The Union Budget 2020, held on 1st February, announced new tax slabs for salaried individuals in India, also called “optional slabs”. Under this new regime, individuals with an annual income of up to Rs.5 lakh have to pay zero tax if they let off all 70 existing tax deductions. Based on their convenience, individuals can either choose the existing or new tax slabs.
- As per a report in the Bloomberg Quint, only a meagre 3% of the total Indian population pay income tax.
This data testifies that a large chunk of India’s population does not come under the purview of taxation. Being unaware of the taxation slabs and proper income tax calculation also leads to tax evasion.
To eliminate the risk of non-payment of income tax, individuals must be aware of the income tax slabs applicable and utilise tax calculators available online to assess their liability.
New tax slabs as per Budget 2020
Knowing the tax slabs is the first step towards calculating income tax online. Following are the new “optional” tax slabs.
- Income up to Rs.5 lakh: Nil
- Between Rs. 5 lakh and Rs.7.5 lakh: 10%
- Between Rs.7.5 lakh and Rs.10 lakh: 15%
- From Rs.10 lakh to Rs.12.5 lakh: 20%
- From Rs.12.5 lakh to Rs.15 lakh: 25%
- Income more than Rs.15 lakh: 30%
Individuals with an annual income of Rs.15 lakh and above now have to pay a tax of Rs.1.95 lakh and not Rs.2.73 lakh if they do not claim any deductions, including the ones available on a home loan.
To compare tax payable as per the new and existing income tax slabs, individuals can use an income tax calculator. To do so effectively, they will also need to know the deductions available on income tax.
Deductions not available under new tax regime
The new tax regime does not include almost 70 exemptions, including home loan tax benefits for under construction property. Therefore, before choosing this new regime, individuals need to take the aid of an online tax calculator to see if it guarantees more savings than the existing one. Following are some exemptions that are unavailable under this scheme –
- Professional tax, entertainment allowance and other standard deductions on salaries.
- Leave Travel Allowance
- House Rent Allowance
- Helper allowance
- Children education allowance
- Special allowances under Section 10(14)
- 80C, 80D, 80E deductions
Besides, several other deductions are not available under this new tax regime. However, individuals opting to pay their taxes under the existing system can continue leveraging the available tax benefits. It will be more beneficial for home loan borrowers, considering the benefits they can claim on repayment components.
Tax deductions available on home loan
Following are the home loan tax exemptions and benefits every new and existing borrower can have on their fingertips if they follow the previous tax regime –
Under this section, home loan borrowers can claim tax deductions of up to Rs.1.5 lakh on principal repayment. It also includes registration charges and stamp duty which are one-time payments.
It allows taxpayers to claim exemptions of up to Rs.2 lakh from taxable income on interest payment. However, this benefit is available if the construction finishes within 5 years. In case the construction is not completed within that time, you can claim Rs.30,000.
This particular section allows first-time homebuyers to claim benefits of up to Rs.50,000. However, in this case, the loan value should not exceed Rs.35 lakh, and the property’s value should be within Rs.50 lakh.
Besides tax benefits, borrowers can also avail pre-approved offers extended by select financial institutions that make loan processing straightforward and quick. Besides home loans, such offers are available on a range of financial products like loans against property. All you have to do is enter your name and contact number to check your pre-approved offer.
Such lenders also let borrowers use an online income tax calculator that eases tax calculation after considering all deductions.
Following are the steps to calculate tax payable using a calculator available on your lender’s website.
Step 1 – Visit the website of your preferred lender.
Step 2 – Enter income details, HRA exemptions details, deductions applicable under Section 16, 80C, 24(b), 80EE, etc.
Step 3 – Click on “calculate”.
The total taxable income and tax payable will appear on the screen within seconds. Note that tax benefits on joint loan are also available for each co-applicant, who can claim it individually.
Therefore, individuals can utilise an income tax calculator and compare the tax payable as per new and existing slabs. Doing so also helps them to invest accordingly and claim maximum tax benefits.