Daijiworld Media Network - New Delhi
New Delhi, Jan 31: As preparations intensify for the Union Budget to be presented on February 1, expectations are running high among individual taxpayers over possible changes to income tax rules. With the new tax regime continuing as the default framework for the financial year 2025–26, attention is centred on whether the government will offer additional relief or indicate the future course of the old tax regime.
For FY 2025–26, income tax liability will be governed by the existing slab structure under the new tax regime. This regime applies automatically while filing income tax returns, though salaried taxpayers can still opt for the old regime at the time of filing. However, belated returns can be filed only under the new tax regime.
Under the current framework, resident individuals earning up to Rs 12 lakh annually are effectively exempt from income tax, provided the income qualifies as normal income. This benefit does not extend to special-rate incomes such as short-term and long-term capital gains.
The new tax regime offers a standard deduction of Rs 75,000 for salaried employees and pensioners, a rebate under Section 87A for resident taxpayers with net taxable income up to Rs 12 lakh, and a deduction of up to 14 per cent of basic salary towards the National Pension System under Section 80CCD(2).
Despite these benefits, the old tax regime continues to appeal to taxpayers who are able to fully utilise deductions and exemptions such as investments under Section 80C, house rent allowance, leave travel allowance, home loan interest, health insurance premiums, education loan interest, and a standard deduction of Rs 50,000. The old regime also offers higher basic exemption limits for senior and super senior citizens.
Finance Minister Nirmala Sitharaman is set to present her ninth consecutive Union Budget, placing her close to the record held by Morarji Desai. While the 2025 Budget provided significant relief under the new tax regime, no changes were made to the old regime, fuelling debate over whether it will be strengthened, retained as is, or gradually phased out.
As Budget 2026 approaches, experts have also highlighted the need for taxpayers to understand the difference between tax relief and tax rebate. While tax relief reduces taxable income through deductions and exemptions, a tax rebate directly reduces the tax payable after calculation. Section 87A remains a key rebate available only to resident individuals.
With just days remaining for the Budget presentation, taxpayers across the country are keenly awaiting policy signals that could reshape India’s income tax structure.