ITR filing: 63% of taxpayers stick to old tax regime, finds survey

To gauge India’s investment mindset, Policybazaar.com recently conducted an “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.

The online survey had 1,263 respondents across India. It revealed that 63% preferred the old tax regime and 37% the new one 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 that 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 71% for 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, the 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. This is in perfect alignment with our 15-year-long mission of helping Indian consumers make more informed financial decisions. This trend is a testament to the continued efforts by government bodies and financial institutions to promote financial literacy, fostering a more resilient and informed financial ecosystem in India.”

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%.

Also read: 51% of respondents say AI will help increase productivity at work: PwC Survey

Also read: Have you worked with 3 or more employers? Here’s how to merge EPF accounts and withdraw your money

Also read: Public Provident Fund: Here’s how you can avoid penalties on your PPF account from a bank

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.