It can be very difficult for taxpayers to choose between the old and new tax schemes in the country. Both the old and new tax schemes have merits and demerits which individuals need to understand before choosing the same. After understanding the features of the old and new tax regimes, it becomes very easy for them to choose the right taxation method.
The government of India introduced the new tax regime rate on April 1, 2020. Consequently, individuals were completely confused regarding whether to opt for the new tax scheme or settle for the old, existing one. Let us understand the future of the old and new tax regimes to choose the better one when you plan to apply for home loan.
Features of the New Tax Regime
Lower tax rates
This is one of the features of the new tax regimes in cooperation with the home loan providers. The new tax regime has huge scope when it comes to tax slab rates. The rate of taxation ranges between seven tax slabs from 0% to 30%, the highest tax rate being applicable only on income above 15 lac. In contrast to the new tax regime, there were only four tax slaps present in the old regime, ranging from 0% to 30%. The maximum rate was levied on earnings over ten lakh rupees.
Deductions and exemptions will be lost if the new tax regime is chosen
The government has taken into consideration the fact that the new tax regime has various deductions and exemptions, which makes compliance by taxpayers and administration of the tax laws by tax authorities a burdensome process. To give relief to all taxpayers in the country, the simplified tax regime requires very specific tax deductions. Various popular tax deductions are allowed in the new tax slab regime.
Opting for the applicable tax regime
An individual that pays taxes should opt for the new tax-free regime only in a specific situation and based on their source of income. If you want to switch from the old to the new tax regime, you need to get it done every year, which can be done only once in a lifetime. Therefore, if you are changing from the old to the new tax regime, you need to consider various things.
Finishing up
When you choose to apply for a home loan, it is important to understand how the old and new tax regimes function. Home loan approval is easy to get when you meet the eligibility criteria mentioned by the home loan providers. However, before taking a home loan, it is recommended to carefully examine the kind of tax regime associated.
