Old tax regime gets a boost. Does it work better for you than the new regime?

If you have moved on to the new income tax regime, should you give the old one another look after the proposed benefits? Read on to see what the changes could mean for your tax savings.

The old income tax regime has received a quiet but meaningful upgrade in the Draft Income Tax Rules 2026. The draft expands the list of cities that qualify for higher metro-level HRA exemption, raises limits for children’s education and hostel allowances, boosts meal voucher values, and updates rules for employer-linked perks, giving the older system renewed relevance for certain taxpayers.

The question for most taxpayers is simple. Do these updates make the old regime a better choice than the new one, or should you continue with the simplified tax structure the government has been nudging everyone toward?

The short answer is that the new regime still works better for most salaried Indians. But the long answer is where things get interesting.

This is because the old regime now clearly benefits a specific slice of taxpayers who rely heavily on exemptions linked to rent, children and employer-provided benefits.

CA (Dr.) Suresh Surana calls the government’s move “a transitional approach”, one that updates long-standing exemptions in order to provide equitable relief while both regimes coexist. In other words, the old regime is being polished, not resurrected.

When the new tax regime was introduced, the intention was to simplify taxation by removing the maze of exemptions and offering lower slab rates. It caters to people who do not want the burden of documentation and compliance.