Home / Money / Personal Finance /  New income tax slabs, a good news for home loan EMIs?

The new income tax slabs announced in the Budget 2023, are seen to give more money into the hands of salaried individuals which is likely to increase the demand for home buyers. Also, increasing the allocation in the PM Awas Yojana (PMAY) by 66% is another positive factor to drive home purchases. That said, these are likely to ease pressures on availing home loans and paying its EMIs.

In her budget speech on Wednesday, Finance Minister Nirmala Sitharaman increased the outlay for PMAY by 66% to 79,000 crore.

While the revised new income tax regime was the showstopper for this budget. FM proposed to make the exemption limit to 7 lakh under the new tax regime. Earlier, the exemption limit was 5 lakh income in both the old and new regimes.

Further, she proposed changing the tax structure in the new regime by reducing the number of slabs to five and increasing the tax exemption limit to 3 lakh.

Under the revised new income tax slab, no tax is levied on a salary of 3 lakh, while a 5% tax rate will be levied on a salary from 3 lakh to 6 lakh; a 10% rate on 6 lakh to 9 lakh; 15% rate on 9 lakh to 12 lakh; 20% rate on 12 lakh to 15 lakh; and 30% rate on above 15 lakh salary.

Additionally, the FM has proposed to reduce the surcharge rate from 37% to 25% on the highest tax rate in the country of 42.74% to a maximum rate would be 39%.

How does it benefit home buyers?

According to Shrikant Shrivastava, Chief Risk Officer, IMGC (India Mortgage Guarantee Corporation), the increase in PMAY funding to 79,000 crores is a positive step toward expanding the economic benefits of affordable housing initiatives to more homebuyers. PMAY had already been a big success, therefore this is a wonderful move to encourage the real estate industry generally, which has a large cascading effect on other areas of the economy. The second significant announcement is an increase in the urban infrastructure budget, which will have a long-term impact on economic growth in general and the real estate industry in particular.

IMGC CRO also pointed out that the personal income-tax changes appear to favour the new tax regime, which would simplify the existing complicated tax regime. Another significant component of the personal tax slab adjustment is that it has been most rewarded in the slab in which the bulk of taxpayers fall.

He said, "We know that just about 6 crore people file income tax returns, of this ~70% have incomes of upto 5 lakhs, while another ~15% have incomes of 5-10 lakhs. The upto 7 lakhs exemption limit will benefit a significant number of existing taxpayers while also providing extra disposable income for a home purchase."

Meanwhile, Dr. Samantak Das, Chief Economist, and Head of Research and REIS, India, JLL, said, "The 2023 Budget, in a pre-election year, sought to build on the roadmap laid down by previous budgets, focusing on inclusive development, fostering growth and job creation while keeping the macro-economy in a stable yet growth-oriented mode. It has given more money into the hands of individuals and households which would, to a large extent, ease out the increasing pressure on account of home loan EMIs and rising home prices."

Das added, "The increase in allocation for PMAY by a significant 66% would help continue capital flow under CLSS and other related schemes. Addressing the need for creating sustainable cities of tomorrow through urban planning, ease of land availability, and promoting TOD schemes will be key towards sustainable development moving forward. Focus on overall infrastructure development and on Tier 2 and 3 cities will be key to overall economic development. The Budget is a balanced one for the economy while missing out on key real estate sector demands."


Disclaimer: The views and recommendations made above are those of individual analysts or companies, and not of Mint.

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