Old vs New Income Tax Act 2026: Salary Allowance Guide
Deciding between tax regimes is no longer just about the slabs. The 2026 Draft Rules have introduced aggressive hikes in exemptions that could tip the scales back to the Old Regime for many.
1. The Allowance Face-Off
| Allowance / Benefit | Old Regime (2026 Draft) | New Regime (Default) |
|---|---|---|
| Standard Deduction | ₹50,000 | ₹75,000 |
| HRA (Metro Cities) | 50% of Basic (8 Metros) | Fully Taxable |
| Education Allowance | ₹3,000 / mo / child | Fully Taxable |
| Hostel Allowance | ₹9,000 / mo / child | Fully Taxable |
| Meal Vouchers | ₹200 / meal (Exempt) | ₹200 / meal (Exempt) |
| Section 80C/80D/24b | Full Deductions Allowed | Not Allowed |
Metro Expansion
The "Metro" 50% HRA benefit now officially extends to Bengaluru, Hyderabad, Pune, and Ahmedabad, matching the high cost of living in these tech hubs.
Which one should you choose?
Old Regime: Best for high-rent payers in metros and parents claiming the new ₹2.88L/year education/hostel benefits.
New Regime: Best for those seeking low-maintenance filing with lower slab rates and a higher ₹75,000 standard deduction.
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