Budget 2026: Six years ago, Budget 2020 introduced a new tax regime offering lower tax rates to taxpayers who were willing to forego deductions and exemptions. Three years later, in Budget 2023, the government made it the default regime. Since then, each successive year has seen the new tax regime become more appealing, with reduced income tax rates, while the old regime remained unchanged.
In Budget 2025, the government went a step further, offering zero tax for individuals earning up to ₹12 lakh under the new regime. This move significantly widened its appeal, sparking speculation that the old tax regime may soon be phased out or made redundant.
As Budget 2026 is tabled today, all eyes are on Finance Minister Nirmala Sitharaman. Will the government finally retire the old tax regime? Some tax experts believe that while a complete phase-out may not happen immediately, the old tax regime could be made increasingly insignificant. nudging taxpayers to the new tax regime.
Last days of old tax regime?
Some experts believe the government will phase out the old tax regime this time or perhaps in the next couple of years.
“The old tax regime is likely to be phased out soon. If not in this Budget, then certainly over the next two to three Budgets. Even under the new tax regime, I don’t expect major additional relief this time, since a significant benefit was already introduced last year in the form of no tax up to ₹12 lakh. Going forward, most Income-tax–related changes are likely to focus on alignment and transition to the New Income Tax Act, 2025, rather than introducing fresh exemptions or deductions. The emphasis seems to be on simplification, certainty, and smoother implementation, rather than expanding tax benefits,” says CA Pratibha Goyal, partner, PD Gupta & Company.
Echoing the sentiments, CA Manish Golyan, Partner, Gupta Jai & Company, says, “It is most likely that the government may partially or wholly remove old regime slabs or deductions, as there are a number of cases of wrongful claims. And the effective tax rate under the new tax regime is lower than that under the old regime, even after deductions (such as Section 80C) and claims (e.g HRA).”
There is one contrarian view that the old tax regime will not be phased out as the New Income Tax Act, introduced in 2025, mentions both regimes. So, it would be too early to phase it out this time.
“I don’t believe that the old tax regime would be phased out completely because the new I-T Act mentions both the regimes. However, the new regime could be made even more attractive this time. And then a year later, the government could say that a vast majority (90%) of taxpayers are already opting for the new regime, which could incentivise them to phase out the old regime,” says CA Chirag Chauhan, founder of Mumbai-based CA Chauhan & Company.
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