A Study of Tax Planning Behaviour Under the Old and New Tax Regimes

This systematic literature review analyzed tax planning behavior within the old and new tax regimes, specifically focusing on the Indian context. The review shows that tax planning is not just about lowering taxes; it is a way of thinking about taxes that takes into account a person's knowledge, preferences, savings goals, and ideas of fairness. The old system encourages planning based on incentives by offering deductions and exemptions. The new system, on the other hand, encourages simplification, less friction, and more freedom. These differences make behavioral ecosystems that are different from each other, not just a simple high-tax versus low-tax comparison. The literature indicates that tax complexity, knowledge, fairness, trust, and compliance motivations are pivotal in elucidating taxpayer decisions. Taxpayers who know about deductions, have their finances in order, and are okay with paperwork may logically prefer the old system. Taxpayers who prioritize simplicity, reduced cognitive burden, and liquidity may rationally gravitate toward the new regime. So, the main policy problem is not to make everyone move toward one regime, but to make it possible for people to choose for themselves by providing clear information and good administrative design. To sum up, tax planning in India shows a shift from optimizing taxes based on deductions to a more behavioral model of tax choice. The new regime's ongoing presence in current law shows that the issue will still be important to researchers, policymakers, and taxpayers. Future empirical research should now expand upon this review to evaluate models of regime preference across income strata, professions, and stages of household life. Such research can significantly enhance the understanding of how tax reform influences not only revenue outcomes but also the financial behavior and decision-making quality of citizens.

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