72% of Personal Income-Tax Payers Opted for New Tax Regime in 2023-24

Sub : Eco

Sec: Fiscal Policy

Shift to New Tax Regime:

72% of personal income-tax payers who filed their returns by the July 31 deadline for the financial year 2023-24 opted for the new tax regime.
This marks a significant shift towards the simpler tax system introduced by the government.
Increase in I-T Return Filings:
- The number of Income Tax (I-T) return filings rose by 7.5%, reaching a record high of almost 7.29 crore.
- Out of the total 7.28 crore I-T returns filed for Assessment Year 2024-25, 5.27 crore were under the new tax regime compared to 2.01 crore under the old tax regime.
Central Board of Direct Taxes (CBDT) Statement:
- The CBDT termed the increase in taxpayers under the new tax regime as “heartening”.
Factors Influencing the Shift:
- The switchover has been expedited by significant changes in the new tax regime, originally introduced in 2020, and further enhanced in Budget 2023-24.
- Changes include making the new system the “default tax regime”.

Key Changes in Budget 2023-24:

Tax Rate Slabs:
- The number of tax rate slabs was reduced from six to five.
Tax-Free Income Limit:
- Raised from ₹2.5 lakh to ₹3 lakh.
Tax Rebate Limit:
- Increased from ₹5 lakh to ₹7 lakh annually.

Additional Changes in Budget 2024-25:

Standard Deduction:
- Raised from ₹50,000 to ₹75,000.
Tax Slabs Rejigged:
- Further adjustments to the tax slabs under the new regime.

Way forward:

These changes are likely to provide greater impetus for taxpayers to opt out of the old regime and adopt the new tax regime.