With Union Budget 2026–27 just weeks away, expectations are rising about potential changes in India’s income tax structure. A major question dominating discussions is whether the government will finally abolish the old tax regime, given that a huge share of taxpayers have already adopted the new system.
Official data shows that over 9.19 crore income tax returns were filed in FY 2024–25, and filings for FY 2025–26 are expected to touch 10 crore. After last year’s budget made income up to ₹12 lakh effectively tax-free under the new regime, government sources indicated that nearly 75% of taxpayers had already switched. Experts now believe the figure has comfortably crossed 80%.
However, tax professionals say the old regime is unlikely to be scrapped in Budget 2026.
Why the Old Regime Will Probably Stay
1. India’s Savings Culture Still Relies on Old Regime Deductions
Section 80C, 80D, HRA and home loan deductions form the foundation of India’s household savings. Experts warn that abruptly removing these incentives could weaken long-term savings and disrupt retirement planning.
2. Middle-Class Finances Are Built Around Tax-Saving Products
Home loans, insurance policies and pension plans are often purchased for tax benefits. Eliminating the old regime overnight could disrupt financial planning for millions of salaried families.
3. Dual Regime Helps Maintain Economic Stability
Economists argue that the new regime boosts consumption, while the old regime encourages disciplined savings. Having both systems protects balance and confidence.
4. Scrapping Old Regime Will Require Legal Overhaul
Removing deductions would mean rewriting several sections of the Income Tax Act. This could trigger confusion, disputes, and compliance challenges for taxpayers.
5. Government Prefers Gradual, Non-Forced Transition
The Centre has been nudging taxpayers towards the new regime through lower tax rates and higher rebates — not by force. Experts expect this gentle phase-out to continue.
What Conditions Must Be Met Before Scrapping the Old Regime?
Experts say the shift should reach 90–95%, the new regime must fully offset losses from common deductions, and a sunset clause / grandfathering period must protect ongoing home loans and long-term investments.
Conclusion
Even though a majority of taxpayers now prefer the new regime, the old system is expected to remain in place for a few more years. With savings patterns, middle-class commitments, and legal complexities at play, Budget 2026 is unlikely to announce a complete abolition of the old tax regime.
Originally published on 24×7-news.com.
