Union Budget 2026: As is always the case, as February approaches, regular people, particularly those with salaries, have a lot of expectations and inquiries about the budget. The announcements about income tax will receive the greatest attention when Finance Minister Nirmala Sitharaman delivers the Union Budget on February 1, 2026.
Taxes are related to savings, future planning, home loan EMIs, and children’s school expenses. In this regard, the topic of whether the previous income tax system is now nearing its end has been on people’s minds for the past few years.
Union Budget 2026: The True Distinction Between the Old and New Tax Systems
The underlying philosophies of the new and old income tax systems differ from one another in addition to the tax slabs. Although the tax rates under the new system are lower, the majority of exemptions and deductions are eliminated.
The basic exemption level under the new tax regime is higher, and if you include the Section 87A refund, salaried persons’ income up to almost ₹12.75 lakh becomes tax-free. To put it simply, someone who makes roughly one lakh rupees a month is exempt from paying taxes. For this reason, the new method initially seems simpler and more appealing.
What led to the introduction of the new tax system?
Simplifying the tax system was the government’s stated goal when the new tax regime was included in the 2020 budget. The government thought that the income tax law was so complicated due to the numerous exemptions and deductions that regular people could not file their taxes without professional help. An effort was made to alleviate this complexity with the new system.
Additionally, it was stated at the time that the government intended to eventually transition to a tax system with fewer exemptions and paperwork. It is evident from the last few budgets that the new tax system has been marginally more advantageous every year.
Union Budget 2026: Will the old tax regime truly be phased out?
The government’s direction is evident, according to tax specialists. The new tax system is thought to be the best option. This does not, however, imply that the previous system will be quickly eliminated. Exemptions from the previous system promote home loans and savings, both of which are still crucial for the middle class.
If a decision is ever made to abolish the previous tax system, experts predict that it would happen gradually. In order to allow people to modify their financial plans without any unexpected shocks, the government will probably offer a lengthy transition time.
Union Budget 2026: The path forward for regular taxpayers
Both choices are already available to taxpayers. The new tax system is helping people whose wage structure does not involve many investments and exemptions. Nonetheless, the previous approach is still useful for people who have long-term investments, insurance, and property loans.
Everyone will be keeping an eye on Budget 2026 to see what signals the administration provides. However, one thing is certain: the tax system is gradually becoming simpler, and this transformation process won’t be finished right away.
Disclaimer: This page is simply meant to raise awareness and provide general information. Please speak with a knowledgeable tax counselor or chartered accountant before making any tax-related decisions. It is crucial to get precise information based on your unique situation because tax laws are subject to change.
Also Read:
India’s Direct Tax Collections Surge in FY26, Cross ₹18.38 Lakh Crore
