What are Income Tax rates under new & old tax regime as govt made no changes this year?
The Indian government’s Budget 2026 has brought a mix of emotions for taxpayers across the country. While some were expecting significant changes in the income tax slabs, others were hoping for a reduction in tax rates. However, the government has decided to keep the personal income tax rates unchanged, leaving many wondering what this means for their finances. In this blog post, we will delve into the income tax rates under both the new and old tax regimes, helping you understand how they apply to your income.
For those who are unaware, the Indian government introduced a new tax regime in 2020, providing taxpayers with the option to choose between the old and new tax systems. The new regime offers lower tax rates, but with fewer deductions and exemptions. On the other hand, the old regime provides more deductions and exemptions, but with higher tax rates. The choice between the two regimes depends on individual circumstances, and it’s essential to understand the tax rates and slabs under each regime.
New Tax Regime
Under the new tax regime, the income tax rates 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
These tax rates are applicable to individuals who opt for the new tax regime, which means they will have to forgo certain deductions and exemptions available under the old regime. The new regime is designed to simplify the tax system and reduce compliance burden, but it may not be beneficial for everyone, especially those who claim significant deductions and exemptions.
Old Tax Regime
In contrast, the old tax regime has the following income tax rates:
- 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 regime offers more deductions and exemptions, such as those on housing loan interest, investments in tax-saving schemes, and charitable donations. However, these benefits come with higher tax rates, making it essential to weigh the pros and cons before choosing this regime.
Comparison of Tax Regimes
To help you decide between the two regimes, let’s consider an example. Suppose you have an annual income of ₹18 lakh. Under the new tax regime, you would pay 15% tax on the amount between ₹12 lakh and ₹16 lakh (₹4 lakh) and 20% tax on the amount between ₹16 lakh and ₹18 lakh (₹2 lakh). Your total tax liability would be approximately ₹1.4 lakh.
In contrast, under the old tax regime, you would pay 5% tax on the amount between ₹2.5 lakh and ₹5 lakh (₹2.5 lakh), 20% tax on the amount between ₹5 lakh and ₹10 lakh (₹5 lakh), and 30% tax on the amount above ₹10 lakh (₹8 lakh). Your total tax liability would be approximately ₹2.75 lakh.
As you can see, the new tax regime offers lower tax rates, but the old regime provides more deductions and exemptions. It’s crucial to consider your individual circumstances, including your income, expenses, and investments, before choosing a tax regime.
Conclusion
In conclusion, the Indian government’s decision to keep personal income tax rates unchanged in Budget 2026 may not have brought significant changes, but it’s essential to understand the tax rates and slabs under both the new and old tax regimes. By doing so, you can make an informed decision about which regime is best for your financial situation. Remember to consider your individual circumstances, including your income, expenses, and investments, before choosing a tax regime. With the right choice, you can minimize your tax liability and maximize your savings.
For more information on the budget and tax changes, you can visit the official government website or consult a tax expert. Stay tuned for more updates on personal finance and taxation.
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