Finance Minister Nirmala Sitharaman will present the Union Budget on 1 February 2026. Like every year, this time too the common man and taxpayers, especially the employed people, are keeping an eye on the possible changes related to income tax. How much tax will have to be paid largely depends on whether you file income tax return in the old tax system (old regime) or in the new tax system (new regime).
Since the introduction of the new tax system, a big question remains in the minds of taxpayers. Will the old tax system be completely abolished in the future? In a survey conducted before Budget 2026, most tax experts believe that the government can gradually move towards abolishing the old tax system, but this process will be phase-wise.
New vs Old Tax Regime: What is the basic difference
The biggest difference between the new and old tax system is regarding tax slabs and deductions. In the new tax system, tax rates on higher income are lower, but exemptions and deductions are very less. Whereas in the old system the tax slabs are higher, but one gets the benefit of many types of exemptions and deductions. The basic exemption limit is higher in the new tax system. With the exemption of Section 87A, income up to Rs 12.75 lakh becomes tax-free for salaried people (including standard deduction). In simple words, if a person earns Rs 1 lakh per month, he has to pay zero tax. Whereas in the old tax system, many exemptions are available like 80C (investments like PF, PPF, LIC), 80D (Health Insurance), NPS, HRA, LTA, 80TTA on bank interest and home loan interest.
Why was the new tax system introduced?
The aim of the government is to simplify the tax system. Due to excessive exemptions and deductions, tax filing becomes complicated and paperwork increases. In Budget 2020, the Finance Minister had said that the new tax system has been brought to simplify the tax law and provide relief to common taxpayers. According to experts, the government was indicating from the beginning that in the long run the exemptions of the old system could be abolished. This is the reason why the new tax system is being made more attractive in every budget.
Increasing popularity of new tax system
According to Surbhi Marwah, tax partner of EY India, about 72% of taxpayers chose the new tax system in assessment year 2024-25. It is clear from this that people are adopting it rapidly. In the last two budgets, the government has given benefits like more exemptions, higher tax-free limit and standard deduction in the new system. Experts believe that the number of people choosing the new system will increase further in 2025-26.
Will the old tax system end?
Many experts believe that the old system is still necessary to promote savings and home loans. Therefore it is difficult to eliminate it immediately. However, the government can gradually make it irrelevant. Some experts say that having two tax systems creates confusion among people and defeats the purpose of tax filing. At the same time, some believe that the old system will be allowed to run for a few more years so that people with long-term investment plans can make changes easily. Overall, the indications are that the government is making the new tax system so attractive that the old system will automatically start being used less in the coming years.