Summary of this article
Most taxpayers now prefer the new income tax regime
Old tax regime will continue without any deadline
Higher STT aims to slow aggressive retail trading
A large majority of individual taxpayers have shifted to the new income tax regime, and the government is not planning to discontinue the old one. Central Board of Direct Taxes (CBDT) Chairman Ravi Agrawal has said that the taxpayers remain free to choose between the two systems, but the response to the new regime has been encouraging.
Strong Shift Among Individual Taxpayers
During a post-Budget interview, Agrawal has stated that nearly 88 per cent of individual taxpayers have opted for the new tax regime. This claim is based on data from ITR forms 1, 2, 3 and 4, which, taken together, cover salaried individuals, professionals, and small business owners.
The trend is even more pronounced among presumptive tax filers. Around 97 per cent of taxpayers using the presumptive taxation scheme have moved to the new regime. These taxpayers typically include small traders, freelancers, and professionals with simpler income structures.
Among companies, about 60 per cent of total taxable income is now reported under the new tax regime, indicating a steady shift by corporates as well.
No Deadline Planned For Old Tax Regime
Agrawal has stated that the government is not considering a sunset clause for the old tax regime. A sunset clause would have set a deadline beyond which taxpayers could no longer choose the old system.
He also said that selecting a tax regime is the taxpayer's choice, but the high adoption of the new regime shows growing acceptance. The old tax regime continues to remain available for those who benefit from deductions and exemptions.
MAT Changes May Push Companies Further
The CBDT chief has highlighted changes proposed to the minimum alternate tax (MAT) in the FY27 Budget. MAT applies only to companies and ensures they pay a minimum tax based on their book profits when regular tax liability is lower.
The Budget 2026 has proposed making MAT the final tax for companies under the old regime. It also reduces the MAT rate from 15 per cent to 14 per cent. Agrawal has stated these changes could persuade more companies to move to the new tax regime over time.
Higher STT Aimed At Curbing Aggressive Trading
Commenting on the proposed increase in securities transaction tax, Agrawal said the move is meant to discourage aggressive trading by retail investors. He said the higher tax is intended to flag concerns around excessive speculation in the markets.
Under the Budget 2026-27 proposals, STT on futures contracts will increase to 0.05 per cent from 0.02 per cent. STT on options premium will rise to 0.15 per cent from 0.1 per cent, while STT on the exercise of options will increase to 0.125 per cent.
Confidence In Tax Collection Target
Agrawal has expressed that he is confident the government will meet the revised direct tax collection target of Rs 24.21 lakh crore for the 2025-26 fiscal.
The old tax regime, in place before 2020, has higher tax rates but allows deductions and exemptions. The new regime offers lower rates and full tax exemption for individuals earning up to Rs 15 lakh annually, but most deductions are not permitted.
