How to pay zero tax on rental income of Rs 10 lakh: New income tax regime
Tax-free income limit under new tax regime: Individuals in India now have more freedom to maximize their tax savings thanks to the new tax system. The fact that salaried individuals with incomes up to Rs 7.5 lakh can claim deductions to enjoy zero tax liability is one significant aspect of this regime.
Additionally, this tax-free income limit is increased to Rs 10 lakh for individuals who only earn rent.
In her Budget 2023 speech, Finance Minister Nirmala Sitharaman made changes to the new income tax system to make it more appealing to taxpayers without investments or exemptions. As a result of the new tax brackets that were announced in the budget, individuals with incomes of up to Rs 7.5 lakh will not be subject to any taxation at all.
Additionally, this limit can be increased to Rs 10 lakh for those who receive rental income. Here we attempt to comprehend the arrangements of the new tax system and how people can limit their tax liability actually by utilizing it —
New Income tax system: How salaried taxpayers can avoid paying income tax on income up to Rs. 7.5 lakh Under the new tax regime announced in the Budget for FY23, salaried taxpayers can avoid paying income tax on income up to Rs. 7.5 lakh by following these steps:
If a person chooses the new income tax system and earns up to Rs 7.5, they can take advantage of the salaried taxpayer's standard deduction of Rs 50,000, bringing their taxable income down to Rs 7 lakh.
Individuals will be required to pay 5% income tax up to Rs 15,000 for the next Rs 3 lakh in the income bracket between Rs 3 lakh and Rs 6 lakh. The Rs 3 lakh slab has no tax.
They must then pay 10% tax, up to Rs 10,000, on the remaining Rs 1 lakh in income between Rs 6 lakh and Rs 7 lakh.
Their total tax liability amounts to Rs 25,000 when you take into account both the Rs 15,000 and the Rs 10,000.
However, salaried workers are eligible for a rebate of Rs 25,000 under Section 87A, which reduces their tax burden to zero.
New tax system for income: Instructions to pay no tax on rental pay upto Rs 10 lakh
According to burden specialists, assuming that an individual has just rental pay, and no other pay and derivation, then they can get rental pay upto Rs 10 lakh without setting off any assessment obligation.
This is possible because, with the exception of deductions for specific expenses, rental income from house property is taxable. These costs include paying the house's property tax and the interest on the mortgage. Additionally, the tax system permits a standard deduction of 30% of the property's net annual value for upkeep and repairs.
If we think about a 30% standard derivation on the off chance that the landowner gets a sum of Rs 10 lakh as lease, then the standard allowance sum comes upto Rs 3 lakhs.
What's more, when this derivation for explicit uses is deducted from the Rs 10 lakh gathered as lease, it comes down to Rs 7 lakh — which is tax-exempt for non-salaried citizens under the New Expense System.
Therefore, the landlord, whose sole source of income is rent, will not be required to pay any taxes in this instance.
Aside from this, it's always a good idea to look at your options, compare the tax savings from the two tax systems, and think about investing in tax-saving instruments to lower your tax bill even more. You can effectively save a lot of money on taxes by using these methods.