With Rs 1,00,000 crore revenue lost to 80C, is the old tax regime on its way out?

For one 30-year-old startup employee from Bengaluru, a meagre raise at work a year ago brought with it a nasty surprise. "It didn’t make a lot of difference to the money I made. But I was in shock when I saw the amount of taxes I paid. The difference of a mere Rs 30,000 changed my income tax slab. I was lumped into the new regime by default, and that meant that none of my deductions—including house rent or life insurance policies were applicable,” she recalls. 

At the time of filing her Income Tax Returns (ITR), she switched from the new to the old regime, hoping for some respite, and says she got back part of the tax she paid thanks to her savings that fall under section 80C of the Indian Income Tax Act. 

For a lot of people like the startup employee quoted above, section 80C has been a boon. The government’s data reflects the same. The last union budget shows that in the year ended March 2023 (FY23), the government of India was projected to have foregone Rs 1,02,000 crore in revenue due to deductions claimed under Section 80C—the single largest tax-saving instrument.