What are Income Tax rates under new & old tax regime as govt made no changes this year?
The Union Budget for 2026 has been announced, and as expected, there were no changes made to the personal income tax rates. The government has chosen to maintain the existing tax slabs and rates, providing relief to taxpayers who were anticipating potential changes. 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 apply to your income.
New Tax Regime:
The new tax regime, which was introduced in 2020, offers a more simplified tax structure with fewer exemptions and deductions. Under this regime, the income tax rates are as follows:
- Income up to ₹12 lakh is tax-free, providing a significant exemption to low- and middle-income earners.
- Income between ₹12 lakh and ₹16 lakh is taxed at a rate of 15%, which is relatively moderate.
- Income between ₹16 lakh and ₹20 lakh is taxed at a rate of 20%, which is slightly higher.
- Income between ₹20 lakh and ₹24 lakh is taxed at a rate of 25%, which is more substantial.
- Income above ₹24 lakh is taxed at a rate of 30%, which is the highest tax bracket.
The new tax regime is designed to be more taxpayer-friendly, with a focus on simplicity and ease of compliance. However, it’s essential to note that taxpayers who opt for the new regime will have to forgo certain exemptions and deductions, such as the standard deduction, interest on housing loan, and deductions under Section 80C.
Old Tax Regime:
The old tax regime, which has been in place for several years, offers a more traditional tax structure with various exemptions and deductions. Under this regime, the income tax rates are as follows:
- Income up to ₹2.5 lakh is tax-free, which is a relatively low exemption limit.
- Income between ₹2.5 lakh and ₹5 lakh is taxed at a rate of 5%, which is a moderate rate.
- Income between ₹5 lakh and ₹10 lakh is taxed at a rate of 20%, which is higher.
- Income above ₹10 lakh is taxed at a rate of 30%, which is the highest tax bracket.
The old tax regime offers various exemptions and deductions, such as the standard deduction, interest on housing loan, and deductions under Section 80C. However, it’s more complex and requires taxpayers to maintain detailed records and documentation.
Comparison of New and Old Tax Regimes:
When comparing the new and old tax regimes, it’s essential to consider your individual circumstances and tax planning strategies. The new regime offers a more simplified tax structure, but it may not be beneficial for taxpayers who have significant exemptions and deductions. On the other hand, the old regime offers more flexibility, but it can be more complex and time-consuming.
To illustrate the difference, let’s consider an example. Suppose you have an income of ₹18 lakh and are eligible for exemptions and deductions under the old regime. Under the old regime, you may be able to reduce your taxable income to ₹12 lakh, resulting in a tax liability of ₹1.2 lakh (10% of ₹12 lakh). In contrast, under the new regime, your tax liability would be ₹1.8 lakh (15% of ₹12 lakh + 20% of ₹6 lakh).
Conclusion:
In conclusion, the income tax rates under both the new and old tax regimes remain unchanged for the financial year 2026. While the new regime offers a more simplified tax structure, the old regime provides more flexibility and exemptions. It’s essential to evaluate your individual circumstances and tax planning strategies to determine which regime is more beneficial for you. As always, it’s recommended to consult with a tax professional or financial advisor to ensure you are making the most of the tax laws and regulations.
For more information on the Union Budget 2026 and the income tax rates, you can visit the official government website or consult with a tax expert. Stay tuned for more updates and analysis on the budget and its implications for taxpayers.
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