On February 1, 2022, Nirmala Sitharaman, India’s Finance Minister, presented the Union Budget, 2022 and established a new income tax bracket. Regular persons, elderly citizens, and HUF are now subject to a new tax system that allows them to pay taxes at reduced income tax slabs in India. Let’s look at the income tax slabs in India for 2022 under both the existing and new tax regimes.
What are the Income Tax Slabs in India?
Individual taxpayers will be required to pay income tax based on the system of tax slabs in India into which they fall. Individuals may fall into a different tax bracket depending on their income.
As a result, people with higher incomes will have to pay more tax. The system of tax slabs in India was implemented to keep the country’s tax system equitable. The tax slabs in India are subject to change with each budget release.
Key Highlights of New Tax Slabs in India in FY 2021-22
1. ULIPs are Taxable
To close the gap between ULIPS and mutual funds, the Finance Bill 2021-22 proposes taxing gains from ULIPS if the premium is higher than Rs. 2.5 lakh per year.
If you purchase any tax saving schemes in India after February 1, 2021, with the expectation of receiving tax benefits at maturity in comparison to mutual funds, this will be phased out beginning in the fiscal year 2021-22.
The maturity proceeds will be taxed in the same manner as mutual funds. Death benefits are still tax-free, regardless of the amount of the premium. This will decrease ULIP misspellings.
2. EPF Interest on contributions above Rs.2.5 lakh is taxable
According to the terms of the Finance Bill 2021, the interest on any contribution exceeding Rs. 2.5 lakh made by an EMPLOYEE to a recognised provident fund is taxable from April 1, 2021.
This comprises both the employee’s EPF and VPF contributions.
3. Section 80EEA Tax Benefit extended up to March 2022
The government proposed a new section 80EEA during the 2019 Union Budget to prolong the tax advantages of the interest deduction up to Rs 1,50,000 for housing loans taken for affordable housing from 1 April 2019 to 31 March 2020.
This has now been extended until March 31, 2022. The individual taxpayer should be a first-time home buyer and should not be eligible for the section 80EE deduction.
4. Pre-Filled Income Tax Forms contain Capital Gains
Previously, they used to include salary, one home property, other sources, and agricultural income up to Rs. 5,000 in the pre-filled income tax forms. However, from April 1, 2021, the information of long-term and short-term capital gains, dividend income, and interest income will be pre-filled in the Income Tax Return Forms.
5. In case of Bank failure, Rs.5 lakh Deposit Insurance is available immediately
Previously, even if banks were insured by Deposit Insurance, if the banks collapse, you are compelled to wait for the withdrawal, or there are certain withdrawal limits. However, there is no longer any such waiting.
If your bank is insured by Deposit Insurance and the bank fails or goes bankrupt, you will not have to wait for your money. You may withdraw it immediately, but only up to Rs.5 lakh.
6. No Change in Income Tax Slab Rates
Yes, the rates of tax slabs in India remain unchanged from last year. There is no change in the case of Mutual Funds.
7. No need to file Income Tax Return if someone is 75 years old or more
The filing of income taxes is now exempt for people aged 75 and over. However, keep in mind that this service is only offered to people with income, such as a pension or interest income.
Exemption from ITR filing does not imply exemption from taxation. The TDS will be deducted by the pension provider or the bank. As a result, older citizens are exempt from filing ITR. As a result, it is simply skipping the process rather than providing a tax benefit to elderly persons.
Tips To Save Income Tax in India
Here are some tips that can help you in saving taxes in India:
1. Contribute to the National Pension System
This deduction under Section 80CCD(1B) is only permitted for NPS contributions up to Rs 50,000. The NPS allows you to establish a retirement corpus by investing in equities and debt pension funds. You can withdraw it when you reach the age of 60.
2. Pay Health Insurance Premiums
Section 80D allows for a deduction of up to Rs 25,000 for health insurance premiums. This is in addition to the deductions indicated above. This ceiling has been raised to Rs 50,000 for older citizens. A person who contributes to tax saving schemes in India for himself and his senior citizen parents can claim a combined deduction of up to Rs 75,000 per year.
3. Get a deduction on your rent
If you get HRA, you may be able to claim a tax deduction for it. There is no top limit, although there are regulations that limit the maximum HRA deduction. If you do not receive HRA but pay rent, you can deduct up to Rs 60,000 per year under Section 80GG.
4. Get a deduction on the interest on your home loan
If you have a house loan, the interest paid on it is tax-deductible up to Rs 2 lakh per year under Section 24 of the Income Tax Act. There is no upper limit if you rent out your home. The total loss that can be claimed on the larger head of income from housing property, however, is limited to Rs 2 lakh.
5. Keep some money in your savings account
Individuals can certainly claim this as the simplest deduction under the Income Tax Act. Section 80TTA exempts interest on savings accounts up to Rs 10,000 per year. The ceiling for older folks is Rs 50,000 for combined FD and savings account interest under Section 80TTB.
6. Contribute to charity
You can deduct charitable contributions from your taxes. There is no top limit; however, several laws limit the number of tax deductions allowed for charitable gifts. The maximum for most donations to NGOs is 50% of the amount contributed plus up to 10% of your adjusted total income.
Wrapping It Up
Income tax laws might be difficult to understand. Individuals should be better able to grasp income tax slabs in India after reading this blog. They may now make educated judgments about whether to continue utilizing the Old or New Tax regimes.
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