Choosing the right tax regime can be confusing, especially if you have a home loan. Therefore, it's important to evaluate all options carefully to maximize tax savings.
A home loan becomes a crucial factor to consider when choosing between the old and new tax regimes. Suneel Dasari, founder and CEO of EZTax.in, explains that individuals with a home loan can benefit from deductions under Section 24 and Section 80C of the Income Tax Act. This means they can claim deductions up to Rs 4,00,000, including interest of Rs 2 lakh, 80C deduction of Rs 1.5 lakh, and standard deduction of Rs 50,000.
Dasari suggests that if an individual's income is less than Rs 10 lakh with the above deductions, they can benefit from the old tax regime. However, if their income exceeds Rs 10 lakh, they will be subject to the 30 per cent tax slab rate and may benefit from the new regime as tax rates up to Rs 15 lakh are lower under the new regime. But it's not just about income. Other deductions may come into play.
Atul Monga, CEO and co-founder of Basic Home Loan, advises that borrowers with a home loan may benefit from sticking to the old regime. Under the old rule, borrowers can claim deductions on the interest paid on home loans up to a maximum of Rs 2 lakh per year and deductions for principal repayment under Section 80C. On the other hand, the new regime does not offer these deductions, which could result in significant tax savings for borrowers who have taken a home loan.
So, what's the verdict? It ultimately depends on an individual's specific circumstances. For example, they may benefit from the old tax regime if they are eligible for deductions in addition to those listed above, such as HRA and NPS. However, the new rule may be more attractive if they only have a home loan and no additional deductions. Therefore, evaluating all deductions and weighing the potential tax savings before deciding is essential.
A home loan is an essential factor when choosing between the old and new tax regimes. With deductions available for interest and principal repayment, borrowers can benefit significantly from the old regime. However, other deductions may also come into play, so it's essential to evaluate all options carefully. As Dasari says, "Taxation is not just about compliance, but also about making the right choices to reduce your tax liability."