With the planning underway on the Union Budget 2026-27, there is one issue that is raising loud debates amongst the salaried workers and taxpayers once again, will the government have finally scrapped the old regime of income tax?
Nirmala Sitharaman Budget 2026; As Finance Minister Nirmala Sitharaman continues to advance the new tax structure in recent years, there is an increasing speculation that Budget 2026 may be another breakthrough in the personal taxation system of India.
Why the Old vs New Tax Regime Debate Matters
India now has a dual system of taxation and taxpayers have the option to either:
- Old Tax Regime – increased tax rates and yet several exemptions and deductions.
- New Tax Regime- reduce tax rates and have few exemptions.
Although this option-based system was brought in to allow flexibility, it has left a lot of confusion to most individual taxpayers particularly those who are salaried and who have to re-evaluate their tax-planning on an annual basis.
Government’s Clear Push Towards the New Tax Regime
The government has shown its preference over the past two Union budgets.
In Budget 2025, the finance minister has substantially reinforced the new tax regime by:
- Increasing the income limit that is tax-free to 12 lakh.
- To make tax slabs friendly to the middle-income earners.
- It should make the new regime a default choice to the taxpayers.
Consequently, many people have already been moving towards the new system and no longer require concessions such as HRA, Section 80C and home loans benefits.
Is the Old Tax Regime being scrapped in Budget 2026?
Until now, it is not officially confirmed that old taxation will be fully eliminated in the Budget of 2026.
Nevertheless, tax professionals assume that the government can do it in bits instead of removing it suddenly.Income tax changes 2026 may bring major relief for salaried taxpayers as the government reviews the future of the old tax regime.
Alternatively to scrapping it outright, the Centre may:
- Make the deductions of the old regime less attractive.
- Bring in additional relief under the new tax system.
- Reduce some exemptions in the long run.
Such a plan would automatically make more taxpayers to migrate without creating a sudden shock.
Why the Government May Avoid a Sudden Removal
Eliminating the current tax regime entirely immediately may have the following effects:
- Homebuyers who were dependent on interest deductions.
- Long term investors investing in tax saving tools.
- Structured tax planning of middle-class families.
This is why the policymakers will need to be balanced in this matter and provide simplicity without inciting any group, which still relies on deductions.
What Experts Expect from Budget 2026
Budget 2026 can revolve around: according to market analysts and tax experts.
● Making individual taxation more simplified
The government is moving towards a less taxing system free of exemptions and less compliance.
● Strengthening consumption
Reduced rates of taxes result in greater amounts of disposable income being held by the citizens, which contributes to domestic consumption.
● Fitting into the new Income Tax law structure
The announcement of changes in this Budget may be consistent with the long-term vision with the new Income Tax Act that is projected to become effective as of April 2026.
What This Means for Taxpayers
For salaried employees
The majority of salaried employees who earn less than 12 lakh would still enjoy the new regime with few paperwork and simple tax returns.
To investors and home owners
This can still benefit those who make deductions (home loan interest or long-term savings) and who will be better off at least in the short term with the old regime.
Nevertheless, tax planners recommend that tax planning should be reviewed annually because incentives based on the old structure might be diminished slowly over time.
Final Word: Transition, Not Termination
Although the speculation is high, there are no chances that Budget 2026 would entirely get rid of the old tax regime in a single step. Rather, the government seems to be keen on a gradual and systematic shift to the simplistic tax system that will be dominated by the new regime.
It will become clear only when Finance Minister Nirmala Sitharaman unveils the Union Budget on February 1, 2026 – a date that is awaited with much anticipation by millions of Indian tax payers.