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 excitement and disappointment for taxpayers in India. One of the most significant aspects of the budget is the income tax rates, which have been a topic of discussion for many years. In this article, we will delve into the details of the income tax rates under the new and old tax regimes, and what it means for taxpayers.
The government has decided to keep the personal income tax rates unchanged, which means that taxpayers will continue to pay the same amount of tax as they did in the previous year. Under the new tax regime, which was introduced in 2020, income up to ₹12 lakh is tax-free, followed by a tax rate of 15% for income between ₹12 lakh and ₹16 lakh. The tax rate increases to 20% for income between ₹16 lakh and ₹20 lakh, 25% for income between ₹20 lakh and ₹24 lakh, and 30% for income above ₹24 lakh.
On the other hand, the old tax regime has a different set of tax slabs. Under this regime, income up to ₹2.5 lakh is tax-free, followed by a tax rate of 5% for income between ₹2.5 lakh and ₹5 lakh. The tax rate increases to 20% for income between ₹5 lakh and ₹10 lakh, and 30% for income above ₹10 lakh.
It is worth noting that the new tax regime is optional, and taxpayers can choose to opt for either the new or the old tax regime. However, once a taxpayer has opted for the new tax regime, they cannot switch back to the old tax regime in subsequent years.
The decision to keep the income tax rates unchanged is likely to be a relief for many taxpayers, who were expecting a reduction in tax rates. However, it is also a missed opportunity for the government to simplify the tax system and reduce the tax burden on individuals.
The new tax regime was introduced with the aim of simplifying the tax system and reducing the number of tax exemptions and deductions. However, it has been criticized for being complex and difficult to understand. The fact that the government has not made any changes to the tax rates or the tax slabs under the new regime suggests that it is still committed to the idea of a simplified tax system.
One of the main advantages of the new tax regime is that it offers a lower tax rate for individuals with income up to ₹12 lakh. This is likely to benefit low- and middle-income taxpayers, who will see a reduction in their tax liability. However, for individuals with higher incomes, the tax rates under the new regime are similar to those under the old regime.
In contrast, the old tax regime offers a range of tax exemptions and deductions, which can help reduce the tax liability of individuals. For example, taxpayers can claim deductions for investments in housing, education, and health insurance, among other things. However, the old regime also has a more complex tax system, with multiple tax slabs and rates.
Ultimately, the choice between the new and old tax regimes will depend on individual circumstances. Taxpayers who have a simple tax situation and do not claim many deductions may find the new regime more beneficial. On the other hand, taxpayers who claim multiple deductions and have a complex tax situation may find the old regime more beneficial.
In conclusion, the income tax rates under the new and old tax regimes remain unchanged, with the new regime offering a lower tax rate for individuals with income up to ₹12 lakh. While the decision to keep the tax rates unchanged may be a relief for many taxpayers, it is also a missed opportunity for the government to simplify the tax system and reduce the tax burden on individuals. As the tax system continues to evolve, it will be interesting to see how taxpayers respond to the new and old tax regimes, and how the government addresses the complexities and challenges of the tax system.
For more information on the 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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