With a notable increase in taxpayers opting for the new tax regime while filing their income tax returns (ITR) for FY 2024, experts predict the Finance Ministry may consider phasing out the old tax regime within the next year or two. The key question is: When will the government officially end the old tax regime?
According to the Income Tax Department, out of 7.28 crore ITRs filed for AY 2024-25, 5.27 crore were submitted under the new tax regime, while 2.01 crore were filed under the old regime. Approximately 72% of taxpayers have chosen the new tax regime, leaving 28% with the old one. The total number of ITRs filed by July 31, 2024, is over 7.28 crore.Â
The income tax department said, “Out of the total ITRs of 7.28 crore filed for AY 2024-25, 5.27 crore have been filed in the new tax regime compared to 2.01 crore ITRs filed in the old tax regime.”
As per the data, the number of new tax regime income taxpayers is two and a half times higher than the old.
The Income Tax Department appreciates taxpayers & tax professionals for timely compliance, resulting in a record surge in the filing of Income Tax Returns (ITRs).
Here are the key highlights:
👉More than 7.28 crore ITRs for AY 2024-25 filed till 31st July, 2024, a 7.5% increase… pic.twitter.com/CzbgZEMUWi
— Income Tax India (@IncomeTaxIndia) August 2, 2024
“The rise in taxpayers choosing the new tax regime this year indicates a major shift in India’s tax landscape. While the intention was to offer flexibility through both old and new regimes, the growing preference for the new system suggests it is effectively simplifying tax matters and reducing the burden for many,” said Siddharth Maurya, Founder & Managing Director of Vibhavangal Anukulakara Private Limited.
This trend is likely to attract attention from the Finance Ministry. If the preference continues, the ministry might consider phasing out the old regime, potentially starting as early as next year, Maurya added.
Should the government decide to phase out the old regime, it is expected to be a gradual process rather than an immediate one. Maurya noted that this might involve setting a future cut-off date to give taxpayers ample time to adjust their financial plans.
Mumbai-based tax and investment expert Balwant Jain believes that India will eventually adopt a single tax regime—the new tax regime. He points out that the Union Budget 2024 reflects a clear shift toward favouring the new tax regime, highlighted by numerous initiatives to make it more appealing to taxpayers.
Jain notes that last year, the government’s commitment to the new tax regime became clear when the income threshold for a rebate under Section 87A was increased from ₹5 lakh to ₹7 lakh, and the tax rebate was raised from ₹12,500 to ₹25,000 for those choosing the new system. Additionally, a provision for marginal relief was introduced to address income exceeding the threshold. The Budget 2024 further proposed amendments to enhance the attractiveness of the new regime.
Jain observes that the government’s strategy attracts the salaried class to the new tax regime. It offers particular benefits to individuals in lower tax brackets who may not have the means to invest and, therefore, miss out on deductions available under the old regime.
Did you miss the July 31 ITR deadline? Income Tax department says…
In the meantime, the Income Tax Department has advised taxpayers who missed the July 31st ITR filing deadline to complete their submissions as soon as possible. Those who did not file by the deadline must submit a belated return and may face consequences, including penalties for late filing.
Disclaimer: The views and recommendations made above are those of individual analysts, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.