What are Income Tax rates under new & old tax regime as govt made no changes this year?
The Budget 2026 has brought a sense of relief to individual taxpayers as the government has decided to keep the personal income tax rates unchanged. This means that taxpayers can continue to enjoy the same tax slabs and rates as the previous year. In this blog post, we will delve into the details of the income tax rates under both the new and old tax regimes, and what this means for taxpayers.
For those who are unaware, the government had introduced a new tax regime in 2020, which offered a simpler and more straightforward way of calculating taxes. The new regime did away with many exemptions and deductions, but offered lower tax rates to compensate for the loss of these benefits. The old tax regime, on the other hand, continues to offer a range of exemptions and deductions, but with higher tax rates.
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
This regime is ideal for those who do not have many investments or expenses that qualify for exemptions and deductions under the old regime. It is also a good option for those who want a simpler tax calculation process.
Old Tax Regime
The old tax regime, on the other hand, has the following tax slabs:
- 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 suitable for those who have significant investments or expenses that qualify for exemptions and deductions. For example, those who have taken a home loan can claim a deduction on the interest paid, which can help reduce their taxable income.
Comparison of New and Old Tax Regimes
So, which tax regime is better? The answer depends on individual circumstances. Those who have many exemptions and deductions to claim may find the old regime more beneficial, as they can reduce their taxable income and pay lower taxes. On the other hand, those who do not have many exemptions and deductions may find the new regime more attractive, as it offers lower tax rates and a simpler calculation process.
To illustrate the difference, let’s consider an example. Suppose an individual has a taxable income of ₹18 lakh and is eligible for exemptions and deductions worth ₹4 lakh under the old regime. Under the old regime, their taxable income would be ₹14 lakh (₹18 lakh – ₹4 lakh), and they would pay 20% tax on the amount between ₹5 lakh and ₹10 lakh, and 30% tax on the amount above ₹10 lakh. Under the new regime, they would pay 20% tax on the entire amount of ₹18 lakh, as there are no exemptions and deductions available.
Impact of No Changes in Tax Rates
The government’s decision to keep the tax rates unchanged is a welcome move, as it provides stability and predictability for taxpayers. This will help individuals and businesses plan their finances better, without worrying about changes in tax rates.
However, some experts had expected the government to tweak the tax rates or slabs to provide more relief to taxpayers. The fact that no changes have been made may be a disappointment to some, especially those who were hoping for a reduction in tax rates or an increase in the tax slabs.
Conclusion
In conclusion, the income tax rates under both the new and old tax regimes remain unchanged, providing stability and predictability for taxpayers. While the new regime offers lower tax rates and a simpler calculation process, the old regime provides more exemptions and deductions, which can help reduce taxable income. Individuals should carefully evaluate their options and choose the regime that best suits their needs.
For more information on the Budget 2026 and the income tax rates, you can visit the official government website or consult a tax expert.
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