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 awaited aspects of the budget was the revision of income tax rates. However, this year, the government has decided to keep the personal income tax rates unchanged. In this blog post, we will delve into the details of the income tax rates under both the new and old tax regimes and explore what this means for taxpayers.
New Tax Regime
The new tax regime was introduced in 2020, with the aim of simplifying the tax structure and reducing the burden on taxpayers. Under this 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
This regime is optional, and taxpayers can choose to opt for it or stick with the old regime. The new regime is beneficial for those who do not have many deductions to claim, as it provides a simpler and more straightforward tax structure.
Old Tax Regime
The old tax regime, on the other hand, has been in place for many years and provides a more complex tax structure with various deductions and exemptions. Under this regime, the income tax rates 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
This regime is beneficial for those who have many deductions to claim, such as home loan interest, medical expenses, and charitable donations. However, it can be more complex and time-consuming to calculate taxes under this regime.
Comparison of New and Old Tax Regimes
So, which regime is better? The answer depends on individual circumstances. If you have many deductions to claim, the old regime may be more beneficial. However, if you have a simple tax situation and do not have many deductions to claim, the new regime may be more suitable.
Here’s an example to illustrate the difference:
Suppose you have an income of ₹18 lakh and claim deductions of ₹2 lakh under the old regime. Your taxable income would be ₹16 lakh, and your tax liability would be:
- ₹0 on the first ₹2.5 lakh
- ₹2,500 (5% of ₹5 lakh) on the next ₹2.5 lakh
- ₹1 lakh (20% of ₹5 lakh) on the next ₹5 lakh
- ₹1.1 lakh (20% of ₹5.5 lakh) on the last ₹5.5 lakh
Total tax liability: ₹2.6 lakh
Under the new regime, your taxable income would be ₹18 lakh, and your tax liability would be:
- ₹0 on the first ₹12 lakh
- ₹0.6 lakh (15% of ₹4 lakh) on the next ₹4 lakh
- ₹0.8 lakh (20% of ₹4 lakh) on the last ₹2 lakh
Total tax liability: ₹1.4 lakh
In this example, the new regime is more beneficial, as the tax liability is lower. However, if you had more deductions to claim under the old regime, the outcome might be different.
Conclusion
In conclusion, the income tax rates under both the new and old tax regimes remain unchanged in Budget 2026. While the new regime provides a simpler and more straightforward tax structure, the old regime offers more deductions and exemptions. Ultimately, the choice between the two regimes depends on individual circumstances. It is essential to carefully evaluate your tax situation and choose the regime that best suits your needs.
As the government continues to work towards simplifying the tax structure and reducing the burden on taxpayers, it is crucial to stay informed about the latest developments and changes in the tax laws. For more information on the Budget 2026 and its implications, you can visit the official government website or consult a tax expert.
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