As Union Budget 2026 approaches, one question continues to dominate discussions among salaried employees and middle-class taxpayers: Will the Old Tax Regime be scrapped permanently? Over the past few years, the government has consistently promoted the New Tax Regime, making it more attractive and even setting it as the default option. This has fueled speculation that the traditional tax system, with deductions and exemptions, may eventually be phased out.

Finance Minister Nirmala Sitharaman is scheduled to present the Union Budget on February 1, 2026, and expectations around income tax reforms are once again running high.

Why the Focus Is Shifting Toward the New Tax Regime

The government’s clear policy direction over recent budgets has been to simplify the income tax structure. The New Tax Regime offers fewer slabs, higher basic exemption limits, and minimal compliance requirements. Under the current framework, after applying the rebate under Section 87A, individuals earning up to ₹12.75 lakh can effectively have zero tax liability.

This simplicity has made the New Tax Regime increasingly appealing, especially for young professionals and those without heavy investments in tax-saving instruments such as insurance, provident funds, or housing loans.

Another major signal came when the New Tax Regime was made the default option for taxpayers. While individuals still have the choice to opt for the Old Regime, this move suggested the government’s long-term intent to gradually transition taxpayers toward a simpler system.

What Government Data Reveals

Recent income tax filing data strengthens the argument that the New Tax Regime is gaining dominance. For the Assessment Year 2024–25, a total of 7.28 crore Income Tax Returns (ITRs) were filed. Out of these, approximately 5.27 crore returns were filed under the New Tax Regime.

This means nearly 72% of taxpayers opted for the New Tax Regime, while only about 28% continued with the Old Tax Regime. Such numbers indicate a major behavioral shift among taxpayers and show that government efforts to promote the new system are yielding results.

Tax experts believe that once a significant majority adopts a particular system, policymakers are more likely to streamline the framework around it.

Is the Old Tax Regime Likely to End Soon?

Despite strong indicators, experts caution against assuming an immediate end to the Old Tax Regime. Millions of taxpayers still rely on deductions under sections related to home loan interest, House Rent Allowance (HRA), Public Provident Fund (PPF), life insurance premiums, and other long-term savings instruments.

Abruptly withdrawing the Old Regime could disrupt financial planning for households that have made multi-year commitments based on existing tax benefits. As a result, analysts believe that if the government chooses to phase out the Old Tax Regime, it would likely happen gradually, not overnight.

So far, there has been no official confirmation from the government about scrapping the Old Tax Regime in Budget 2026.

What Taxpayers Should Expect from Budget 2026

Most experts agree that Budget 2026 is unlikely to announce the complete removal of the Old Tax Regime. However, the trend suggests that the government may continue enhancing the New Tax Regime—either by tweaking slabs, increasing exemption limits, or offering targeted relief—to the point where the Old Regime becomes less relevant over time.

In essence, instead of abolishing it outright, the Old Tax Regime may slowly lose its appeal as fewer incentives are added to it.

What Should Taxpayers Do Now?

Taxpayers should avoid making assumptions and instead focus on informed planning. The right choice between the Old and New Tax Regimes still depends on individual income levels, investment patterns, and financial goals.

• Those with substantial tax-saving investments may still benefit from the Old Regime.

• Taxpayers with fewer deductions often find the New Regime more efficient and hassle-free.

With Budget 2026 around the corner, staying updated and reviewing personal tax calculations after official announcements will be crucial.

Bottom Line

While signs strongly indicate that the government is pushing taxpayers toward the New Tax Regime, the Old Tax Regime is unlikely to disappear immediately. Instead, Budget 2026 may further strengthen the new system, making the old one gradually less attractive. For now, taxpayers should prepare for a future where simplicity takes precedence—but without rushing to conclusions before official policy decisions are announced.