Hi rajkumark10
Tag Manager API Supports either older location (/etc/tags) or newer location at a time. At the start of the component, It detects if this is an upgraded system i.e. /etc/tags exists. Then the TagManager runs in BC mode, i.e. it uses /etc/tags as base path, If not, it uses new location '/content/cq:tags'. In BC mode, TagManager (tag pickers) shows the tags from /etc/tags and not from /content/cq:tags.
To make TagManager to use new location (i.e. /content/cq:tags.) the system should not have tags under /etc/tags.
In case of upgraded instances where tags are present under old location (i.e. '/etc/tags') are supported by tagmanager API and classic/touch UI. Once references to old tag base path (i.e. '/etc/tags') are replaced by using tagId or new tag location (i.e. "/content/cq:tags"), you can move tags to the new location (i.e. '/content/cq:tags') in CRX followed by component restart.Also, may I know why are you still creating tags under /etc/ and not in /content? I would suggest you to migrate your old tags to the new location and also create new tags using the new location only.