Quick Summary
In the upcoming Budget for FY26, Finance Minister Nirmala Sitharaman is expected to announce a roadmap for the gradual phasing out of the old personal income tax regime over the next few years. The move aims to align with the government's broader goal of simplifying tax structures and making the new tax regime, introduced in FY21, the default choice for taxpayers. As of now, more than 72% of taxpayers have already embraced the new regime, which offers lower tax rates but with limited exemptions
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FAQ :
The government plans to gradually phase out the old personal income tax regime over the next few years, starting with Budget 2025.
The old tax regime will not be immediately removed and will remain available for certain taxpayers who benefit from its exemptions and deductions.
The government is considering raising the first tax slab and the basic exemption limit to Rs 4 lakh, and recalibrating other slabs to make the new regime more appealing.
As of now, over 72% of taxpayers have already embraced the new tax regime, with 28% opting for the old regime in the assessment year 2024-25.
The new tax regime offers lower tax rates, a simplified structure, and greater flexibility as it reduces the need for specific investments to claim deductions, lowering compliance burdens.
Taxpayers who benefit from exemptions like house rent allowance, Section 80C deductions, home loan interest, health insurance premiums, and NPS contributions may continue to find the old regime relevant.
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