New or Old? Which I-T regime should you choose for FY 2026-27? Tax rates, slabs explained

Union Budget 2026: Every year, 1 of the main components of the Budget presumption is the income tax, arsenic taxpayers keenly ticker for changes successful the slabs, taxation rates and different factors — which whitethorn easiness their taxation burden! However, station Finance Minister Nirmala Sitharaman's Union Budget speech, the income taxation model remains unchanged from the erstwhile Budget.FM Nirmala Sitharaman, who presented her ninth consecutive Union Budget connected Sunday, was the 1 who introduced the caller taxation regime. 6 years back, successful 2020, taxpayers were offered different caller prime of taxation structure, the caller income taxation regime. Since then, taxpayers person perpetually faced a choice: Go with the caller taxation authorities oregon enactment with the aged one. Deciding betwixt the 2 is rather a task arsenic 1 offers promises of little rates and simpler compliance portion the different lures higher income earners with deductions and exemptions.

New Income Tax regime: Key taxation rates, taxation slabs & benefits

The caller income taxation authorities was introduced to springiness middle-class taxpayers much relief. It besides aims to simplify the taxation strategy and marque filing easier.

For FY 2026-2027, nether the caller taxation regime, income up to Rs 4 lakh volition stay wholly tax-free. Beyond this, a progressive slab strategy is there, with rates expanding gradually based connected income levels:

One of the cardinal highlights of the caller authorities introduced successful FY 2025-26, is the enhanced rebate.

Previously, nonmigratory individuals with a full income up to Rs 7 lakh did not wage immoderate tax. However, nether the revised strategy effectual FY 2025-26, this rebate bounds has been hiked allowing individuals earning up to Rs 12 lakh to beryllium wholly tax-free. For salaried taxpayers, this threshold efficaciously rises to Rs 12.75 lakh, owing to a modular deduction of Rs 75,000.

Old income taxation regime: Key taxation rates, taxation slabs & benefits

The aged income taxation authorities continues to connection a higher fig of exemptions and deductions, making it preferable for salaried taxpayers who assertion important taxation exemptions and deductions during the year.

However, the taxation rates successful the aged taxation authorities are comparatively higher:

Deductions commonly claimed nether the aged authorities see House Rent Allowance (HRA), Leave Travel Allowance (LTA), Section 80C, aesculapian security nether Section 80D, further NPS publication nether Section 80CCD (1B), and involvement connected lodging loans for self-occupied property.

New vs aged income taxation regime: Which is amended for you successful FY 2026-27?

Every year, taxpayers person a cardinal query - which taxation authorities - caller oregon aged volition trim their taxation outgo?For income levels up to Rs 12 lakh (Rs 12.75 lakh successful the lawsuit of taxpayers), opting for the caller taxation authorities means ZERO tax. So, determination is nary question of opting for the aged taxation regime. Let’s recognize this with an example; astatine an income level of Rs 10 lakh, with conscionable Section 80C exemptions of Rs 1.5 lakh availed, the taxation load nether the aged authorities is Rs 75,400/- including cess. This magnitude is ZERO oregon NIL nether the caller regimeIt’s important to recognize the thumb regularisation erstwhile deciding betwixt the aged and caller income taxation regimes.

The simplest mode to bash this is to adhd the full fig of exemptions and deductions that you tin avail. So adhd your House Rent Allowance oregon Home Loan interest, Leave Travel Allowance (LTA), Section 80C, NPS payment of Rs 50,000, Section 80D for aesculapian insurance, Section 80TTA for slope involvement income, Section 80G for charity. If this fig is little than Rs 8 lakh for an income threshold of supra Rs 24 lakh, past the caller income taxation authorities is much beneficial for you, and your taxation outgo nether it volition beryllium little than the aged taxation regime.

If however, you are capable to assertion exemptions and deductions supra Rs 8 lakh astatine income levels supra Rs 24 lakh, past the aged taxation authorities is the close prime for you.For incomes betwixt Rs 12 lakh to Rs 24 lakh, this threshold bounds volition alteration depending connected the deductions and exemptions you tin avail.

New highlights for taxpayers successful Budget 2026:

In Budget 2026, portion the concern curate near halfway income taxation operation untouched, a clutch of announcements were made to easiness procedures and widen alleviation to antithetic categories of taxpayers.

For income taxation regime, however, determination were nary caller changes.

Evolution of taxation regime

Since 2020, India’s caller taxation authorities has dilatory evolved to go simpler and much generous, particularly for middle-income taxpayers, portion the aged taxation authorities has remained unchanged.2020Finance curate Nirmala Sitharaman introduced the caller taxation authorities to trim complexity and dependence connected taxation professionals. It offered little slab rates but removed astir deductions. At the time, income up to Rs 2.5 lakh was exempt, the apical 30% complaint applied lone beyond Rs 15 lakh, and Section 87A ensured zero taxation up to Rs 5 lakh. Even without deductions, galore taxpayers paid little taxation nether the caller strategy than the aged one. The caller authorities provided little taxation rates but higher but the aged authorities stood beardown with deductions.2023The Union Budget 2023 marked a large shift. The basal exemption bounds nether the caller authorities was raised to Rs 3 lakh, and the Section 87A rebate was accrued to Rs 7 lakh, making income up to that level tax-free, though the aged authorities stayed capped astatine Rs 5 lakh. Standard deduction benefits were introduced, surcharge astatine income supra Rs 5 crore was chopped from 37% to 25%, and the caller authorities became the default option.2024Taxpayers received much alleviation aft modular deduction nether the caller authorities accrued to Rs 75,000 for salaried employees, and the household pension deduction raised to Rs 25,000, benefiting astir 4 crore taxpayers.2025The biggest alleviation arrived erstwhile income up to Rs 12 lakh (Rs 12.75 lakh for salaried taxpayers aft modular deduction) was made efficaciously tax-free nether the caller regime. The 30% taxation slab threshold was besides raised sharply from Rs 15 lakh to Rs 24 lakh.From 2020 to 2026, the caller taxation authorities has been repeatedly liberalised with higher exemptions and little effectual taxes, portion the aged authorities remains unchanged, offering higher rates, but with deductions and exemptions intact.