Taxpayers Pay Attention! Will FM Abolish Old Tax Regime On Feb 1, Union Budget 2026? Old Tax Vs New Tax Regime

All eyes has once again shifted towards Finance Minister Nirmala Sitharaman who will present India's union budget for financial year 2026-27. And once again, expectation on key changes in income tax rates is pinned. This time the attention is shifted towards old tax regime, whether, the government would keep the old regime or not. It needs to be noted that the buzz around abolishing old tax regime has been around since past few budgets, especially since new tax regime was declared as the default option for taxpayers.

Union Budget 2026 Expectations:

As per many experts, the chances of scrapping old tax regime is high during Union Budget 2026, however, the process could be in a phased manner.

During the previous budget, FM made key changes in income tax slabs under the new regime, which aimed at reducing taxes substantially for middle class and leave more money in their hands. The FM on February 1, 2025, said that there will be no income tax payable up to income Rs 12 lakh under the new tax regime. This limit will be Rs.12.75 lakh for salaried tax payers, due to standard deduction of Rs. 75,000.

However, there were no changes in old tax regime during Union Budget 2025. Currently, the new tax regime is the default option for taxpayers. However, the salaried individuals can still choose between old and new regimes. And the option to switch between the regimes is available every financial year.

Old Tax Regime Vs New Tax Regime:

Income Tax Slabs for FY 2025-26 under New Tax Regime

- Salary up to Rs 4 Lakh: Zero Tax

- Salary up to Rs 4 lakh to Rs 8 lakh: 5% Tax Rate

- Salary up to Rs 8 lakh to Rs 12 lakh: 10% Tax Rate

- Salary up to Rs 12 lakh to Rs 16 lakh: 15% Tax Rate

- Salary up to Rs 16 lakh to Rs 20 lakh: 20% Tax Rate

- Salary above Rs 24 lakh: 30% Tax Rate

That being said, because of hike in tax rebate to Rs 60,000 under the new regime, there is no tax up to Rs 12 lakh salary. However, this is not applicable to special taxes like capital gains, crypto income, online gaming income, lotteries and others.

Income Tax Slabs for FY 2025-26 under Old Tax Regime (Unchanged)

There has been no change in old tax regime.

For Individuals Below 60 Years:

- Salary up to Rs 2.5 lakh has zero tax rate.

- Salary from Rs 2.5 lakh to Rs 5 lakh has 5% tax rate.

- Salary from Rs 5 lakh to Rs 10 lakh has 20% tax rate.

- Salary above Rs 10 lakh has 30% tax rate.

However, under old tax regime, there are various tax deductions under sections 80C, 80D, 80G, and 80TTA. Further, there is tax benefit on HRA, LTA, home loan interest under Section 24. Also, Section 80E tax benefit for education loan interests are some of the benefits.

Income Tax Slabs for Senior Citizens aged between 60 to 80 Years & Income Tax Slabs for Super Senior Citizens above 80 Years

For Senior Citizens aged between 60 to 80 Years:

- Salary up to Rs 3 lakh there is zero tax.

- Salary between Rs 3 lakh to Rs 5 lakh has 5% tax rate.

- Salary between Rs 5 lakh to Rs 10 lakh has 20% tax rate.

- Salary above Rs 10 lakh has 30% tax rate.

For Super Senior Citizens:

- Salary up to Rs 5 lakh has nil tax.

- Salary between Rs 5 lakh to Rs 10 lakh there is 20% tax rate.

- Salary above Rs 10 lakh has 30% tax rate.

Old Tax Regime Vs New Tax Regime:Who is better?

Here are some of the common differences between the two tax regimes, as per ClearTax.

Basis of Difference	Old Tax Regime	New Tax Regime
Deductions and Exemptions	The old tax regime offers a variety of deductions and exemptions. For example, House Rent Allowance, investment deductions under section 80C, etc..	The New Tax Regime has limited exemptions and deductions.
Beneficial for taxpayers	The old tax regime promotes tax savings through planned investments, encouraging long-term financial security and retirement planning.	The new tax regime is more beneficial for middle-income earners, without any elaborate tax planning strategies.
Default Regime	The old tax regime is not the default regime, still the taxpayers can choose to file under the old regime by exercising the option.	The new tax regime is the default tax regime.
Standard deduction	Rs. 50,000 allowed for salaried employees.	Rs. 75,000 allowed for salaries of employees.
Rebate	Maximum Rs. 12,500 allowed.	For FY 2025-26, maximum Rs. 60,000 allowed.

As per ClearTax, for taxpayers with a lot of tax-saving deductions, often summing up to a few lakhs, the old regime is the most beneficial. But for taxpayers with limited tax-saving deductions and middle-class income earners, the new regime is the most beneficial.

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