Comparative Analysis of Old and New Tax Regimes in India and Its Impact on Middle Income Taxpayers

ABSTRACT The introduction of the optional New Tax Regime in India marks a significant reform in personal income taxation, aimed at simplifying compliance through lower slab rates and reduced reliance on deductions and exemptions. The coexistence of both tax regimes has increased decision-making complexity for individual taxpayers, particularly within the middle-income group that traditionally relies on deduction-based tax planning. This study presents a comparative analysis of the Old and New Tax Regimes with specific focus on middle-income salaried taxpayers. The research adopts a doctrinal and scenario-based simulation approach using secondary data from statutory tax provisions, government budget documents, and CBDT guidelines. Three representative taxpayer scenarios were developed, covering taxpayers with no major investments, taxpayers utilising deductions under Sections 80C and 80D, and taxpayers combining investment deductions with housing loan benefits. Tax liability under both regimes was evaluated by applying relevant slab rates, deductions, rebate provisions, and statutory cess. The study aims to provide a structured understanding of tax regime selection and contribute to academic and policy discussions on India’s evolving direct taxation framework. Keywords: Old Tax Regime, New Tax Regime, Middle-Income Taxpayers, Tax Planning, Direct Taxation, Tax Compliance, Income Tax Policy.