Union Budget 2026: Will it provide clarity on future of old tax regime?
Budget expectations: The majority of taxpayers are in the new income tax regime, but the old regime is helpful for those with home loans, long-term investments
- Jan 13, 2026,
- Updated Jan 13, 2026 1:56 PM IST
Will the old income tax regime continue? With the new income tax regime gaining more popularity amongst taxpayers, the Union Budget 2026-27 could make an announcement on the future of the old tax regime.
“A large number of taxpayers have moved to the new income tax regime over the years, which has proved to have several advantages. Roughly around 80% taxpayers are in the new regime,” noted a person familiar with the development, adding that the Budget could provide some clarity on the future of the old tax regime. While an immediate end to the old tax regime is unlikely, the Budget could provide a sunset date to it.
However, another source pointed out that the other option is to let it continue and it could be eased away as the number of taxpayers using it falls further. “The old tax regime continues to have advantage for certain taxpayer who have long term investments and savings or those with home loans,” the source noted.
As per official data, of the 7.28 crore ITRs filed for AY 2024-25 till July 31, 2024, 5.27 crore or 72% had moved to the new tax regime. The number is seen to have increased with the Union Budget 2025-26 announcing several more benefits and no tax for those earning up to Rs 12 lakh under the new tax regime, up from the earlier rebate limit of Rs 7 lakh. It had also announced a major rejig of the income tax slabs under the new income tax regime with the 30% tax slab now on income above Rs 24 lakh per year.
Experts noted that the old tax regime continues to promote and encourage long term savings, which is also an essential requirement.
Amit Maheshwari, Managing Partner, AKM Global, a tax and consulting firm states, “While the government has been actively promoting the new tax regime for its simplicity, transparency, and minimal documentation requirements, a complete abolishment of the old regime may raise broader concerns. The old regime has long encouraged personal financial discipline through investments in instruments like PPF, ELSS, insurance, and home loans, and has supported essential protections such as mediclaim and other deductions tied to social security,” he said, adding that moving entirely to the new regime without these structured incentives could be viewed as the government gradually discouraging tax-linked savings and personal risk-mitigation measures.
But now, with stronger financial literacy and a more mature investment ecosystem, it may not be as difficult for the government to eventually move away from the old regime, he further said, noting that statistics also indicate that taxpayers are more inclined towards simplistic approach under new regime and no longer combining tax planning and investment decisions.
Will the old income tax regime continue? With the new income tax regime gaining more popularity amongst taxpayers, the Union Budget 2026-27 could make an announcement on the future of the old tax regime.
“A large number of taxpayers have moved to the new income tax regime over the years, which has proved to have several advantages. Roughly around 80% taxpayers are in the new regime,” noted a person familiar with the development, adding that the Budget could provide some clarity on the future of the old tax regime. While an immediate end to the old tax regime is unlikely, the Budget could provide a sunset date to it.
However, another source pointed out that the other option is to let it continue and it could be eased away as the number of taxpayers using it falls further. “The old tax regime continues to have advantage for certain taxpayer who have long term investments and savings or those with home loans,” the source noted.
As per official data, of the 7.28 crore ITRs filed for AY 2024-25 till July 31, 2024, 5.27 crore or 72% had moved to the new tax regime. The number is seen to have increased with the Union Budget 2025-26 announcing several more benefits and no tax for those earning up to Rs 12 lakh under the new tax regime, up from the earlier rebate limit of Rs 7 lakh. It had also announced a major rejig of the income tax slabs under the new income tax regime with the 30% tax slab now on income above Rs 24 lakh per year.
Experts noted that the old tax regime continues to promote and encourage long term savings, which is also an essential requirement.
Amit Maheshwari, Managing Partner, AKM Global, a tax and consulting firm states, “While the government has been actively promoting the new tax regime for its simplicity, transparency, and minimal documentation requirements, a complete abolishment of the old regime may raise broader concerns. The old regime has long encouraged personal financial discipline through investments in instruments like PPF, ELSS, insurance, and home loans, and has supported essential protections such as mediclaim and other deductions tied to social security,” he said, adding that moving entirely to the new regime without these structured incentives could be viewed as the government gradually discouraging tax-linked savings and personal risk-mitigation measures.
But now, with stronger financial literacy and a more mature investment ecosystem, it may not be as difficult for the government to eventually move away from the old regime, he further said, noting that statistics also indicate that taxpayers are more inclined towards simplistic approach under new regime and no longer combining tax planning and investment decisions.