Government of India has introduced several schemes and benefits to encourage more individuals to opt for home loans with affordable interest rates. One of the most attractive benefits includes providing tax rebates on home loan repayments. Accordingly, borrowers need to take into account the new tax slabs that were introduced in budget 2020-21 for calculation of income tax for the year 2020-21.
- Individuals with income below Rs.2.5 lakh are not required to pay taxes.
- Those with income within Rs.2.5 – 5 lakh need to pay 5% tax.
- Individuals with an income between Rs.5-10 lakh have to pay tax at 20%
- A person with an income above Rs.15 lakh is required to pay tax at 30%
- Senior citizens with income of up to Rs.3 lakh are not required to pay taxes.
Under the new tax regime, individuals who have opted for a home loan for a property that has been rented out can avail tax exemption on the interest component of the home loan as well as a standard deduction on the rental income. However, no such facility is available for individuals with a self-owned property.
Individuals have been given the option to calculate and pay tax according to this new regime or the old regime. One can also use an income tax calculator to calculate his/her tax payable without any errors quickly. Under the old system, a person could claim tax deduction under the following section.
Consequently, before paying your tax, you should check which tax regime offer better tax benefits on your home loan.
Additional Read: Make Use of Income Tax Calculator and Compare Your New and Old Tax
