Even though nearly 88% taxpayers have moved to the new tax regime, the government has quietly signalled that the old tax regime is not going away anytime soon. A close look at the draft Income-tax Rules, 2026, which will come into force from April 1, 2026, shows that key benefits linked to the old tax regime remain fully intact, with no indication of an imminent phase-out.
Draft rules show continuity, not exit
The draft income tax rules, which have been floated for comments from different stakeholders including the public, explain how the new Income-tax Act, 2025 will be implemented. Importantly, when it comes to salary-related exemptions, perquisites and benefits, the rules do not distinguish between old and new tax regimes.
This means many benefits that have traditionally made the old tax regime attractive continue to exist in the rulebook, suggesting that the government is allowing both regimes to run in parallel.
Key old-regime style benefits that remain protected
The draft rules retain several tax-free exemptions and non-taxable perks, including:
-Employer gifts up to Rs 15,000 a year, such as festival vouchers and rewards
-Free meals, tea and snacks at the workplace, within prescribed limits
-Medical treatment for specified serious diseases in approved hospitals
-Interest-free or concessional employer loans up to Rs 2 lakh
-Laptops and computers provided for official work
-Official travel, accommodation and work-related expenses, subject to documentation
These provisions have been carried forward almost unchanged, pointing to policy stability rather than withdrawal of benefits.
Medical exemptions strengthened, not diluted
One of the strongest signals comes from the way medical benefits are handled. The draft rules provide detailed conditions for tax-free medical treatment, including approved hospitals, infrastructure requirements and a long list of specified diseases.
Tax experts say such detailed drafting usually indicates that the government intends to retain and regulate these benefits, not remove them.
Why the old tax regime mattered to taxpayers
For years, the old tax regime was the default choice for middle-class taxpayers because of its wide range of deductions and exemptions. These included:
-Section 80C deductions for PF, ELSS, life insurance and other savings
-Section 80D for health insurance premiums
-HRA exemption for salaried employees living in rented houses
-LTA for travel expenses
-Deductions on home loan interest and education loans
These benefits encouraged savings, insurance coverage and long-term financial planning, making the old regime particularly useful for families with housing loans, children’s education costs and regular investments.
Commenting on the draft rules indication for old tax regime, Mousami Nagarsenkar, Partner, Deloitte India, says, “While no further modifications were introduced in Budget 2026 to enhance the relative attractiveness of the new regime, the proposed increases in various thresholds under the draft Income tax rules (currently published for public comment) — such as raising the exemption for children’s education allowance to Rs 3,000 per month per child instead of the current Rs 200 per month per child — suggest that the government does not intend to discontinue the old regime in the near future. Rather, these developments reflect a deliberate effort to maintain the viability of both regimes at present.”
“Nevertheless, policy direction in this area remains dynamic, and it will ultimately be necessary to observe how the government continues to shape the tax framework in the coming years,” she noted.
Sumeet Hemkar, Partner, Deloitte India, says, “The draft rules to the new income tax law on taxation of individuals especially the ones earning salary income predominantly enhance the monetary limits for several deductions such as HRA, children’s education and hostel allowances, etc. and also aligns perquisite values to current inflation levels. This makes the old tax regime more practical and inflation adjusted for salaried taxpayers.”
As a result, the government has made the old regime applicable on a more fair base for taxpayers who still continue to be under the old tax regime. Possibly, the sunset on the old regime is not likely to be anytime immediately.
How the new tax regime gained ground
Over the past few years, the government has clearly favoured the new tax regime. Tax slabs were rationalised, compliance was simplified, and most importantly, the new regime was made the default option.
At the same time, no fresh benefits were added to the old tax regime, making it relatively less attractive for many taxpayers. As a result, a large number of people shifted to the new system—often by default rather than after a detailed comparison. This is how 88% taxpayers are now under the new tax regime.
Yet, no move to scrap the old tax regime
Despite this strong push, the government has repeatedly stated that it has no plans to scrap the old tax regime altogether. The draft income tax rules back this claim.
The rules are written in a regime-neutral manner, keeping valuation rules, exemptions and compliance structures intact. If the old tax regime were close to being withdrawn, many of these detailed provisions would likely have been simplified or removed.
What this means for taxpayers
The message from the draft rules is clear:
the new tax regime is being encouraged
the old tax regime is being preserved
Taxpayers who depend on deductions and exemptions still have a valid option, while those who prefer lower rates and simplicity can stay with the new regime.
Summing up…
Even with 88% taxpayers shifting to the new tax regime, the Draft Income-tax Rules, 2026 show no urgency to dismantle the old system. Instead, the government appears to be following a gradual transition approach, giving taxpayers time and choice.
For many salaried and middle-class taxpayers, the old tax regime may continue to remain relevant for years to come.