A Comparative Study of Old Tax Regime and New Tax Regime in India: Implications for Individual Taxpayers

In the recent years, the income tax system in India has been changing drastically, given the fact that the new tax regime has been introduced as a part of the Union Budget 2020. The new regime came about to make the tax regime easier and offer taxpayer more favourable tax rates by eliminating different deductions and exemptions offered by the previous tax regime. Nevertheless, the old tax regime still has its relevance due to the fact that taxpayers will be able to enjoy a variety of tax incentives in the form of investments under Section 80C, medical insurance under Section 80D, and house rent allowance. The purpose of this research paper is to compare and contrast the old tax regime and the new tax regime in India and see the implications of the same on individual taxpayers. It also looks into the benefits, drawbacks and appropriateness of each regime depending on the levels of incomes and patterns of investments. The research has brought to light the different options that taxpayers can make to favourable regime based on their financial position through scenario-based analysis and comparison. The paper also covers the implications of the new tax regime on the current tax policy reforms in India of simplifying and becoming more transparent.