In this regard, using an income tax calculator may seem beneficial that estimates the tax amount by providing income details and deductions.
The central government also announced slabs and exemptions on income tax to facilitate ease of computation.
Hence, taxpayers can use an income tax calculator 2020 to efficiently compare their tax liabilities with the old and new structure for the financial year 2020-21. This would ease out completing the taxpaying and return process.
The primary difference between old vs new income tax slabs
Lowered income tax slabs directly affect the new income tax structure when one foregoes breaks and exemption. This helps an individual make the right credit choice, like availing of a home loan for a shorter or longer tenor.
An individual’s tax liability helps him/her review the repayment capability as it affects disposable income. In such a situation, using an income tax calculator helps in determining the tax exemptions applicable under various sections.
Hence, a borrower must assess what are the tax savings and other advantages offered by home loans today to manage their savings better.
Again, this will streamline searching for a suitable home loan lender offering a better interest rate and easy eligibility criteria.
Some HFCs also provide pre-approved offers on the home loan and related products like a loan against property, personal loan, etc. This makes the loan application straightforward and hassle-free. Check your pre-approved offer by entering your name and contact number on the official site.
Tax deductions restricted under the new regulation
Ideally, a taxpayer receives two options-
- New income tax structure which allows preceding of all indemnity and breaks to avail of a lower tax rate.
- The old income tax structure allows the benefits from breaks and exemptions on the current tax rate.
However, under the new rules, significant changes have been brought in tax exemptions. Like Section 24 that helped borrowers to avail home loan tax benefits for under-construction properties, is not applicable anymore.
Since most tax exemptions have been eliminated, a borrower can check other ways of tax reduction. They can use an income tax calculator to start saving the amount needed to be paid before the deadline.
The difference in new and old income tax slabs for FY 2020-21
The changes in the tax exemption also affect the tax slabs. Some of them are discussed below. A tax calculator can help in such an assessment.
- For an individual earning upto Rs.2.5 lakh
The individuals falling in this category won’t be charged any tax. This rule remains intact in both previous and this year.
- Individuals having income between Rs.2.5 lakh and Rs.5 lakh.
Under this category, the tax slab stands at 5%, which has also remained unchanged.
- Income range between Rs.5 lakh to Rs.7.5 lakh
This slot rate has been brought down from 20% to 10% in the new tax rule.
- Income ranging between Rs.7.5 lakh to Rs.10 lakh
Here individuals can enjoy a rate reduction of 5%. The rate in this slot been reduced from 20% to 15%.
- Income ranging Rs.10 lakh to Rs.12.5 lakh
Under this category, there has been a 10% reduction. Previously the tax slab stood at 30%, which now stands at 20%.
- Income ranging between Rs.12.5 lakh to Rs.15 lakh
Here a 5% reduction has been seen. Previously the tax slab stood at 30%, now went down to 25%.
- Income above Rs.15 lakh
The tax rate remained constant under this category. Here, the taxpayer has to pay around 30%.
Hence, a taxpayer can use an online tax calculator to estimate relevant deductions by providing relevant details like income, age, profession, etc. Moreover, comparing the old and new rules will help evaluate the breakdown better by using a tax calculator.
Hence, knowing the new tax rates will help taxpayers pay the amount on time and save efficiently on disposable income. For this purpose, using an income tax calculator will be beneficial. So, read the new rules in detail to make a proper decision for tax payment.
