What are Income Tax rates under new & old tax regime as govt made no changes this year?
The Union Budget 2026, presented by Finance Minister Nirmala Sitharaman, has left personal income tax rates unchanged, providing relief to taxpayers across the country. The decision to maintain the existing tax slabs and rates has been welcomed by many, as it ensures that individuals and families can continue to plan their finances without any significant changes to their tax liabilities. In this blog post, we will delve into the details of the income tax rates under both the new and old tax regimes, highlighting the key differences and implications for taxpayers.
New Tax Regime
The new tax regime, which was introduced in 2020, offers a simplified and more concise tax structure. Under this regime, individuals can opt for a lower tax rate, but they must forgo certain exemptions and deductions. The tax slabs under the new regime are as follows:
- Income up to ₹12 lakh is tax-free
- 15% tax on income between ₹12 lakh and ₹16 lakh
- 20% tax on income between ₹16 lakh and ₹20 lakh
- 25% tax on income between ₹20 lakh and ₹24 lakh
- 30% tax on income above ₹24 lakh
The new tax regime is designed to reduce the complexity of the tax system and make it more attractive for individuals to opt for a lower tax rate. However, it’s essential to note that taxpayers who choose this regime must give up certain exemptions and deductions, such as the standard deduction, interest on housing loan, and deductions under Section 80C.
Old Tax Regime
The old tax regime, which has been in place for several decades, offers a more traditional approach to taxation. Under this regime, individuals can claim various exemptions and deductions, but they must also pay a higher tax rate. The tax slabs under the old regime are as follows:
- 0% tax on income up to ₹2.5 lakh
- 5% tax on income between ₹2.5 lakh and ₹5 lakh
- 20% tax on income between ₹5 lakh and ₹10 lakh
- 30% tax on income above ₹10 lakh
The old tax regime provides more flexibility and options for taxpayers to reduce their tax liability. However, it’s also more complex, with multiple exemptions and deductions available. Taxpayers who opt for this regime can claim deductions under Section 80C, interest on housing loan, and other exemptions, but they must also pay a higher tax rate.
Comparison of New and Old Tax Regimes
When comparing the new and old tax regimes, it’s essential to consider individual circumstances and financial goals. The new tax regime is more suitable for individuals who have a simple tax profile and do not require multiple exemptions and deductions. On the other hand, the old tax regime is more beneficial for taxpayers who have a complex tax profile and can claim various exemptions and deductions.
For example, an individual with an income of ₹18 lakh may find that the new tax regime is more beneficial, as they can pay a lower tax rate of 20% on their income. However, if the same individual has a housing loan and can claim interest deductions, they may find that the old tax regime is more beneficial, as they can reduce their taxable income and pay a lower tax rate.
Implications of No Changes to Tax Rates
The decision to maintain the existing tax rates and slabs has significant implications for taxpayers and the economy as a whole. With no changes to tax rates, individuals and families can continue to plan their finances without any significant disruptions. This stability can also boost consumer confidence, leading to increased spending and economic growth.
However, some experts argue that the government missed an opportunity to simplify the tax system further and reduce tax rates. A reduction in tax rates could have put more money in the pockets of taxpayers, leading to increased consumption and economic growth.
Conclusion
In conclusion, the Union Budget 2026 has left personal income tax rates unchanged, providing relief to taxpayers across the country. The new tax regime offers a simplified and more concise tax structure, while the old tax regime provides more flexibility and options for taxpayers to reduce their tax liability. Individuals must carefully consider their financial goals and circumstances before choosing between the two regimes. As the economy continues to grow and evolve, it’s essential to monitor the tax system and make adjustments as necessary to ensure that it remains fair, simple, and effective.
For more information on the Union Budget 2026 and the income tax rates, please visit: https://indianexpress.com/article/india/budget-live-2026-new-vs-old-income-tax-rate-cut-slab-change-fm-nirmala-sitharaman-speech-announcements-10504348/lite/
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