What are Income Tax rates under new & old tax regime as govt made no changes this year?
The Union Budget 2026 has been announced, and as expected, there were no changes made to the personal income tax rates. The government has decided to keep the tax slabs unchanged, providing relief to taxpayers who were expecting some adjustments. In this blog post, we will delve into the details of the income tax rates under both the new and old tax regimes, helping you understand how they impact your finances.
For those who are unaware, the government introduced a new tax regime in 2020, offering an alternative to the existing tax system. The new regime provides for lower tax rates, but with fewer deductions and exemptions. On the other hand, the old regime offers 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 both regimes to make an informed decision.
New Tax Regime
Under the new tax regime, the tax rates 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 relatively moderate rate.
- Income between ₹16 lakh and ₹20 lakh is taxed at 20%, which is still lower than the tax rates under the old regime.
- Income between ₹20 lakh and ₹24 lakh is taxed at 25%, which is a slight 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 simpler and more straightforward, with fewer deductions and exemptions. However, it may not be the best option for everyone, especially those who have significant investments in tax-saving instruments or have high medical expenses.
Old Tax Regime
Under the old tax regime, the tax rates 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 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 standard deduction, deduction for housing loan interest, and deduction for investments in tax-saving instruments. However, the tax rates are higher, and the system is more complex, which may make it less attractive to some taxpayers.
Comparison of Tax Rates
A comparison of the tax rates under both regimes reveals that the new regime is more beneficial for those with lower incomes, while the old regime may be more suitable for those with higher incomes and significant deductions. For example, an individual with an income of ₹15 lakh would pay 15% tax under the new regime, while they would pay 20% tax under the old regime. On the other hand, an individual with an income of ₹25 lakh and significant deductions may find the old regime more beneficial.
Impact on Taxpayers
The decision to keep the tax rates unchanged may have both positive and negative impacts on taxpayers. On the positive side, it provides stability and predictability, allowing taxpayers to plan their finances with greater certainty. On the negative side, it may not provide the relief that some taxpayers were expecting, especially those who were hoping for a reduction in tax rates or an increase in the tax-free threshold.
Conclusion
In conclusion, the income tax rates under both the new and old tax regimes remain unchanged, providing a sense of stability and predictability for taxpayers. While the new regime offers lower tax rates and simplicity, the old regime provides more deductions and exemptions. It’s essential for taxpayers to understand the tax rates and slabs under both regimes and choose the one that best suits their individual circumstances. As the government continues to evolve the tax system, it’s crucial to stay informed and adapt to the changes to minimize your tax liability and maximize your savings.
For more information on the Budget 2026 and the income tax rates, you can 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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