In with the NEW

THE GOVERNMENT'S FLAGSHIP, SIMPLIFIED NEW TAX REGIME HAS SLOWLY BUT SURELY GAINED TAXPAYERS’ ACCEPTANCE. IN ASSESSMENT YEAR 2024-25, 72% OF TAXPAYERS OPTED FOR IT. IS THIS CHANGE HERE TO STAY?

- BY TEENA JAIN KAUSHAL

OLD OR NEW-this ancient debate on the merits of the two has received a new twist in India's personal income tax. Putting an end to the discussion on which system is better, 2024 marked an important year for the government's flagship New Tax Regime (NTR). By July 31, 72.8 million Income Tax Returns (ITRS) were filed for Assessment Year (AY) 2024-25, marking a 7.5% increase from last year's count of 67.7 million, per Press Information Bureau data. Out of that, 72% of taxpayers, or about 52.7 million people, chose the new system, marking a significant shift.

Taxpayers claim the primary attraction of the new regime lies in its straightforward approach. They are no longer required to calculate and claim multiple exemptions and deductions, such as Leave Travel Allowance (LTA), House Rent Allowance (HRA), and Section 80C benefits. By eliminating these complexities, the NTR simplifies the tax-filing process.

NEW TAX REGIME TAKES OFF

• 72% of taxpayers opted for the new tax regime, prioritising simplicity

• Many young professionals favour the new tax regime as they often lack investments for tax deductions

• Increased NPS contribution deduction incentivises employee participation

• Budget 2025-26 may introduce further reforms to boost new regime adoption

"This shift suggests that taxpayers find the New Tax Regime more appealing, likely due to its simplified structure with lower tax rates and fewer deductions," says Parizad Sirwalla, Partner and National Head-Tax, Global Mobility Services at consultant firm KPMG in India.