The recently notified Income Tax Rules, 2026, may shift taxpayer preference back toward the old tax regime, particularly among high-income salaried individuals, according to tax experts and early assessments of the changes. The rules introduce three significant revisions that could alter the cost-benefit calculation between the two systems.
What has changed
The government has proposed adjustments that affect deductions, compliance provisions, and reporting requirements. While the new tax regime still offers lower slab rates with minimal exemptions, the updated rules appear to strengthen certain benefits linked to deductions and allowances available only under the old regime.
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Why high earners may reconsider
Tax professionals say individuals in higher salary brackets often rely on deductions such as house rent allowance, home-loan interest, insurance premiums, and investment-linked exemptions. With refinements in how some of these benefits can be claimed or documented, the relative advantage of the new regime could narrow for this group.
Compliance and documentation impact
One of the changes focuses on revised reporting norms, which may streamline claim processes for specific exemptions. Analysts suggest that if compliance becomes simpler while deductions remain substantial, taxpayers with structured salary packages may find the old regime more financially efficient.
The Centre has repeatedly signalled its long-term intent to make the new tax regime the default system. However, the latest rule adjustments indicate a balancing approach, ensuring that taxpayers who depend on deductions are not disadvantaged during the transition phase.
Chartered accountants and financial planners advise salaried taxpayers not to assume the new regime is automatically better. Instead, they recommend annual tax comparisons based on salary structure, investments, and deductions before choosing a regime.
What taxpayers should do
Financial advisers suggest that individuals, especially those with high annual income and multiple exemptions, should run detailed calculations for the assessment year 2026–27 before filing returns. The decision should be based on actual tax liability rather than slab rates alone.
Outlook ahead
If the revised provisions translate into tangible tax savings for deduction-heavy earners, the coming filing season could see a measurable increase in taxpayers opting for the old regime again, reversing the recent trend toward the simplified system.
