The Ministry of Finance had presented the much anticipated Budget of 2022-23 with announcements of tax slabs and reduced tax rates. According to the finance ministry, almost 70% of taxpayers would save on tax pay-outs under the new system.
Following the new income tax regime is optional, which has further led to confusion between taxpayers and potential credit borrowers. That is why understanding both the old and new regime is crucial before undertaking any decision. An income tax calculator online can help individuals make an informed choice and gauge the impact of both regimes on their income.
What are the amendments made to the income tax rebate, slabs, and rate?
Taxpayers are divided into three categories as per these slabs –
- Residents and non-residents within the age of 60 years.
- Residents who are senior citizens above the age of 60 but below 80 years.
- Resident super senior citizens who are above the age of 80 years.
The Union Finance Minister announced a significant cut in tax rates for salaried employees in FY2021, provided they forgo the existing deductions and exemptions. One can easily calculate the tax they are required to pay using an income tax calculator. The new rates are mentioned below –
- No income tax for the individuals with income below Rs.2.5 lakh
- 5% – Rs.2.5 lakh and Rs.5 lakh
- 10% – Rs.5 lakh to Rs.7.5 lakh
- 15% – Rs.7.5 lakh and Rs.10 lakh
- 20% – Rs.10 lakh and Rs.12.5 lakh
- 25% – Rs.12.5 lakh and Rs.15 lakh
- 30% – income above Rs.15 lakh
For loan seekers, the entire taxation process may seem even more confusing. However, there are some home loan tax exemptions and benefits every new and existing borrower should have on their fingertips to optimise their savings on tax payment.
These exemptions are offered on home loan interest payment or the principal amount.
Additionally, every taxpayer is entitled to rebates which are mentioned below –
- Resident individuals can avail a rebate of up to Rs.12,500 if their gross taxable income after deductions does not exceed Rs.5 lakh.
- Cess at 4% rate is applicable on the income tax amount.
Figuring out the total tax liability can be a hassle owing to the calculations involved. To simplify the task, use an income tax calculator online.
Which regime should you choose?
This new tax regime is different from the old one in two aspects –
- The Finance ministry has increased slabs in the new regime along with lowered rates.
- All exemptions and deductions enjoyed by individuals in the old regime cannot be availed on this new one.
The new regime will not allow individuals to claim the available deductions in the old one. For example, one cannot avail the deduction towards EPF. Furthermore, potential home loan seekers cannot claim their part of deductions on principal and interest payment.
Read More: Know how can Bajaj Housing Finance home loan calculator help you plan your finances better
Home loan offers an array of benefits for borrowers. Being secured, they are the gateway to buying one’s dream home with minimal risk. However, there are certain things that one must know before taking a home loan. Tax exemption, for instance, is one of the major benefits of the old income tax system.