85% filers chose old tax regime AY 23-24 for Income Tax Return filing

85% filers chose old tax regime AY23-24: A long-awaited trend analysis, which provides a thorough comparison of income tax return submissions between the Old Regime and New Regime, was just published by India’s online tax filing platform. According to the report, taxpayer preferences have changed significantly, with 15% of people favoring the New Regime while 85% continue to choose the Old Regime. The difference between the two shows that the New Regime is gaining popularity and that it may offer advantages over the old order.

Read Also: No ITR refund until you verify the Income Tax Return

The report further offers intriguing insights into the tax preferences among Indian taxpayers, shedding light on the changing landscape of income tax filing. With Some of the key findings were:

1.  Age and Gender -wise split of filers

Among the total number of taxpayers filing ITR, 70% were male and 30% were women. However, the report highlights distinct tax filing patterns among various age groups. Filers aged between 31 and 40 years constitute the largest share at 50%, followed by individuals up to 30 years old at 28%. Taxpayers between 41 and 50 years make up 16%, while those above 50 years account for 7%. These insights provide valuable guidance for tax planning and strategies for different age brackets.

2. Utilisation of 80C Deductions (Old Regime Exclusive)

80C deductions are significant under the Old Regime, with 55% of taxpayers fully utilizing this advantage, 17% utilizing benefits up to 50,000 rupees, and 10% utilizing benefits between Rs 1L and Rs 1.5L. Surprisingly, 10% of people haven’t used this provision, highlighting the need for greater knowledge and instruction regarding tax-saving choices.

3. Json Processing Time

Portal’s efficient services are reflected in the report, with an impressive average time of 7.93 seconds taken to parse the Capital Gains report and populate the details. This quick processing ensures a seamless experience for the users, reducing the time and effort required for tax filing.

4. Commonly used Tax Deductions

Out of the various tax deductions, 50% of users claimed 80D for medical insurance tax deductions and 20% used 80CCD(1B) for NPS self-contributions tax deductions. These statistics highlight the significance of health and retirement planning for Indian taxpayers and highlight their preferences for investments that reduce their tax liability.

Read Also: ITR Refund: When it will be received FY22-23

New Tax Regime

A new tax regime was introduced in Budget 2020 wherein the tax slabs were altered, and taxpayers were offered concessional tax rates. However, those who opt for the new regime cannot claim several exemptions and deductions, such as HRA, LTA, 80C, 80D and more. Because of this, the new tax regime did not have many takers. The government in Budget 2023 introduced 5 key changes to encourage taxpayers to adopt the new regime. They are:

• Higher Tax Rebate Limit: Full tax rebate on an income up to ₹7 lakhs has been introduced. Whereas, this threshold is ₹5 lakhs under the old tax regime. This means that taxpayers with an income of up to ₹7 lakhs will not have to pay any tax at all under the new tax regime!

• Income Tax Slab Rates for New Vs Old Tax Regime:

• Standard Deduction and Family Pension Deduction:
• Salary income: The standard deduction of ₹50,000, which was only available under the old regime, has now been extended to the new tax regime as well. This, along with the rebate, makes ₹7.5 lakhs as your tax-free income under the new regime.
• Family pension: Those receiving family pension can claim a deduction of: ₹15,000 or 1/3rd of pension, whichever is lower.
• Reduced Surcharge for High Net Worth Individuals: The surcharge rate on income over ₹5 crores has been reduced from 37% to 25%. This move will bring down their effective tax rate 42.74% to 39%.
• Higher Leave Encashment Exemption: The exemption limit for non-government employees has been raised from ₹3 lakhs to ₹25 lakhs, an 8-fold increase.
• Default Regime: Starting from FY 2023-24, the new income tax regime will be set as the default option. If you want to continue using the old regime, you must submit a form at the time of return filing. You will have the option to switch between the two regimes annually.

Read Also: Over 6.77 crore Income Tax Returns filed for FY22-23

Old Tax Regime

The old regime is the tax system that prevailed before the introduction of the new regime. Under this regime, there are over 70 exemptions and deductions available, including HRA and LTA, that can reduce your taxable income and lower tax payments. The most popular and generous deduction is Section 80C, which allows for a reduction of taxable income up to Rs.1.5 lakh. The taxpayers are given a choice between the old and the new tax regime.

Deductions and Exemptions Under Old Tax Regime

List of Deduction

• Public Provident Fund
• Equity Linked Savings Scheme (ELSS)
• Employee Provident Fund
• Life Insurance Premium
• Principal and Interest component of Home Loan
• Children Tuition Fees
• Health Insurance Premiums
• National Pension Scheme
• Tuition fee for Children
• Saving Account Interest

List of Exemptions

• House Rent Allowance
• Leave Travel Allowance
• Mobile and Internet Reimbursement
• Food Coupons or Vouchers
• Company Leased Car
• Standard Deduction
• Uniform Allowance
• Leave Encashment

Read Also: Salaried may get Income tax notices for deductions FY23

Disclaimer: The article or blog or post (by whatever name) in this website is based on the writer’s personal views and interpretation of Act. The writer does not accept any liabilities for any loss or damage of any kind arising out of information and for any actions taken in reliance thereon.
Also, www.babatax.com and its members do not accept any liability, obligation or responsibility for author’s article and understanding of user.

For Collaborating with us-

• Mail us at [email protected]
• Whatsapp us at +91-7024984925