New Tax Regime Explained: Lower Taxes, Fewer Exemptions for Middle Class & Salaried
- The middle class and upper middle class get tax relief, as 30% tax only starts after INR 24 lakh. - The new tax regime is automatic, and if one wants the old one, they must actively choose it.
Pay less taxes, says the new budget. The new tax regime focuses on the future. It's much simpler, cleaner and financially attractive for the salaried middle class. However, there are exemptions in place. With less tax to pay, one must forgo most tax-saving exemptions, such as 80C, HRA, and LTA. This year, the new tax regime applies by default. Therefore, if one wants to opt for the old regime, they must actively choose it (much opposite to the earlier system). Budget 2026 is expected to tweak and polish the system rather than completely change it. So, what are the changes? What are the key differences between the two? For all that, learn more.
What’s the New Tax Regime?
The old tax regime required higher taxes, but with many exemptions and deductions. The new tax regime now asks for lower taxes, is much simpler, and has fewer exemptions. For the salaried middle class who always worry about taxes, this time around, the tax increases slowly and smoothly, not suddenly.
There's marginal relief to prevent any unfair tax rates. For instance, if one earns just above INR 12 lakh, the tax won't suddenly jump sharply. Rebate under Section 87A (very important) means if your taxable income is up to INR 12 lakh, you get a rebate of up to INR 60,000, and the final tax becomes ZERO. Plus, the maximum surcharge under the new regime is now 25%. The 30% tax threshold starts at INR 24 lakh, not at INR 15 lakh anymore (this is a big change for upper-middle-class salaried employees).
For salaried, here are the new tax slabs:
New Tax Regime – Income Tax Slabs (Fy 2025–26)
Old Tax Regime vs. New Tax Regime (Key Differences)
Final Thoughts...
There are no major changes in the new regime, but there is fine-tuning to make the tax simpler and easier to understand for all. The middle class and upper middle can take the benefit of the new regime, but with exemptions in place (as explained above). For more updates on the same, keep in touch.
Sanvi Barjatya
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