Budget 2026: Will FM Sitharaman Make the New Tax Regime Better?

Budget 2026 Puts Income Tax Back in the Spotlight: With Budget 2026 around the corner, income tax reforms have once again become a major talking point. Ever since the new tax regime was made the default option, speculation has grown over whether Finance Minister Nirmala Sitharaman will take a decisive step to reshape or further strengthen the system in the upcoming budget.

New Tax Regime Continues to Be the Government’s Preferred Choice: The new tax regime has been positioned as a cleaner and simpler alternative, offering lower slab rates and minimal paperwork. By removing most exemptions and deductions, it aims to make tax compliance easier, especially for younger and salaried taxpayers who prefer straightforward calculations over tax planning.

A Significant Minority Still Prefers the Old Regime: Despite the push towards the new system, a sizable share of taxpayers continues to stick with the old tax regime. Nearly 28–29 percent of individuals still opt for it, largely because they are able to lower their tax burden through deductions and exemptions that are not available under the new framework.

Why the Old Tax Regime Still Makes Financial Sense for Many: For taxpayers who actively claim benefits like HRA, Section 80C investments, health insurance under Section 80D, education loans, or home loan interest, the old regime can result in meaningful tax savings. High-income earners with structured salary packages often find it more efficient despite the higher slab rates.

Scrapping the Old Regime Is Not a Simple Policy Call: Eliminating the old tax regime outright could disrupt long-term financial plans built around tax-saving instruments such as provident funds, insurance, and housing. Over decades, these incentives have shaped household savings, making a sudden withdrawal both economically and politically sensitive.

Experts Expect Both Tax Regimes to Coexist for Now: Tax professionals largely agree that Budget 2026 is unlikely to scrap the old regime. Repeated assurances from the Finance Ministry suggest that taxpayers will continue to have a choice, even if the government gradually nudges more people towards the new regime through better slabs and higher standard deductions.

What Budget 2026 Is Likely to Signal for Taxpayers: Rather than a dramatic overhaul, Budget 2026 is expected to reinforce simplicity, compliance, and gradual transition. The new tax regime may see further fine-tuning, but the old regime is likely to stay for those who benefit from it. For now, taxpayers will still need to compare both options carefully and choose what works best for their finances. This photostory is based on a report from Moneycontrol and is intended for informational purposes only.

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