News

Finance Minister Nirmala Sitharaman presented the Union Budget 2026 on Sunday, February 1. She announced that the income tax slabs for individuals will remain unchanged. This means people will pay taxes at the same rates as last year. There is no new relief for taxpayers, but the tax system remains stable.

Here's how much tax individual pay on their income according to new and old tax regime.

Filing an income tax return today begins with an important decision — choosing between the old tax regime and the new tax regime. The choice directly impacts how much tax a person finally pays.

The old regime has traditionally been popular because it allows several deductions and exemptions. These include Section 80C benefits of up to Rs 1.5 lakh, health insurance deductions under Section 80D, NPS contributions, HRA, LTA, home loan interest, and deductions on savings bank interest.

The new regime works very differently. It offers lower tax rates, but most deductions and exemptions are not allowed. Instead, it promises simplicity.

What has tilted the balance in favour of the new regime is the generous Section 87A rebate. With this rebate and the standard deduction, a salaried taxpayer can earn up to Rs 12.75 lakh and still pay zero income tax.

Put simply, someone earning Rs 1 lakh a month does not pay any income tax under the new regime. For many taxpayers, especially those who don’t invest heavily in tax-saving instruments, this has been a game changer.

The new income tax regime was for the first time introduced in Budget 2020 with one primary aim of make tax filing easier. During the 2020 Union Budget speech, Finance Minister Sitharaman pointed out that the old tax system had become too complex and difficult, compelling the taxpayers to rely on professionals just to stay compliant.

The government wanted to offer an alternative: lower rates, fewer conditions, and less paperwork. Over the years, the new regime has been steadily improved to make it more attractive.

The numbers tell their own story. By FY2025, around 72% of taxpayers had opted for the new tax regime. The preference for simplicity over managing multiple deductions is becoming increasingly clear.

According to a Taxmann report, the AY 2025–26 return filing season offered an important clue. Taxpayers opting for the old regime faced higher scrutiny, especially where deduction claims appeared inflated or unsupported. Due to the paper work and complexities involved, quite often the refunds were delayed, verifications increased, and many taxpayers had to once again revise their returns.

Meanwhile, those under the new regime faced fewer queries and quicker processing, largely because there were fewer claims to examine.