What are Income Tax rates under new & old tax regime as govt made no changes this year?
The recent Budget 2026 has left many taxpayers wondering about the fate of their income tax rates. In a move that was widely anticipated, the government has chosen not to make any changes to the personal income tax rates. This decision has significant implications for individuals and families, as it affects their take-home pay and overall financial planning. In this blog post, we will delve into the details of the income tax rates under the new and old tax regimes, highlighting the key differences and takeaways.
New Tax Regime: A Recap
Introduced in 2020, the new tax regime was designed to simplify the tax system and reduce the burden on taxpayers. Under this regime, income up to ₹12 lakh is completely tax-free, making it an attractive option for low- and middle-income earners. The tax slabs 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 tax regime is optional, and taxpayers can choose to opt for it or stick with the old regime. However, those who opt for the new regime must forgo certain deductions and exemptions, such as the standard deduction, interest on housing loan, and deductions under Section 80C.
Old Tax Regime: A Comparison
The old tax regime, on the other hand, has been in place for decades and offers a more traditional approach to taxation. Under this regime, the tax slabs 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
One of the key advantages of the old regime is that it allows taxpayers to claim various deductions and exemptions, such as the standard deduction, interest on housing loan, and deductions under Section 80C. However, the tax rates are generally higher, making it less attractive for high-income earners.
Key Differences and Takeaways
So, what are the key differences between the new and old tax regimes? Here are a few takeaways:
- The new tax regime offers a higher tax-free threshold of ₹12 lakh, compared to ₹2.5 lakh under the old regime.
- The tax rates under the new regime are generally lower, with a maximum rate of 30% applicable only on income above ₹24 lakh.
- The old regime offers more deductions and exemptions, but the tax rates are higher, with a maximum rate of 30% applicable on income above ₹10 lakh.
- Taxpayers who opt for the new regime must forgo certain deductions and exemptions, which may affect their overall tax liability.
Implications for Taxpayers
The decision to stick with the existing tax rates has significant implications for taxpayers. For low- and middle-income earners, the new tax regime remains an attractive option, offering a higher tax-free threshold and lower tax rates. However, high-income earners may still find the old regime more beneficial, especially if they can claim significant deductions and exemptions.
Conclusion
In conclusion, the income tax rates under the new and old tax regimes remain unchanged, with the new regime offering a higher tax-free threshold and lower tax rates, and the old regime offering more deductions and exemptions. Taxpayers must carefully evaluate their options and choose the regime that best suits their needs and financial situation. With the tax landscape remaining unchanged, individuals and families can breathe a sigh of relief, knowing that their tax liability will not increase. However, it is essential to stay informed and plan accordingly, as tax laws and regulations can change in the future.
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