Will there be a sunset clause for old income tax regime? CBDT chairman Ravi Agrawal responds

"I can tell you that when ITR 1, 2, 3 and 4 are taken together (income tax return forms used by individuals), about 88 per cent of people have moved to the new tax regime.

"And insofar as presumptive tax cases, about 97 per cent of the taxpayers have moved to the new tax regime. For corporates, about 60 per cent of the income is now being reflected in the new tax regime," Agrawal told PTI during a post-Budget interview.

Despite the government’s push for a simplified tax structure, many taxpayers, especially salaried individuals with planned investments, continue to prefer the old regime for its broad range of deductions and exemptions.

Old Tax Regime Slabs

The old tax regime continues with its long-standing slab structure:

Up to ₹2.5 lakh: Nil

₹2.5 lakh to ₹5 lakh: 5%

₹5 lakh to ₹10 lakh: 20%

Above ₹10 lakh: 30%

While these slabs have remained unchanged for several years, the real value of the old regime lies in the tax-saving opportunities it provides.

Key deductions and exemptions

One of the biggest attractions of the old tax regime is Section 80C, which allows deductions of up to ₹1.5 lakh on eligible investments such as life insurance premiums, home loan principal repayment, Employees’ Provident Fund (EPF), and the Public Provident Fund (PPF).

Additionally, Section 80D allows taxpayers to claim deductions on medical insurance premiums paid for themselves, family, and parents, offering both tax relief and encouragement for health coverage.

A regime that has seen few changes

The last major revision to the old tax regime took place in FY 2017–18, when the tax rate for income up to ₹5 lakh was reduced from 10% to 5%.

Who should still opt for the old tax regime?

The old tax regime may still be suitable for taxpayers who:

• Make full use of Section 80C and 80D deductions

• Pay significant home loan EMIs and insurance premiums

• Claim HRA and other salary-based exemptions

• Prefer long-term tax-saving investments

The old tax regime refers to the income tax calculation and slabs that existed before the introduction of the new tax regime in 2020. The old tax regime has higher tax rates, but taxpayers can claim various tax deductions and exemptions. In contrast, the new regime offers lower tax rates and allows full exemption for those earning up to ₹12.75 lakh a year (including standard deduction).