Income Tax Slabs and Rates: Know New vs Old Regime Ahead of Budget 2026
Ahead of Budget 2026, the New Tax Regime is the default, offering zero tax for income up to INR 12 lakh via an INR 60,000 rebate. Salaried users get an extra INR 75,000 standard deduction, pushing the tax-free limit to INR 12.75 lakh. The Old Regime remains for those with high deductions like HRA and 80C. Scroll below to know which regime to choose ahead of Union Budget 2026-27.
New Delhi, January 31: As Finance Minister Nirmala Sitharaman prepares to present the Union Budget 2026 (Budget 2026) tomorrow, February 1, taxpayers across India are evaluating their options between the New and Old tax regimes. Following significant reforms in the previous budget, the New Tax Regime has become the default choice for the majority, offering a tax-free threshold of up to INR 12 lakh (effectively INR 12.75 lakh for salaried individuals). However, for those with substantial investments in home loans and insurance, the Old Regime remains a viable, albeit more complex, alternative.
Current Slabs Under the New Tax Regime (Default)
The New Tax Regime is designed for simplicity, offering lower tax rates but removing most common exemptions like HRA and Section 80C. Union Budget 2026-27: Why Nirmala Sitharaman Is Tabling the Budget on a Sunday? Know Why ‘Sunday Budget’ Is a First Since Independence.
For the current cycle (FY 2025-26), the slabs are structured as follows:
| Income Slab | Tax Rate |
| Up to INR 4,00,000 | Nil |
| INR 4,00,001 – INR 8,00,000 | 5 per cent |
| INR 8,00,001 – INR 12,00,000 | 10 per cent |
| INR 12,00,001 – INR 16,00,000 | 15 per cent |
| INR 16,00,001 – INR 20,00,000 | 20 per cent |
| INR 20,00,001 – INR 24,00,000 | 25 per cent |
| Above INR 24,00,000 | 30 per cent |
Key Advantage: Thanks to an enhanced rebate under Section 87A, individuals with a total taxable income of up to INR 12 lakh pay zero tax. For salaried employees, the INR 75,000 standard deduction pushes this "zero-tax" limit to a gross income of UNR 12.75 lakh.
Current Slabs Under the Old Tax Regime (Optional)
The Old Tax Regime has remained largely unchanged for several years. It is preferred by taxpayers who utilise various deductions to lower their taxable income.
| Income Slab | Tax Rate (Individuals < 60 Years) |
| Up to INR 2,50,000 | Nil |
| INR 2,50,001 – INR 5,00,000 | 5 per cent |
| INR 5,00,001 – INR 10,00,000 | 20 per cent |
| Above INR 10,00,000 | 30 per cent |
- Senior Citizens (60–80 years): Exemption up to INR 3 lakh.
- Super Senior Citizens (80+ years): Exemption up to INR 5 lakh.
- Rebate: A tax rebate of up to INR 12,500 is available for those with income up to INR 5 lakh.
The Comparison: Which Tax Regime Should You Choose?
The choice between the two regimes depends on your "Break-even Point"- the amount of deductions required to make the Old Regime cheaper than the New one.
Choose the New Regime if: You prefer a straightforward filing process with lower rates and do not have significant investments in tax-saving instruments. It is generally more beneficial for middle-income earners with limited deductions.
Choose the Old Regime if: You have high-value deductions exceeding INR 3.75 lakh to INR 4 lakh (including Section 80C, 80D, HRA, and interest on home loans). Union Budget 2026 Date, Time, Live Streaming: When and Where to Watch Nirmala Sitharaman’s Budget Speech.
What to Expect in Budget 2026?
While the 2025 reforms were substantial, experts anticipate "fine-tuning" in tomorrow's announcement. Key expectations include an increase in the Standard Deduction from INR 75,000 to INR 1 lakh. Additionally, the potential rationalisation of the INR 12 lakh to INR 20 lakh income bracket to further reduce the middle-class tax burden and clarity on the new Income-tax Act, 2025, which is slated to replace the 1961 Act starting April 1, 2026.
(The above story first appeared on LatestLY on Jan 31, 2026 04:42 PM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).