Comparative Study of Tax Planning Under Old and New Tax Regime in India
Shreehari V, Shruthi Krishna, Sinchana,
Sri Meena Dharshini V, Shabya Singh,
Shiyam K S
Dr. Batani Raghavendra Rao
MBA Students 2025-2027 batch
Faculty of Management Studies
Faculty of Management Studies, CMS Business School,
JAIN (Deemed-to-be-University)
Bangalore, India
ABSTRACT
Money management for people in India has changed, due to moving from their old method of income tax to a new method. Both of these methods exist together, as both methods were introduced at the same time in 2022. This research has compared these two methods of income tax for the assessment year of 2025-26, where the effect of deductions/exemptions/tax rates on overall tax liability was evaluated using five scenarios.
The old method of income tax (old regime) allows a taxpayer to effectively plan how their funds will be allocated for long-term goals and provides several incentives for this (i.e., Section 80C, Section 80D, HRA, home loan interest). Likewise, the old regime requires a taxpayer to keep records for many transactions. The new income tax method (new regime), on the other hand, is structured to simplify recordkeeping for compliance, reduce tax rates, and ultimately increase take home pay for all taxpayers. Therefore, taxpayers that have no financial structure beyond a bank account or have limited savings are likely to benefit the most from using the new regime of income tax.
The study found that middle-income earners and high-income earners will be impacted the most based on their choice of tax regime, while lower-income earners will benefit the most from the simplicity of the new income tax regime. Thus, which tax regime a person ultimately chooses is based on income, and their financial behavior with respect to savings habits and goals (long-term versus short-term), thus enabling them to make a well-informed decision about which tax regime they will choose to minimize their income taxes/financial planning.
Key words: Income Tax, Old Tax Regime, New Tax Regime, Tax Planning, Financial Planning, Tax Compliance, Savings Behavior, Scenario Analysis, Tax Liability.
