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 about a mix of emotions among the citizens of India. One of the most significant aspects of the budget is the income tax rates, which have been a topic of discussion for months. In a surprise move, 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 income tax rates under 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 tax structure with reduced tax rates. The tax slabs under the new regime are as follows:
- Income up to ₹12 lakh is tax-free, providing a significant relief to low- and middle-income earners.
- Income between ₹12 lakh and ₹16 lakh is taxed at 15%, which is a moderate tax rate.
- Income between ₹16 lakh and ₹20 lakh is taxed at 20%, which is a relatively higher tax rate.
- Income between ₹20 lakh and ₹24 lakh is taxed at 25%, which is a significant increase from the previous slab.
- Income above ₹24 lakh is taxed at 30%, which is the highest tax rate under the new regime.
The new tax regime is designed to be more taxpayer-friendly, with reduced tax rates and a simplified tax structure. However, it also comes with some restrictions, such as the inability to claim certain deductions and exemptions.
Old Tax Regime
The old tax regime, which has been in place for decades, offers a more complex tax structure with multiple deductions and exemptions. The tax slabs under the old regime are as follows:
- Income up to ₹2.5 lakh is tax-free, which is a relatively low threshold.
- Income between ₹2.5 lakh and ₹5 lakh is taxed at 5%, which is a moderate tax rate.
- Income between ₹5 lakh and ₹10 lakh is taxed at 20%, which is a significant increase from the previous slab.
- Income above ₹10 lakh is taxed at 30%, which is the highest tax rate under the old regime.
The old tax regime offers more deductions and exemptions, such as the ability to claim deductions for housing loan interest, medical expenses, and charitable donations. However, it also comes with a more complex tax structure, which can be daunting for many taxpayers.
Comparison of New and Old Tax Regimes
The new and old tax regimes have distinct differences, and the choice between them depends on individual circumstances. The new tax regime is more suitable for taxpayers who have a simple tax profile and do not claim many deductions and exemptions. On the other hand, the old tax regime is more suitable for taxpayers who have a complex tax profile and claim multiple deductions and exemptions.
In terms of tax rates, the new tax regime offers more favorable rates for low- and middle-income earners, while the old tax regime offers more favorable rates for high-income earners. However, the old tax regime also comes with more deductions and exemptions, which can reduce the tax liability significantly.
Implications of Unchanged Tax Rates
The decision to keep the income tax rates unchanged is a significant development, as it provides stability and predictability for taxpayers. It also means that taxpayers can continue to plan their finances without worrying about changes in tax rates.
However, the unchanged tax rates also mean that the government has missed an opportunity to provide relief to taxpayers, particularly those in the middle and lower-income brackets. With the rising cost of living and inflation, many taxpayers were expecting some relief in the form of reduced tax rates or increased deductions and exemptions.
Conclusion
In conclusion, the income tax rates under the new and old tax regimes remain unchanged, providing stability and predictability for taxpayers. The new tax regime offers a simplified tax structure with reduced tax rates, while the old tax regime offers more deductions and exemptions. The choice between the two regimes depends on individual circumstances, and taxpayers should carefully evaluate their options before making a decision.
As the budget 2026 has been announced, it is essential to stay informed about the latest developments and updates. For more information on the budget and income tax rates, please visit the official government website or consult a tax professional.
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