63% taxpayers stick to Old Tax Regime; Here’s why
December 11, 2023
The survey highlighted PPF and life insurance as the most favoured tax-saving instruments, chosen by 39% and 34% of respondents, respectively.
These key findings underscore a collective shift in financial behaviour, with Indian consumers showcasing heightened awareness, prudent decision-making, and a preference for long-term financial stability.
While the New Tax Regime heralds a new era for India, the Old Tax Regime continues to retain popularity among taxpayers by a margin, reveals a Policybazaar Survey. The Old Tax Regime emerged as the clear preference as 63% of respondents opted for it.
In an attempt to gauge India’s investment mindset, Policybazaar.com recently conducted “India’s Investment Readiness” survey across 350 cities with those who fall within the taxable income bracket. The research delves into the mindfulness with which Indians choose their Tax Regime and analyses the drivers of this choice, especially since the New Tax Regime became the default option this year.
There emerges a distinct preference, with 63% takers for the Old Tax Regime and 37% for the New Regime owing to the tax-saving benefits and a sense of security offered by long-term savings instruments that one can leverage in the former.
The findings also reveal a heartening level of proactiveness as 71% of respondents based their choice on meticulous calculations. Notably, there’s a shift in gender dynamics, with 74% of women calculating tax liability under both regimes, slightly exceeding the 71% of men. A deeper analysis of investment behaviour across gender, region, employment type, and age groups indicates that there is a growing trend of financial prudence across India.
Long-term investment mindset gains traction
Age-wise, the report indicates a shifting mindset as 62% of respondents in the 18-30 age bracket who would typically be expected to choose short-term investments and gains, opted for the Old Tax Regime citing long-term investments as the reason. In fact, majority of respondents in the 18-50 age group chose the Old Regime, signalling a growing openness towards long-term investments.
Sarbvir Singh, President and Joint-Group CEO at PB Fintech, expressed optimism, stating, “It is evident from our survey that the Indian consumer has a deep-rooted, savings-centric mentality and approaches financial planning with mindfulness. The trends showcased in the report indicate a promising future for financial security. Taxpayers are now considering both immediate tax benefits and long-term gains from retirement-linked instruments like provident funds, pensions, and insurance.”
Metros most financially aware; Tier 2 & 3 not far behind
Across locations and genders, a positive trend emerges — demographic sections that have traditionally had limited access to financial knowledge are on a recovery path because of their keen, calculation-based involvement in financial planning. For example, women might be less financially aware than men but still adopt a more hands-on approach towards tax planning. Tier-I respondents display maximum propensity to save tax through long-term investments as 69% chose the Old Regime.
Interestingly, Tier 2 and 3 respondents aren’t far behind, with 61% and 59%, respectively, consciously opting for the Old Regime and strategically planning their investments. Southern India shows the highest investment readiness with 65% takers for the Old Regime, but even in the North, West, and East, this statistic sits well above 50%.
PPF and Life Insurance most preferred tax saving instruments
The survey highlighted PPF and life insurance (including ULIP and traditional policies) as the most favoured tax-saving instruments, chosen by 39% and 34% of respondents, respectively. The survey covered an array of tax-saving tools, including ELSS, home loans, NPS, SSY, Tax Saver FD, donations/ charity, SCSS, NSC, Infrastructure Bonds, and education loans, with percentages ranging from 3% to 39%. The emergence of Insurance and PPF as top tax-saving tools reflects a shift from traditional savings instruments towards diversified investments.
These key findings underscore a collective shift in financial behaviour, with Indian consumers showcasing heightened awareness, prudent decision-making, and a preference for long-term financial stability. The growing popularity of insurance as a preferred tax-saving instrument reflects a nuanced and evolving financial landscape, suggesting a more secure and forward-looking future for India’s investors.
[The Financial Express]