What are Income Tax rates under new & old tax regime as govt made no changes this year?
The Union Budget 2026, presented by Finance Minister Nirmala Sitharaman, has left many taxpayers wondering about the income tax rates. In a move that was widely anticipated, the government has decided to keep the personal income tax rates unchanged. This means that taxpayers will continue to have the option to choose between the new and old tax regimes, with the same tax rates and slabs that were introduced in the previous year.
Under the new tax regime, which was introduced in 2020, income up to ₹12 lakh is tax-free. This is a significant increase from the old regime, where tax exemption was only available up to ₹2.5 lakh. The new regime also has a more gradual tax rate structure, with 15% tax applicable on income between ₹12 lakh and ₹16 lakh, 20% on income between ₹16 lakh and ₹20 lakh, 25% on income between ₹20 lakh and ₹24 lakh, and 30% on income above ₹24 lakh.
On the other hand, the old tax regime has a more traditional tax rate structure, with 0% tax applicable up to ₹2.5 lakh, 5% on income between ₹2.5 lakh and ₹5 lakh, 20% on income between ₹5 lakh and ₹10 lakh, and 30% on income above ₹10 lakh. While the old regime has a lower tax exemption limit, it also allows taxpayers to claim various deductions and exemptions, such as those available under Section 80C, Section 80D, and Section 24.
The decision to keep the tax rates unchanged is likely to be a relief for many taxpayers, who were worried about the possibility of higher tax rates or reduced exemptions. However, it also means that taxpayers will have to continue to navigate the complexities of the two tax regimes, and decide which one is more beneficial for them.
New Tax Regime: A Closer Look
The new tax regime was introduced in 2020, with the aim of simplifying the tax system and reducing the compliance burden on taxpayers. The regime has a more gradual tax rate structure, with five tax slabs and a higher tax exemption limit. The tax rates under the new regime are as follows:
- 0% tax on income up to ₹12 lakh
- 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
The new regime also does away with many of the deductions and exemptions that are available under the old regime. For example, taxpayers cannot claim deductions under Section 80C, Section 80D, or Section 24 under the new regime. However, they can still claim a standard deduction of ₹50,000, which is available to all taxpayers.
Old Tax Regime: A Closer Look
The old tax regime, on the other hand, has a more traditional tax rate structure, with four tax slabs and a lower tax exemption limit. The tax rates under the old regime 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
The old regime also allows taxpayers to claim various deductions and exemptions, such as those available under Section 80C, Section 80D, and Section 24. For example, taxpayers can claim a deduction of up to ₹1.5 lakh under Section 80C, which includes investments in instruments such as provident fund, public provident fund, and national savings certificate.
Which Regime is More Beneficial?
The decision to choose between the new and old tax regimes depends on individual circumstances. Taxpayers who have a high income and are able to claim many deductions and exemptions may find the old regime more beneficial. On the other hand, taxpayers who have a lower income and are not able to claim many deductions and exemptions may find the new regime more beneficial.
It’s also worth noting that the new regime has a higher tax exemption limit, which means that taxpayers do not have to pay tax on income up to ₹12 lakh. This can be a significant advantage for taxpayers who have a lower income, as it means that they do not have to worry about paying tax on their income.
Conclusion
In conclusion, the Union Budget 2026 has left the personal income tax rates unchanged, which means that taxpayers will continue to have the option to choose between the new and old tax regimes. The new regime has a more gradual tax rate structure and a higher tax exemption limit, while the old regime allows taxpayers to claim various deductions and exemptions. Taxpayers will have to navigate the complexities of the two regimes and decide which one is more beneficial for them.
For more information on the income tax rates and slabs, readers can visit the official website of the Income Tax Department or consult a tax professional. It’s also worth noting that the tax rates and slabs are subject to change, and taxpayers should stay informed about any updates or changes to the tax laws.
About the Author
