What are Income Tax rates under new & old tax regime as govt made no changes this year?
The Budget 2026 has been announced, and as expected, it has brought a mix of emotions among the taxpayers in the country. One of the most significant aspects of the budget is the income tax rates, which have been a topic of discussion for many years. This year, the government has decided to keep the personal income tax rates unchanged, providing relief to many taxpayers. In this blog post, we will delve into the details of the income tax rates under the new and old tax regimes and understand what this means for the common man.
New Tax Regime:
The new tax regime, which was introduced in 2020, has been gaining popularity among taxpayers due to its simplicity and lower tax rates. Under this regime, the income tax rates are as follows:
- Income up to ₹12 lakh is tax-free, which means that individuals with an annual income of up to ₹12 lakh do not have to pay any income tax.
- For income between ₹12 lakh and ₹16 lakh, the tax rate is 15%. This means that individuals with an annual income between ₹12 lakh and ₹16 lakh will have to pay 15% of their income above ₹12 lakh as tax.
- For income between ₹16 lakh and ₹20 lakh, the tax rate is 20%. This means that individuals with an annual income between ₹16 lakh and ₹20 lakh will have to pay 20% of their income above ₹16 lakh as tax.
- For income between ₹20 lakh and ₹24 lakh, the tax rate is 25%. This means that individuals with an annual income between ₹20 lakh and ₹24 lakh will have to pay 25% of their income above ₹20 lakh as tax.
- For income above ₹24 lakh, the tax rate is 30%. This means that individuals with an annual income above ₹24 lakh will have to pay 30% of their income above ₹24 lakh as tax.
Old Tax Regime:
The old tax regime, which has been in existence for many years, has a different set of tax rates. Under this regime, the income tax rates are as follows:
- Income up to ₹2.5 lakh is tax-free, which means that individuals with an annual income of up to ₹2.5 lakh do not have to pay any income tax.
- For income between ₹2.5 lakh and ₹5 lakh, the tax rate is 5%. This means that individuals with an annual income between ₹2.5 lakh and ₹5 lakh will have to pay 5% of their income above ₹2.5 lakh as tax.
- For income between ₹5 lakh and ₹10 lakh, the tax rate is 20%. This means that individuals with an annual income between ₹5 lakh and ₹10 lakh will have to pay 20% of their income above ₹5 lakh as tax.
- For income above ₹10 lakh, the tax rate is 30%. This means that individuals with an annual income above ₹10 lakh will have to pay 30% of their income above ₹10 lakh as tax.
Comparison between New and Old Tax Regimes:
Now that we have understood the tax rates under both regimes, let’s compare them to see which one is more beneficial. The new tax regime has a higher tax-free limit of ₹12 lakh, compared to ₹2.5 lakh under the old regime. However, the tax rates under the new regime are higher for income above ₹12 lakh. On the other hand, the old regime has lower tax rates for income between ₹2.5 lakh and ₹5 lakh, but the tax rates are higher for income above ₹10 lakh.
Impact on Taxpayers:
The decision to keep the income tax rates unchanged will have a significant impact on taxpayers. For individuals with an annual income of up to ₹12 lakh, there will be no change in their tax liability. However, for individuals with an annual income above ₹12 lakh, the tax rates will remain the same as last year. This means that individuals who have invested in tax-saving instruments such as life insurance policies, public provident fund, and national savings certificates will continue to enjoy the tax benefits.
Conclusion:
In conclusion, the Budget 2026 has kept the personal income tax rates unchanged, providing relief to many taxpayers. The new tax regime has a higher tax-free limit and lower tax rates for income up to ₹24 lakh, while the old regime has lower tax rates for income between ₹2.5 lakh and ₹5 lakh. Taxpayers should carefully evaluate their tax liability under both regimes and choose the one that is more beneficial to them. As the government continues to simplify the tax system and promote voluntary compliance, it is essential for taxpayers to stay informed about the latest developments in income tax rates and regulations.
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