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Old Tax Regime Lives On: Draft Rules Confirm Continuity
10 Feb
Summary
- Draft income tax rules of 2026 show old tax regime benefits remain intact.
- Nearly 88% of taxpayers have moved to the new tax regime.
- Salary exemptions, perquisites, and benefits are regime-neutral.
Draft Income-tax Rules for 2026, currently open for public comment, reveal that the old tax regime will continue to coexist with the new one. These rules, set to take effect on April 1, 2026, do not distinguish between old and new tax regimes for salary-related exemptions, perquisites, and benefits. This policy ensures that many attractive benefits traditionally associated with the old regime remain accessible to taxpayers.
Key benefits like employer gifts up to Rs 15,000 annually, workplace meals, and employer loans up to Rs 2 lakh are preserved. Detailed provisions for tax-free medical treatment also signal the government's intent to regulate rather than remove these benefits. Experts note that retaining these aspects makes the old regime more practical and inflation-adjusted for salaried individuals.
While the new tax regime became the default option and has seen 88% of taxpayers shift to it, the draft rules confirm the government's stance against an immediate discontinuation of the old system. This approach offers taxpayers a choice between the simplicity and lower rates of the new regime and the deductions and exemptions of the old one, allowing for a gradual transition.
