Netizens say no to the new tax regime: prefer deductions

"Will you choose the new tax regime or stick to the old one?" Here is what 3216 Facebook and Twitter users voted. Also, did the govt miss a trick while introducing this new regime?

Twitter poll screenshot of Will you choose the new tax regime or stick to the old one

Published: February 4, 2020 at 11:22 am

Last Updated on

Two polls were conducted to find out support for the new tax regime introduced in budget 2020. Here is how 1182 Facebook users and 2034 Twitter users responded. We also discuss if the govt missed a trick in introducing the new regime.

The new tax regime introduced in budget 2020 removes all deductions that a tax-payer can buy/save/invest to reduce taxable income.  See: New tax regime (section 115BAC): you cannot avail these deductions! Certain deductions are however retained. See: List of tax deductions in New tax regime (section 115BAC)

Have you checked if you should switch to the new slabs? Use this New Tax Regime vs Old Tax Regime Comparison Table to find out. Also see:  If I choose the new tax regime can I switch back to the old regime?

Explore the rest of our budget 2020 coverage: (1) Individuals to pay Tax on Dividends from Shares and Mutual Funds! (2) Is the interest earned from PPF, EPF, SSY Taxable in new tax regime? (3) Will TDS apply to mutual fund capital gains from April 2020? (4) Do Middle East NRIs need to pay tax in India from April 2020?

Twitter poll: “Will you choose the new tax regime or stick to the old one?” As you can see from the featured image above, 83% have polled in favour of the old regime. The poll is still open. You can vote here

Facebook poll: This was conducted in the Facebook group, Asan Ideas for Wealth. Since it is a closed group, a screenshot cannot be provided. A good 940 members voted in favour of the old tax slab and 127 in favour of the new slab.

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Why do netizens prefer the old slab? If you use the comparison spreadsheet linked above, it should be fairly clear that higher the deductions that you are currently eligible for and using, lower will be your taxable income. Thus even if you are in the 30% slab, the tax outgo would be lower in the old regime.

While it is debatable if these polls are representative or not, it should be fairly clear that there is not enough incentive to move to the new regime, simpler as it may be.

Did the govt miss the trick? In my opinion, yes. They could have made the new tax regime compulsory for young earners, say for those who will turn 18 after 1st April 2020. This will be a gradual but significant shift to the new regime. Perhaps they wanted to avoid protests that occurred when EPF was made taxable.

Since it is early in the government’s tenure, one can expect the new tax regime to become gradually more attractive and deductions eased out in the old.

What is your stance? Will you shift to the new slabs even if it means paying more tax? Or will you continue with the old as long as it is available (this is my stance)?

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Pattabiraman editor freefincalM. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. since Aug 2006. Connect with him via Twitter or Linkedin Pattabiraman has co-authored two print-books, You can be rich too with goal-based investing (CNBC TV18) and Gamechanger and seven other free e-books on various topics of money management. He is a patron and co-founder of “Fee-only India” an organisation to promote unbiased, commission-free investment advice.
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  1. I think govt. did the right thing in rationalising the income tax.
    Indians are obsessed with tax saving and not with real investment. People keep buying unwanted policies only to save tax.
    Knowing about “personal finance” and knowing the difference between saving and investing is very important.
    The new tax regime is a step forward where people can move away from the old thinking of mixing investment and tax saving.

    Anyway those who have more deductions like home loan can stick to old regime for now.

  2. Sir , other sites, money control have provided auto caculations of tax, with diff in raxes by feeding in parameters of your incomes and ded. Please prepare such a tool

  3. At the outset, I congratulate you & your contributors for more useful analysis than put out by other experts, of the latest brainwave.

    Both the option of choosing between 2 regimes & graded approach suggested by you, are symptomatic of lack of conviction/intention to actually simplify. How does increase in tax slabs, leaving out certain deductions & retaining other ones, square up with the objectives of the exercise & still not able to push people to opt for new thought – except for the ones who won’t care to analyse.

    The approach basically is to introduce a variation to solve one problem & revert back to the some version of the original problem after 2-3 years. The experts keep on analyzing & nobody has moved an inch – refer DDT, tax rates, tax slabs etc.

    Don’t expect great things to happen on their own if one does not value time, discipline & will to clear bottlenecks. $5 trillion will happen. When & will it then be sufficient for the bottom 30% of population, are the questions to ponder over.

  4. will the Finance Minister Change Her Adament Attitude ,
    And Do Something As Per People’s Wish ; Will ShePe
    Care To Listen Poor Common People’s Voices And Concern ;

    For Her , There Are No Senior Citizens Of 60 Years And
    Above , And Also There Are No Super / Very Senior
    Citizens Of 80 Years And Above , Alive / Living In Our
    Mahan Bharat Desh .

    All Helpless ???

  5. Old tax regime encourages savings while the new tax regime is aimed at more cash in hand for tax payers. This may be the Government’s way to encourage spending. In my opinion especially for young tax payers, its better to stick to the old regime to inculcate / encourage the habit of saving for the future. Granted there are saving instruments which offer better returns over the long run and a disciplined young investor with more cash in hand is better equipped to utilize those instruments, but then how often are young salaried individuals disciplined 😊

  6. You know, the people who can’t take advantage of deductions(many reasons) can benefit from new tax regime. Looks like 83.4% people are taking advantage, that is very good number. Govt only satisfied 16.6% tax payers.

    Thanks for the post.

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