A Comparative Analysis of Old Vs New Tax Regime in India and Its Impact on Middle Income Taxpayers

ABSTRACT: Within the context of the present income tax system, this study compares the Old Tax Regime and the New Tax Regime in India and looks at how they affect middle-class taxpayers. The study relies solely on secondary sources, including public policy evaluations, Union Budget documents, Finance Acts, and statutory tax requirements. The study assesses tax liabilities, effective tax rates, and post-tax disposable income across representative middle-income levels ranging from ₹5 lakh to ₹15 lakh annually using a scenario-based and simulation-driven approach. According to the report, middle-class taxpayers who actively employ exemptions and deductions like Section 80C, health insurance payments, and house rent allowance continue to benefit from the Old Tax Regime, which promotes long-term investments and organised savings. On the other hand, the New Tax Regime, which has been made more appealing by changes included in Budgets 2023 and 2024, provides lower slab rates, greater rebate thresholds, and easier compliance. For taxpayers with fewer deductions, this means a lower tax burden and more liquidity. The results show that policy has clearly shifted from deduction-driven tax relief to rate-based tax efficiency, but they also emphasise that there isn't a system that is better for all middle-class taxpayers. The study comes to the conclusion that in order to maximise tax results under India's dual tax regime structure, educated regime selection—backed by increased tax literacy—is essential. Keywords: Income Tax Slab Structure, Tax Policy Reforms, Middle-Class Taxpayers in India, Old Tax Regime, New Tax Regime, Comparative analysis.