Calculation of Income Tax for the Assessment Year – 2020-21

According to a recent report published by The Economic Times, a present finance minister in the budget 2020 announced the date for availing home loans under an affordable housing scheme to be extended till March 31 2021. Earlier the date was fixed to be March 31st, 2020. The extension of affordable housing schemes helps individuals acquire affordable housing loan opportunities.

Further, the tax exemptions and benefits aid customers in their venture of availing home loans. Budget 2019 itself came with a lucrative opportunity for borrowers of housing credit as the maximum limit of interest on which tax exemption can be attained was increased to Rs.3.5 lakh up from Rs.2 lakh.

Subsequently, with the recent changes in rules as per the budget and revisions of the Income Tax Act, individuals have to take several pointers into account for calculating income tax for the assessment year 2020-21. In this pursuit, the income tax calculator comes handy as it simplifies the calculation for the assessee.

Income tax slab for the assessment year 2020-2021

Individuals (NRIs or residents) below the retirement age of 60 are included in the following tax slabs based on their annual income.

  • Individuals within the income tax slab of Rs.2.5 lakh don’t have to pay taxes.
  • For income between Rs.2.5 lakh to Rs.5 lakh, the income tax rate is 5%.
  • For income between Rs.5 lakh to Rs.10 lakh, the income tax rate is 20%.
  • For income above Rs.10 lakh, the income tax rate is 30%.

In case of senior citizens (age between 60 and 80), they don’t have to pay taxes for earnings up to Rs.3 lakh. The rate of tax remains the same for other slabs.

How to calculate income tax for the assessment year 2020-21?

In order to calculate income tax as per the current regime, individuals have mention income from all sources, such as –

  • Salary for working employees.
  • Income from business operations (for self-employed professionals).
  • Income from house rent, etc. One should also include the interest paid for a home loan as that can be exempted.
  • Income from other sources, capital gains, etc.

Now, the total tax levied on income calculated for the assessment year 2020-21 is calculated as per the rates mentioned above using an income tax calculator. Further, individuals can calculate the tax payable according to the new regime as well as the old regime. However, the reduced rates of new tax regime may not allow all tax exemptions on home loan repayment.

Tax exemptions on interest paid for home loans under the old regime

Taxpayers that wishes to avail tax exemption on the repayment of home loans need to file taxes as per the old regime. One can use a home loan tax benefit calculator to understand how these calculations function.

  • Section 80C – Individuals can avail tax saving on home loan principal amount of up to Rs.1.5 lakh. They can avail home loan tax benefits for under-construction property and save more by availing benefits on stamp duty, registration fee, etc.
  • Section 24B – Even the new tax regime abides by this exemption rule. Individuals can claim exemptions on the housing loan interest paid as per the act.
  • Section 80EE – It is applicable for first-time homebuyers. They can avail additional tax exemption of up to Rs.50,000 as per the Act.

Further, knowing about these home loan tax exemption and benefits will help individuals in calculating the Income-tax for the assessment year 2020-21 with accuracy. Availing housing loan and repaying them also accrues tax exemption as per the Income-tax Act and hence homebuyers have preferred to avail such finances.

Subsequently, individuals who get well-versed with the above aspects of Income Tax and exemptions on housing loans will be able to calculate the tax payable with accuracy using an income tax calculator. Using such a tool helps taxpayers understand the complicated calculations conveniently.

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