Comparative Analysis of Income Tax Planning under the New and Old Tax Regimes in India for Financial Year 2025–26: An Empirical and Behavioural Perspective

The introduction of the New Tax Regime in India aimed to simplify tax compliance while offering lower rates and limited deductions. With significant changes announced in Budget 2025–26, taxpayers face a complex choice between the traditional Old Regime and the simplified New Regime. This paper integrates a comparative tax liability analysis (for incomes ranging from ₹5 lakh to ₹25 lakh) with insights from recent studies on investor behaviour towards tax planning. Findings indicate that the New Regime offers clear advantages for low- and middle-income taxpayers without significant deductions, while the Old Regime continues to benefit high-income earners who can claim substantial exemptions. Behavioural factors, including awareness, investment habits, and risk appetite, strongly influence regime selection. Policy recommendations emphasize the need for financial literacy initiatives and tailored advisory support.

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The authors declare no conflict of interest.

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The datasets used in this study are openly available at [repository link] and the source code is available on GitHub at [GitHub link].

This work did not receive any external funding.