Will the Old Tax Regime Be Phased Out Soon?

The future of the old tax regime has been the subject of ongoing speculation, especially with the implementation of the new Income Tax Act, 2025. From April 1, 2026, the new regime becomes the default option, but the old regime remains available. Current reforms focus on modernising the law and simplifying compliance, not on removing the older system. Taxpayers can continue choosing the old regime if they prefer deductions and exemptions, making it clear that the government has no immediate plans to phase it out.

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Table of Contents

• Current Status of the Old Tax Regime

• Impact of the Income Tax Act, 2025 on the Old Regime

• Will the Old Tax Regime Be Phased Out Soon?

• Why the Old Regime Continues as an Option

• Key Benefits Still Available Under the Old Regime

• Comparison Between the Old and New Tax Regimes

• How to Choose Between Old and New Regimes During Filing

• Practical Guidance on Selecting the Old Regime

• Role of Tax Platforms in Helping Taxpayers Decide

• Conclusion

• FAQs

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Current Status of the Old Tax Regime

The old tax regime continues to function as a valid option for taxpayers in India. Despite the new regime being introduced to simplify tax calculations, the government has kept the old framework intact. It still provides access to deductions under Section 80C, 80D, HRA, home loan interest, and several exemptions that reduce taxable income. For salaried individuals and professionals who have significant investments in tax-saving avenues, the old regime remains attractive. It is not mandatory for any category of taxpayers but must be actively chosen during the filing process since the new regime is now the default.

Impact of the Income Tax Act, 2025 on the Old Regime

The Income Tax Act, 2025, which comes into effect on April 1, 2026, is primarily designed to modernise India’s tax laws by removing outdated provisions and simplifying language. Importantly, it does not eliminate the old tax regime. The dual framework—old and new regimes—remains intact, ensuring that taxpayers retain flexibility. While the new regime is promoted as the default option, the choice of the old regime is preserved. This ensures continuity for those who rely on deductions and exemptions that the new regime does not allow.

Will the Old Tax Regime Be Phased Out Soon?

There is currently no official announcement about discontinuing the old tax regime. The government has taken steps to simplify compliance and promote the new regime by making it the default, but eliminating the old regime is not on the immediate horizon. Any such move would require significant debate, stakeholder consultation, and a phased transition plan. For now, taxpayers can rest assured that both systems will coexist, giving them the flexibility to choose what suits their financial profile.

Why the Old Regime Continues as an Option

The old regime has deep-rooted benefits for taxpayers who rely on deductions such as Section 80C (investments in PPF, ELSS, life insurance), Section 80D (health insurance premiums), and HRA exemptions. Removing it entirely would disrupt the tax planning strategies of millions of individuals. By retaining it as an option, the government ensures a smoother transition toward the new regime without forcing taxpayers to abandon their existing financial commitments. It also allows individuals with higher deductions to optimise their tax liabilities effectively.

Key Benefits Still Available Under the Old Regime

The old regime continues to provide benefits that are not available under the new system. Some of the most relevant include:

• Deductions under Section 80C for investments in instruments like ELSS, PPF, and life insurance policies

• Deduction under Section 80D for health insurance premiums

• House Rent Allowance (HRA) exemptions for salaried individuals living in rented accommodation

• Deduction on interest paid on home loans under Section 24(b)

• Leave Travel Allowance (LTA) and other allowances specific to salaried taxpayers
  

These benefits can result in substantial tax savings for individuals with higher financial commitments or investments, making the old regime worthwhile in many cases.

Comparison Between the Old and New Tax Regimes

Comparison between the old and new tax regimes has become a crucial exercise for taxpayers in recent years, especially after the government positioned the new regime as the default option. Both systems have distinct structures, benefits, and limitations, and the choice depends largely on an individual’s financial profile and the extent of deductions they are eligible for.

The new tax regime is designed with simplicity in mind. It introduces lower slab rates across different levels of income, making it easier to compute tax liability without relying on complex tax planning or multiple investment declarations. However, this simplicity comes at a cost: most common exemptions and deductions available under the old regime are not permitted. This includes benefits like Section 80C investments in PPF, ELSS, or life insurance, Section 80D deductions for health insurance, and HRA exemptions for salaried employees. For taxpayers who do not make significant investments in such instruments, the new regime often provides a lower tax outflow and less administrative effort.

On the other hand, the old tax regime continues to be attractive for individuals and families who actively use tax-saving provisions. Salaried employees who claim HRA, home loan interest deductions, and benefits under sections like 80C and 80D often find that the old system reduces their taxable income substantially. For example, a person with housing loan repayments, health insurance premiums, and contributions to provident funds may save more tax under the old regime than by opting for the flat slab rates of the new regime.

Essentially, the new regime suits individuals with fewer deductions, freelancers with straightforward income structures, or those who prefer a hassle-free filing experience. The old regime is more beneficial for taxpayers who have structured their finances around long-term investments, insurance, and housing loans, as these translate into significant deductions.

By retaining both options, the government ensures flexibility for taxpayers. The decision between regimes should ideally be made after calculating the total liability under each system, allowing individuals to choose the one that best matches their financial commitments and long-term goals.

How to Choose Between Old and New Regimes During Filing

Taxpayers need to calculate their tax liability under both regimes before filing. If deductions like 80C, 80D, HRA, or home loan interest exceed a certain threshold, the old regime often provides greater tax savings. On the other hand, if deductions are minimal, the new regime’s reduced slab rates may be more beneficial. Salaried individuals can make this choice directly in their ITR form each year, while business owners must be more careful, as switching options is restricted.

Practical Guidance on Selecting the Old Regime

For salaried taxpayers, the selection is straightforward—while filing the ITR, they can choose the old regime if it results in lower tax outgo. Pensioners without business income also enjoy this flexibility. However, individuals with business or professional income must file Form 10-IEA to choose the old regime, and once they opt for the new regime, they cannot revert to the old one in future years. Therefore, business taxpayers must evaluate long-term implications before making a choice.

Role of Tax Platforms in Helping Taxpayers Decide

The choice between the old and new tax regimes can often feel complicated, especially when deductions, exemptions, and long-term commitments like home loans or insurance premiums are involved. Many taxpayers struggle to calculate their liability under both systems and may end up choosing an option that is less beneficial. This is where tax platforms play an important role in simplifying the process and guiding individuals toward the right decision.

Platforms such as TaxBuddy make use of AI-driven tools to compare both regimes side by side. Taxpayers only need to provide basic details such as salary, allowances, deductions, investments, or business income. Once the data is entered, the platform automatically calculates tax liability under both the old and new regimes. This quick comparison gives taxpayers a clear picture of which option results in lower tax outgo without the need for manual calculations or complicated spreadsheets.

For individuals who are not confident about interpreting tax laws or want additional clarity, expert-assisted plans offer a practical solution. In this case, professionals review the taxpayer’s income and financial commitments and provide tailored advice on whether the old or new regime is more suitable. They also help in understanding the long-term implications of choosing a regime, especially for business taxpayers who face restrictions on switching once they move to the new regime.

Tax platforms also provide compliance support by ensuring that the right forms are submitted while making a choice. For example, salaried individuals can select the old regime directly through the ITR form, while business taxpayers are required to submit Form 10-IEA. By guiding taxpayers through these compliance requirements, platforms like TaxBuddy help prevent errors that could otherwise result in notices or penalties.

Another advantage is the seamless filing experience these platforms offer. Instead of juggling multiple calculations or worrying about missing deductions, taxpayers can rely on automated systems and expert reviews to ensure accuracy. This not only saves time but also reduces stress during the filing season. With the Income Tax Act, 2025, bringing in new changes and refinements, such platforms ensure that taxpayers stay aligned with the latest rules while maximising the benefits available to them.

In essence, tax platforms act as both calculators and advisors—automating the technical part of tax filing while also offering personalised guidance where needed. By combining AI-driven analysis with human expertise, services like TaxBuddy empower taxpayers to make informed decisions and file returns with confidence.

Conclusion

The old tax regime is not being phased out in the near future. It will remain available as an option even after the new Income Tax Act, 2025, comes into effect from April 2026. While the new regime is the default, the government recognises the importance of keeping both frameworks to suit diverse financial needs. Tax platforms like TaxBuddy continue to play an important role in helping taxpayers choose wisely between regimes and file their returns accurately. For anyone looking for assistance in tax filing, it is highly recommended to download the TaxBuddy mobile app for a simplified, secure, and hassle-free experience.

FAQs

Q1. Does TaxBuddy offer both self-filing and expert-assisted plans for ITR filing, or only expert-assisted options? TaxBuddy provides flexibility by offering both self-filing and expert-assisted plans. Under self-filing, taxpayers can upload documents such as Form 16, TDS certificates, and bank statements, and the platform auto-fills relevant fields using its AI-driven engine. This makes it easy for individuals who are comfortable filing their own returns but still want error checks and validations. For more complex cases—such as capital gains, business income, or foreign assets—TaxBuddy’s expert-assisted plans allow professionals to review and file the return on behalf of the taxpayer. This dual model ensures that both simple and complicated tax cases are handled efficiently.

Q2. Which is the best site to file ITR? The official Income Tax Department portal remains the statutory platform for filing ITR in India. However, many taxpayers prefer using platforms like TaxBuddy for a smoother and more user-friendly experience. TaxBuddy integrates AI tools for auto-validation, real-time TDS matching, and automated error checks, significantly reducing the chances of mistakes. Moreover, expert support is available for those who need guidance. Compared to other online filing services, TaxBuddy provides both convenience and professional assistance, making it one of the best choices for taxpayers.

Q3. Where to file an income tax return? An income tax return can be filed directly on the government’s e-filing portal at incometax.gov.in, which is free but requires manual entry and checks. Alternatively, taxpayers can use private platforms like TaxBuddy, which simplify the process through automation. These platforms allow for auto-filled forms, guided workflows, and access to professional experts. For taxpayers who find the government portal overwhelming, using a service like TaxBuddy can save time and ensure greater accuracy in compliance.

Q4. Will the old tax regime be discontinued soon? As of now, there are no official notifications or announcements about discontinuing the old tax regime. The government has made the new regime the default option, but the old system remains available. Taxpayers who prefer claiming exemptions and deductions under sections such as 80C, 80D, and HRA can still opt for the old regime during ITR filing. Any future move to phase it out would likely involve gradual changes and public consultations, so it is not expected in the near term.

Q5. Can all taxpayers continue using the old regime after 2026? Yes, taxpayers will still have the option to use the old regime even after the Income Tax Act, 2025, comes into effect from April 1, 2026. The Act retains the dual system, ensuring that individuals, salaried employees, and pensioners can continue choosing the old regime when filing their returns. Business taxpayers can also opt for it, though they must follow specific rules and declarations, such as filing Form 10-IEA when required.

Q6. Is the old regime better for HRA and 80C benefits? Yes, the old tax regime is particularly advantageous for taxpayers who want to claim deductions and exemptions. For example, salaried employees living in rented accommodation can claim House Rent Allowance (HRA), which is not available in the new regime. Similarly, deductions under Section 80C, such as investments in ELSS, PPF, or life insurance premiums, are fully allowed under the old regime but excluded under the new one. For those who maximise such benefits, the old system usually results in lower overall tax liability.

Q7. Is the default tax regime the new one for all taxpayers? Yes, the new regime has been made the default for all taxpayers starting from FY 2023-24. This means if no selection is made during ITR filing, the system automatically applies the new regime. However, taxpayers still retain the option to switch to the old regime at the time of filing their return. This ensures flexibility while nudging taxpayers towards adopting the simpler, exemption-free system.

Q8. What steps are needed to opt for the old regime? The steps depend on the category of taxpayer. For salaried individuals and pensioners, the selection can be made directly in the ITR form during filing. They simply need to tick the option for the old regime before submitting the return. For business taxpayers or professionals with income under “Profits and Gains from Business or Profession,” the process is more stringent. They are required to submit Form 10-IEA within the due date to opt for the old regime. Once business taxpayers opt for the new regime, they cannot switch back to the old regime in future years.

Q9. Can a salaried taxpayer switch between regimes every year? Yes, salaried taxpayers and pensioners without business income can switch between the old and new regimes annually when filing their ITR. This flexibility allows them to calculate tax liability under both systems each year and select the one that minimises their tax burden. However, taxpayers with business or professional income have restrictions. Once they opt for the new regime, they cannot revert to the old regime in future years, making their decision more binding.

Q10. What happens when the Income Tax Act, 2025, comes into effect? The Income Tax Act, 2025, replaces the earlier Act of 1961 and will take effect on April 1, 2026. Its goal is to simplify tax laws by removing outdated provisions and modernising language. Importantly, it does not eliminate the old tax regime. Instead, it preserves the dual framework while making the new regime the default. Taxpayers will continue to have the option to choose whichever regime benefits them more, subject to current rules.

Q11. How do taxpayers decide which regime suits them best? To decide between regimes, taxpayers need to compare their liability under both. This involves calculating income after deductions under the old regime and comparing it with the flat tax rates under the new regime. For individuals with substantial deductions under sections like 80C, 80D, and HRA, the old regime often proves more beneficial. Those with limited deductions and simpler income sources may find the new regime more attractive. Tax calculators and professional advice can simplify this comparison process.

Q12. How can TaxBuddy help with choosing the right regime? TaxBuddy assists taxpayers by providing automated tools that calculate tax liability under both regimes and recommend the more beneficial option. Its AI-driven platform ensures accuracy in identifying applicable deductions and exemptions while preventing filing errors. For complex cases, TaxBuddy’s expert-assisted plans offer personalised guidance from professionals who analyse a taxpayer’s income profile and recommend the best regime. This combination of technology and expert support helps taxpayers make informed decisions and file with confidence.