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Income tax

Navigating Salary Allowances: Old vs. New Income Tax Act (2026 Updates)

A comprehensive comparison of salary allowances under the newly proposed 2026 rules, highlighting the massive hikes in exemptions that make the Old Tax Regime competitive again.

Old vs New Income Tax Act 2026: Salary Allowance Guide

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.

Last updated: 2 months ago
Author

Krishna Gopal Varshney

Founder & CEO - Myitronline Global Services Pvt. Ltd.

Providing expert tax filing and business services across India with over 25 years of experience in financial consulting and compliance management.

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