TL; DR: After becoming the default in FY 2023–24, the new tax regime significantly reduced exemption-based claims, mainly among Individuals & HUFs. Total revenue foregone fell sharply, driven by a near halving of Section 80C deductions from ₹1.2 lakh crore in 2022–23 to ₹49,317 crore in 2023–24, returning to 2016–17 levels. Section 80D deductions also declined. In contrast, Section 87A rebates increased to ₹58,950 crore, reflecting higher rebates under the new regime. Overall, tax relief has shifted from deductions toward direct rebates.

Context

India’s personal income tax system has undergone a major shift in recent years with the introduction of the new tax regime, which offers lower tax rates but removes most exemptions and deductions. While the older regime encouraged savings and social objectives, it also made taxation complex and created uneven benefits across income groups. This shift has important implications for government revenue, taxpayer behaviour, and fiscal policy.

From FY 2023–24 onward, the new regime became the default option, signalling the government’s intention to gradually move toward a simpler, exemption-free tax structure. Understanding whether this shift is actually improving revenue efficiency is crucial for long-term fiscal planning. The latest budget 2026-27 offers a key data point to evaluate whether the policy transition is achieving its intended outcomes.

Who compiles this data?

The data on the revenue foregone and the impact of tax regime changes can be found from the Union Budget documents, under the Receipts Budget titled “Statement of Revenue Impact of Tax Incentives under the Central Tax System”.

Where can I download clean & structured data from the Indian Budget and Revenue impact of the tax regime changes?

Clean, structured, and ready-to-use detailed datasets from the revenue impact and budget documents are available to download from Dataful. This collection also includes data on the total expenditure, tax and non-tax receipts, state-wise tax devolutions, among others.

Key Insights

• Significant drop in Revenue Foregone after the New Tax regime became default
  Before the new regime, revenue foregone due to tax incentives and exemptions rose steadily from ₹13,550 crore in 2005–06 to ₹2.32 lakh crore in 2019–20, driven mainly by Individuals & HUFs (₹13,550 crore to ₹1.30 lakh crore) and then corporates.

  After the new regime was introduced in FY 2020–21, total revenue foregone fell to ₹2.11 lakh crore, but then rose sharply to ₹2.95 lakh crore by 2022–23, with Individuals & HUFs increasing from ₹1.28 lakh crore to ₹1.97 lakh crore.

  When the new regime became the default in FY 2023–24, total revenue foregone declined to ₹2.50 lakh crore, mainly due to a sharp fall among Individuals & HUFs from ₹1.96 lakh crore to ₹1.52 lakh crore, while corporate and non-corporate figures remained stable, suggesting that defaulting taxpayers into the new regime reduced exemption-based claims, especially for individuals. The projections for 2024-25 stand at ₹1.71 lakh crore for individuals, and ₹2.8 lakh crore for all categories of taxpayers.

• 80C revenue foregone halves after new tax regime becomes default
  Individuals and HUFs have been the most impacted by the shift to the new tax regime. Section-wise data shows that revenue foregone due to 80C deductions rose from ₹22,134 crore in 2006–07 to ₹1.2 lakh crore in 2022–23. However, after the new regime became the default in 2023–24, this fell sharply to ₹49,317 crore—nearly halving and returning to 2016–17 levels. A similar trend is seen in 80D deductions, which increased from ₹496 crore in 2006–07 to ₹12,719 crore in 2022–23, before declining to ₹9,742 crore in 2023–24.

  In contrast, revenue foregone due to tax rebates under Section 87A rose steadily from ₹3,397 crore in 2014–15 to ₹41,237 crore in 2022–23 and further increased to ₹58,950 crore in 2023–24, as the new regime offers higher rebates of up to ₹25,000 compared to ₹12,500 under the old regime.

Why does it matter?

Government data shows a clear shift toward the new tax regime. According to the CBDT chairman, about 88% of individual taxpayers have opted for the new regime, indicating a strong movement away from exemption-based taxation.

Government data showing high adoption of the new regime suggests that simplicity and lower rates are working as intended from an administrative and compliance perspective.

However, this simplification also raises an important policy concern: how are social and developmental objectives being met once tax exemptions are withdrawn? Under the old regime, many exemptions were designed to promote specific outcomes—such as household savings (Section 80C), health insurance coverage (Section 80D), and home ownership (housing loan interest). With these incentives losing relevance under the new regime, the tax system itself is no longer a primary tool for encouraging such behaviour.

This implies a gradual shift in policy design. Social objectives that were earlier pursued through tax incentives may now need to be addressed more directly through explicit government spending, subsidies, or targeted welfare schemes.

Therefore, while tax simplification strengthens the fiscal framework, its long-term success depends on whether social objectives are effectively supported through well-designed expenditure programs and whether this transition from tax-based incentives to spending-based interventions delivers better outcomes in terms of equity, inclusion, and economic security.

Key Numbers

• Overall revenue foregone for all types of taxpayers

  • Individuals & HUFs (in ₹Lakh Cr): 2020-21: 1.28, 2022-23: 1.96, 2023-24: 1.52

  • Corporates (in ₹Cr): 2020-21: 75218, 2022-23: ₹88109, 2023-24: ₹86810

  • Non-Corporates (in ₹Cr): 2020-21: ₹7731 Crore, 2022-23: ₹10920 Crore, 2023-24: ₹11785 Crore

• Section-wise major revenue impact sections, for individuals and HUFs

  • 80C: 2022-23: 1.02 Lakh Crore, 2023-24: ₹49317 Crore

  • 80D: 2022-23: ₹12719 Crore, 2023-24: ₹9742 Crore

  • 87A: 2022-23: ₹41237 Crore, 2023-24: ₹58950 Crore