A latest survey showed that 85% of India’s taxpayers still opted for the old regime with only 15% going for the old regime of filing tax returns.
The government introduced a new tax regime in Budget 2020 wherein the tax slabs were altered, and taxpayers were offered concessional tax rates.
In Budget 2023, the government introduced various incentives to encourage the adoption of the new regime. It is to be noted that those who opt for the new regime cannot claim several exemptions and deductions, such as HRA, LTA, 80C, 80D, and more.
“These changes show that the government’s intention is to have taxpayers transition to the new regime and eventually phase out the old one. Though the new regime is now the default tax regime, the old tax regime will continue to exist,” said a survey by Clear.
It further revealed that among the total number of taxpayers filing ITR, 70% were male and 30% were women. Those in the age between 31 and 40 years constitute the largest share at 50%, followed by individuals up to 30 years old at 28%.
Taxpayers with age between 41 and 50 years make up 16%, while those above 50 years account for 7%.
As per the survey, 55% of taxpayers fully utilise benefits under 80C deductions. 17% utilise benefits up to Rs 50,000 and 10% between Rs 1L – Rs 1.5L. Interestingly, 10% of individuals have not taken advantage of this provision.
What were the key changes introduced by the government?
In order to make the new tax regime lucrative, the government introduced certain key changes. A full tax rebate on an income up to Rs 7 lakh was introduced. Also, the tax exemption limit has been increased to Rs 3 lakh.
Under the old regime, the standard deduction of Rs 50,000 was only available which has now been extended to the new tax regime. Along with the rebate, the standard deduction makes Rs 7.5 lakh as your tax-free income under the new regime.
Those receiving family pension can claim a deduction of Rs 15,000 or 1/3rd of the pension, whichever is lower. Under the new regime, the surcharge rate on income over Rs 5 crore has been reduced from 37% to 25%. The exemption limit for non-government employees has been raised from Rs 3 lakh to Rs 25 lakh.