As preparations for the Budget 2026 are underway, with February 1 being the presentation date, expectations are rising among taxpayers for possible tweaks to income tax rules. While industry bodies are pitching
for measures to spur growth, individuals are keenly tracking whether the government will offer further relief under either the new or the old income tax regime.
For now, tax liability for FY 2025-26 will be determined by the existing slab structures, with the new tax regime continuing as the default option.
New Tax Regime: Default for FY 2025-26
Under the new tax regime, individuals earning up to Rs 12 lakh a year are effectively exempt from paying income tax, provided the income qualifies as “normal income”. This excludes special-rate incomes such as short-term capital gains (STCG) and long-term capital gains (LTCG).
For ongoing FY 2025–26 income tax return (ITR) filings, the new regime applies automatically. Salaried taxpayers can still opt for the old regime at the time of filing their return. However, a belated ITR, filed after the due date, can only be submitted under the new regime.
New tax regime slabs
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Rs 0 to Rs 4,00,000: Nil
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Rs 4,00,001 to Rs 8,00,000: 5%
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Rs 8,00,001 to Rs 12,00,000: 10%
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Rs 12,00,001 to Rs 16,00,000: 15%
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Rs 16,00,001 to Rs 20,00,000: 20%
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Rs 20,00,001 to Rs 24,00,000: 25%
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Above Rs 24,00,000: 30%
Key benefits under the new regime
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Standard deduction of Rs 75,000 for salaried employees and pensioners
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Section 87A rebate for resident taxpayers with net taxable income up to Rs 12 lakh
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NPS deduction of up to 14% of basic salary for salaried employees under Section 80CCD(2).
Old Tax Regime: Deductions-Driven Structure
The old tax regime continues to attract taxpayers who are able to claim multiple exemptions and deductions. These include Section 80C benefits of up to Rs 1.5 lakh through investments such as PPF, ELSS and LIC, as well as house rent allowance (HRA), leave travel allowance (LTA), home loan interest under Section 24, health insurance premiums under Section 80D, education loan interest under Section 80E and a standard deduction of Rs 50,000 for salaried individuals.
Slabs for individuals below 60 years
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Rs 0 to Rs 2,50,000: Nil
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Rs 2,50,001 to Rs 5,00,000: 5%
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Rs 5,00,001 to Rs 10,00,000: 20%
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Above Rs 10,00,000: 30%
Slabs for senior citizens (60 to below 80 years)
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Rs 0 to Rs 3,00,000: Nil
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Rs 3,00,001 to Rs 5,00,000: 5%
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Rs 5,00,001 to Rs 10,00,000: 20%
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Above Rs 10,00,000: 30%
Slabs for super senior citizens (80 years and above)
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Rs 0 to Rs 5,00,000: Nil
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Rs 5,00,001 to Rs 10,00,000: 20%
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Above Rs 10,00,000: 30%
Which Regime Makes More Sense?
Tax experts suggest that the choice depends largely on income levels and the ability to claim deductions.
“You may benefit from the new regime if you earn up to Rs 12 lakh in a year. Most people fall under this category,” said Aman Sharma, a Delhi-based chartered accountant.
He added that the old regime may still work better if you claim substantial deductions under Sections 80C and 80D, HRA or home loan interest, have invested heavily in tax-saving instruments such as PPF or ELSS, receive salary components like HRA or LTA, or are a senior citizen eligible for multiple deductions.
With Budget 2026 set to be presented on February 1, taxpayers will be watching closely to see whether the government fine-tunes these slabs or deductions, or leaves the choice between the two regimes unchanged.
