Editor’s Note: What Will You Use That Tax Saving For?

The asks from this year’s Budget were many but the two big announcements on tax slabs brought big smiles on the faces of middle-class Indians. By now, you would already be aware of the two big changes that will affect taxpayers directly. One, those with incomes up to Rs 12 lakh per annum will have no tax to pay, though this income doesn’t include capital gains. Two, the 30 per cent tax slab rate will now be applicable to only those with incomes above Rs 24 lakh; earlier those with incomes above Rs 15 lakh had to pay 30 per cent tax.

Finance Minister Nirmala Sitharaman’s focus on senior and super senior citizens was also heartening. Among many other measures for them, the one that stands out: the expansion of the interest limit on deposits made by senior citizens that is not subject to tax deducted at source (TDS). There will be no TDS on interest income up to Rs 1 lakh, up from Rs 50,000 from FY 26.

A big takeaway is the fact that the new Budget proposals make the old tax regime irrelevant for most people. In FY26, signing up for the new tax regime will be more beneficial for most of you, unless you avail of a host of deductions and pay huge rent to be eligible for a large house rent allowance (HRA) exemption. It’s quite clear that the old tax regime is on its last legs.

Going by the announcement made just on the tax relief front, it is a given that a lot more individuals will have more money in their hands for consumption and investments. This in turn could give a boost to the savings rate and the economy.

But there’s a catch here. What do you do with that extra money in your hands? Do you want to spend all that to party harder or to complete the shopping cart with items that you couldn’t afford earlier, or to just eat out more?

I would say, pause and think hard about that extra money. It could simply go into adding to your investments for various financial goals like children’s education and retirement. For those who are not on that road already, it could go into opening a brand new investment account and making a beginning. It may be a silver lining for those burdened with debt. The extra payments towards your principal payment can reduce your loan burden dramatically over a period of time, especially in the case of long-term ones like home loans. You could also look at capital-intensive pending tasks like repair and renovation of your house or replacement of consumer durables that are giving constant trouble.

It’s tempting to add to your monthly expenses list, but it would be wise to weigh the scales and carve the extra money out for a purpose that benefits you in the long term.