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. This means that the tax slabs and rates introduced in previous years will continue to apply for the current financial year. 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 work and which one might be more beneficial for you.
New Tax Regime
The new tax regime was introduced in 2020, with the aim of simplifying the tax structure and reducing the tax burden on individuals. Under this regime, the 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
As you can see, the new tax regime offers a higher tax-free limit of ₹12 lakh, which is a significant increase from the old regime. However, the tax rates are slightly higher in the higher income brackets. The new regime also does away with most of the tax deductions and exemptions, which were available under the old regime.
Old Tax Regime
The old tax regime, also known as the “existing tax regime,” has been in place for many years. Under this regime, the tax rates 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 tax regime offers a lower tax-free limit of ₹2.5 lakh, but it also provides a range of tax deductions and exemptions that can help reduce your tax liability. These deductions include things like home loan interest, medical expenses, and investments in tax-saving instruments.
Comparison of New and Old Tax Regimes
So, which tax regime is more beneficial for you? The answer depends on your individual circumstances and tax planning strategy. If you have a high income and few tax deductions, the new tax regime might be a better option, as it offers a higher tax-free limit and simpler tax structure. On the other hand, if you have a lot of tax deductions and exemptions, the old tax regime might be more beneficial, as it allows you to claim these deductions and reduce your tax liability.
Here’s an example to illustrate the difference between the two regimes:
Suppose you have an income of ₹18 lakh and claim tax deductions of ₹2 lakh under the old regime. Your taxable income would be ₹16 lakh, and your tax liability would be:
- Under the old regime: ₹16 lakh x 20% = ₹3.2 lakh
- Under the new regime: ₹18 lakh x 20% = ₹3.6 lakh
In this case, the old tax regime is more beneficial, as it allows you to claim tax deductions and reduce your tax liability.
Conclusion
In conclusion, the income tax rates under both the new and old tax regimes remain unchanged for the current financial year. While the new regime offers a higher tax-free limit and simpler tax structure, the old regime provides a range of tax deductions and exemptions that can help reduce your tax liability. Ultimately, the choice between the two regimes depends on your individual circumstances and tax planning strategy. It’s always a good idea to consult a tax professional or financial advisor to determine which regime is more beneficial for you.
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