In Budget 2023, Union Finance Minister Nirmala Sitharaman announced several measures to make the new tax regime more popular.
While a standard deduction of Rs 52,500 has been introduced in the new tax regime, most other deductions, like those on home loans, house rent allowance (HRA), etc., are not available in the new tax regime.
The key announcements include increasing the tax slabs under the new regime. For example, in the new regime, the exemption limit is Rs 3 lakh instead of Rs 2.5 lakh earlier. Also, the income limit with an applicable 10 per cent tax has been increased from Rs 5 lakh-Rs 7.5 lakh to Rs 6 lakh-Rs 9 lakh.
Earlier, an income of between Rs7.5 lakh and Rs10 lakh had a 15 per cent tax, now 15 per cent tax applies to an income between Rs 9 lakh and 12 lakh, and so on.
Should You Opt For New Tax Regime If You Have A Home Loan?
It is important to understand whether it makes sense for someone with a home loan to stay in the old or the new tax regime.
Generally, taxpayers with a home loan can claim interest deductions under section (u/s) 24 and principal u/s 80C of the Income Tax Act. One can claim deductions up to Rs 4 lakh for a home loan (Interest-2 lakh, 80C-Rs1.5 lakh, and standard deduction-50,000).
Income |
Tax under the old regime
Tax under the new regime
Rs 10 lakh
Rs 33, 800
Rs 54,600
Rs 20 lakh
Rs 148,200
Rs 154,600
Rs 30 lakh
Rs 304,200
Rs 296,400
Source. Eztax.in
“With the above deductions, if the taxpayer's income is less than Rs 10 lakh, he can benefit under the old regime. If the taxpayer's income is more than Rs 10 lakh, he will come under the 30 per cent slab rate, and the new regime is beneficial to him as the tax rates in the new regime up to Rs 15 lakh are lesser,” says Suneel Dasari, founder and CEO, EZTax.in, an online income tax filing portal.
He adds that he will benefit under the old tax regime if the taxpayer has more deductions in addition to the above deductions like HRA, national pension system (NPS), etc. Otherwise, the new tax regime is attractive.
Overall, the new tax regime is more attractive as the salaried people can get more take home and don't need to invest unnecessarily for tax-saving purposes. Instead, they can divert the funds to higher-return income-generating options. And the silver line is not to produce any receipts as proof of investments.
