The new income tax regime received a significant upgrade in the Union Budget 2023, but a survey suggests that more Indians still prefer the old regime.
A recent survey conducted by Policybazaar.com suggests that Indians still prefer long-term investments, and subsequently, the old tax regime due to the exemptions they get under Section 80C, 80D, and others.
These deductions play a crucial role in substantially lowering the taxable income, consequently reducing the tax liability. In contrast, the new regime eliminates a majority of these deductions while providing lower tax rates.
It may be noted that more than 1,200 people participated in the online survey across 350+ cities, with income groups ranging from below Rs 7.5 lakh per annum to over Rs 15 lakh per annum.
The survey noted that 63 per cent of respondents favoured the old income tax regime, given their prioritisation of long-term investments. In contrast, only 37 per cent opt for the new regime.
What makes old tax regime more popular?
The report highlighted a noteworthy shift in mindset, as 62 per cent of respondents in the 18-30 age bracket, typically expected to favor short-term gains, choose the old tax regime for its focus on long-term investments.
The majority of respondents in the 18-50 age group show a growing openness toward long-term investments.
Sarbvir Singh, President and Joint-Group CEO at PB Fintech, expressed optimism about the survey results. He stated, “It is evident from our survey that the Indian consumer has a deep-rooted, savings-centric mentality and approaches financial planning with mindfulness.”
Singh highlighted the alignment of trends with a mission to promote financial literacy, fostering a resilient and informed financial ecosystem in India.
More, the survey highlighted that PPF and life insurance have emerged as the most preferred tax-saving instruments, chosen by 39 per cent and 34 per cent of respondents, respectively.
It covers a range of tax-saving tools, including ELSS, home loans, NPS, SSY, Tax Saver FD, donations/charity, SCSS, NSC, Infrastructure Bonds, and education loans.
Metros, high-earners prefer old regime
The survey noted that while the old regime is a preferred choice for respondents across all demographics, it is especially popular amongst taxpayers with income above Rs 7.5 lakh per annum.
In contrast, the respondents earning between Rs 12-15 lakh per annum had the greatest preference for the old income tax regime.
“Even though the initial investment would be significant for high earners, they showcase a tendency to prioritise the benefits of long-term savings over the convenience of liquidity,” said the survey.