A Comparative Analysis of Old Vs New Tax Regime in India and Its Impact on Middle Income Taxpayers

Taxation plays a critical role in the functioning of modern economies by providing governments with the revenue necessary to fund public services and infrastructure development. In India, the personal income tax system has undergone significant reforms over the years to improve transparency, simplify procedures, and encourage compliance among taxpayers. One of the most significant reforms in recent years was the introduction of the New Tax Regime through the Union Budget 2020. The introduction of the new tax regime created an alternative tax structure for individual taxpayers. While the traditional tax regime allows several deductions and exemptions, the new tax regime offers lower tax rates but eliminates most deductions and exemptions. As a result, taxpayers must evaluate their financial situation carefully before selecting the appropriate regime. This study aims to conduct a comparative analysis of the old and new tax regimes in India in order to determine their relative advantages and impact on taxpayers across different income groups. The research is based on both primary and secondary data sources. Primary data was collected through a structured questionnaire distributed among 50 salaried employees, while secondary data was obtained from government reports, financial publications, and academic journals. The findings of the study suggest that the old tax regime remains beneficial for taxpayers who utilize deductions and tax-saving investments. However, the new tax regime provides a simplified taxation structure that may benefit individuals with limited deductions. The study concludes that the choice of tax regime depends largely on individual income levels, financial planning strategies, and investment behaviour.