax benefits.

3. Shift in portfolio preferences

Without the pressure to invest in ELSS or PPF for deductions, some may lean more toward mutual funds, index funds or FDs depending on their risk appetite and life stage.

4. Greater focus on post-tax returns

The focus now shifts to investments that offer better post-tax value. For example, tax-free options like sovereign gold bonds or long-term equity gains might look more attractive.

5. Easier financial planning

A simpler tax structure allows for clearer monthly budgeting. Once you know your exact tax outgo, it becomes easier to set investment targets and track progress.

6. Better use of salary components

Salaried individuals may now revisit components like HRA and allowances, since exemptions matter more under the old regime. Choosing the right regime each year could improve overall financial efficiency.

Now is the right time to take a closer look at your income, expenses and financial goals with the updated tax rules in place. Whether you’re planning to save more each month or invest more strategically, understanding your tax liability is the first step. Use this opportunity to reassess where your money goes and how it grows. 

You don’t need to overhaul your entire portfolio, but small changes based on the new slabs can make a noticeable difference over time. If needed, speak to a financial advisor and plan smartly for the year ahead—your future self will thank you for it.