Home Loan Interest in New Tax Regime: Are you planning your tax savings under the New Tax Regime this financial year? Here’s a surprising update that many taxpayers overlook: you can still claim a home loan interest benefit of up to ₹2 lakh — even under the New Regime. But there’s a catch! This benefit is not straightforward like in the Old Tax Regime. To claim this tax relief, you need to follow a specific rule related to your property’s usage. Let’s break it down for you.
Home Loan Tax Benefits in New Regime
| Point | Details |
|---|---|
| Direct Interest Exemption | Not allowed on self-occupied property |
| Allowed on Let-Out Property | Yes, via ‘loss from house property’ |
| Max Loss Set-Off Allowed | ₹2 lakh per year |
| Other Benefits in New Regime | Standard deduction, NPS employer contribution |
| Expert Advice Recommended | Always consult your CA or tax planner before switching |
Is Home Loan Interest Deduction Allowed in the New Tax Regime?
Unlike the Old Tax Regime, where home loan interest on self-occupied property is directly deductible under Section 24(b), the New Tax Regime does not offer this direct exemption. However, there’s a backdoor benefit — if your property is rented out (also called “let-out”), the interest paid on the loan can still reduce your taxable income by up to ₹2 lakh per year. That’s a smart way to legally save on taxes.
What Is the Rule for Claiming Home Loan Interest in the New Regime?
Here’s how it works: if you have rented out your home, the difference between rental income and interest paid on the home loan is treated as a loss from house property. This loss (up to ₹2 lakh annually) can be set off against your other income, such as salary or business income. But if your house is self-occupied, this benefit is not available at all in the New Regime.
Old vs New Tax Regime: What You Should Know Before Switching
Many taxpayers get confused while choosing between the Old and New Tax Regime. The Old Regime allows deductions under Section 80C, 24(b), and others, while the New Regime offers lower tax slabs with limited deductions. But the standard deduction of ₹50,000 (increased to ₹75,000 for salaried) and employer NPS contribution still apply under the New system. The home loan interest benefit via let-out property is one hidden gem of the New Regime.
Example: How You Can Save ₹2 Lakh in Taxes
Let’s say you pay ₹3 lakh in annual home loan interest, and your rental income is ₹1 lakh. The net loss from house property becomes ₹2 lakh. Under the New Regime, you can adjust this ₹2 lakh loss with your other income, reducing your total taxable amount. This method is fully legal under the Income Tax Act, as long as your property is let-out.
FAQs – Home Loan Interest in New Tax Regime
Yes, but only if the property is let-out (rented), not self-occupied.
You can set-off up to ₹2 lakh of loss from house property per year.
You cannot claim interest benefit under the New Tax Regime.
Only after completion and if rented out, this rule can apply.
Compare total deductions in the old vs new regime; seek professional advice.
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