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Will India abolish old tax regime in upcoming Budget 2026?
19 Jan 2026

As the Budget 2026 nears, a question is being asked by taxpayers: will the government finally abolish the old tax regime?

The new tax regime is now the default choice, and successive budgets have made it more appealing.

But despite this push, a significant number of taxpayers still prefer the old system for its benefits.

Old tax regime still preferred by 28% taxpayers
Tax preferences

The old tax regime is still preferred by many taxpayers who actively use deductions like House Rent Allowance (HRA), Section 80C investments, health insurance premiums under Section 80D, education loans, and home loan interest benefits.

Nitin Bajal, Executive Director at Deloitte India, said that "there is a significant proportion still about 28 to 29%."

This shows that even as most taxpayers are moving to the new regime, a sizable minority continues to find real tax savings under the old framework.

Scrapping old regime could disrupt financial planning
Policy concerns

Scrapping the old regime isn't as simple as it seems.

The Indian tax system has encouraged household savings through tax-linked instruments like provident funds, insurance, and housing over decades.

A sudden withdrawal of this system could disrupt long-term financial planning for millions who have committed to these products based on stable tax assumptions.

Government's assurance on old regime's continuity
Assurance

Tax experts have pointed out that the government has repeatedly assured that the old regime will continue to coexist.

Neeraj Agarwala, Partner at Nangia & Co LLP, said, "Based on repeated statements and clarifications from the Finance Ministry, there has been a consistent assurance that the old tax regime will not be abolished."

This continuity also helps the government manage transition toward a simpler tax system without alienating taxpayers who are midway through long-term commitments.

Government's gradual shift toward new regime
Transition strategy

The government's intent to gradually nudge taxpayers toward the new regime is clear.

By making it the default choice and improving slab structures, the incentive to voluntarily shift has increased.

Over time, this could naturally reduce the relevance of the old regime without formally abolishing it.

Sudhakar Sethuraman from Deloitte India said that "the old tax regime and new tax regime will continue to be available."