Union Budget 2026: Who Benefits Most From the New Tax Regime? Revied Slabs, Impact on Salaried Class & More

India's new income tax regime has become increasingly attractive for taxpayers after recent revisions. Simplified slabs, higher exemptions and fewer conditions make it especially appealing to a wide group of taxpayers, especially those who prefer straightforward tax calculations over juggling deductions. 

Union Budget 2026: What is the New Tax Regime?

The new tax regime is an optional income tax system introduced by the Indian government to simplify how individuals pay taxes. Unlike the old regime, it does not offer many deductions and exemptions, but compensates with lower and more transparent tax rates.

Under the new regime, taxpayers can choose between the simplified tax structure or retain the old system with deductions and exemptions — whichever gives them a lower tax bill.

Union Budget 2026: Revised Tax Slabs Under the New Tax Regime

Here is how the updated slab rates are structured under the new tax regime (applicable for FY 2025–26 and beyond):

• ₹0 – ₹4 lakh                 Nil
• ₹4 lakh – ₹8 lakh         5%
• ₹8 lakh – ₹12 lakh       10%
• ₹12 lakh – ₹16 lakh     15%
• ₹16 lakh – ₹20 lakh     20%
• ₹20 lakh – ₹24 lakh     25%
• Above ₹24 lakh           30%

One big highlight is that income up to ₹12 lakh is effectively tax-free for many taxpayers after accounting for the higher rebate under Section 87A — a central incentive in the updated regime.

Union Budget 2026: Who Benefits the Most From the New Tax Regime?

The new tax regime provides noticeable advantages to several groups of taxpayers, particularly:

Individuals With Simple Income Structures

If you have straightforward income, like a salary or a pension, and don’t rely on a large number of deductions (like investments under Section 80C, home loan interest, etc.), the lower slab rates can reduce your overall tax liability without any complex calculations.

First-Time and Young Workers

New entrants to the workforce or first-job earners typically have limited tax-saving investments. The new regime gives them the benefit of lower tax rates with minimal paperwork and planning.

Middle-Class Households Without Heavy Investments

People earning moderate incomes with few tax-saving investments, such as basic savings and small expenses, can often pay less tax under the new regime than the old one because of the simpler slab structure and higher effective exemption.

Salaried Individuals Seeking Ease and Transparency

Those who prefer ease of compliance and transparent tax obligations choose the new system because it keeps tax calculations straightforward — especially without having to optimise deductions and track multiple investment instruments.

Union Budget 2026: Real-World Impact of the New Slabs

The latest changes significantly shift the income tax landscape:

• Zero tax on income up to ₹12 lakh: Many salaried individuals will not pay any tax up to this threshold after rebates.
• Simplified options: Choose between regime-based lower rates or the old regime with deductions, whichever is more beneficial.
• This has made the new regime particularly attractive, with a growing share of taxpayers opting in over the old tax system.

Union Budget 2026: Comparing New Tax Regime Vs Old Regime

The key difference lies in deductions and exemptions:

• New regime: Fewer deductions but more straightforward and generally lower tax rates across slabs.
• Old regime: Offers deductions like 80C (investments up to ₹1.5 lakh), HRA, 80D (health insurance) and others, which can help reduce taxable income if you invest wisely.

For some taxpayers, especially those with high investments or specific exemptions, the old regime still makes sense. However, for most with simple income and limited deductions, the new regime often results in lower taxes and easier compliance.

Union Budget 2026: How to Decide Which Regime Works Best for You?

Choose the new tax regime if:

• You don’t claim many deductions.
• You want a simple tax filing.
• You earn less than ₹12–15 lakh without heavy investments.
• You prefer predictable tax planning without extra paperwork.

Stick with the old regime if:

• You invest significantly in tax-saving instruments (like ELSS, PPF, life insurance, etc.).
• You pay home loan interest.
• You have medical or education expenses eligible under the old deductions.

Union Budget 2026: Why More People Are Switching to the New Regime

Experts say the updated regime, with its broader slab range and higher exemption thresholds, has become much more attractive than before. Many taxpayers who used the old system are now considering switching because the new slabs can lead to better tax savings without needing detailed investment planning. 

With the Union Budget 2025 reforms fully in place and the new tax regime gaining traction, it continues to be a key choice for India’s salaried and simple-income taxpayers.