A Study on the New Income Tax System in Comparison to the Old Income Tax System

Taxation must be remained an integral feature in terms of government-wide revenues, fiscal financial investments as well as individuals' saving and investment patterns within а economic system. The key point of introduction of the new income tax regime to Union's Budget 2020 was to provide an option of the current tax system towards a unified tax system with lesser dependencies on exemptions & deductions. Under the new regime lower rates have been introduced but it removed most of the deductions as available earlier under the old regime; thus making significant dilemma either to shift or to remain with old regime, depending on the financial position of the taxpayers. This study, however, goes in detail through old tax versus new tax regime and upon the tax rates and exemptions and deductions and also checks out the total cost implications. The research is based on primary data obtained from 90 respondents with a projection sample of 130 through structured questionnaires. Descriptive and statistical analysis technique such as t-tests, chi-square test, regression analysis has been used to analyze taxpayer preference, savings behavior and compliance under both tax systems. The results show that taxpayers with less investment and deductions support the new tax regime because of its ease, whereas those with large investments in tax-saving vehicles still hold on to the old tax regime. Further, budgetary adjustments in 2024-2025 and 2025-2026 have also changed tax slabs and rebate structures, which affect the choices of taxpayers. The research points out that tax regime choice is influenced significantly by factors other than income levels, including investment behavior, long-term savings, and financial literacy.