Home Loan Deduction in the New Tax Regime: What You Must Know Before Filing ITR

Rita Bisht
Jun 17
2 min read

With the Income Tax Return (ITR) filing season underway for FY 2024–25 (AY 2025–26), salaried individuals and property owners must re-evaluate their tax planning strategies - especially those servicing a home loan.

The central question remains: Do home loan deductions still apply if you opt for the new tax regime under Section 115BAC?

Let’s break it down.

The New Tax Regime (115BAC): Simpler, But Stricter

Introduced to simplify income tax filing, the new regime offers lower tax rates but removes most deductions and exemptions available under the old regime.

Here's what you lose under the new regime if you have a home loan:

❌ Section 80C (Principal repayment)
❌ Section 24(b) (Interest on home loan up to ₹2 lakh)
❌ Section 80EEA (Additional deduction of ₹1.5 lakh for affordable housing)

So, for self-occupied residential property, there is no tax relief on either the interest or the principal repayment.

What About Let-Out Property?

There’s a partial exception.

If your home loan is for a rented (let-out) property:

You can still claim a deduction on the interest paid on the loan against rental income.

But there’s a caveat:

Any loss from house property (i.e., interest > rent) cannot be adjusted against salary income under the new regime.
This loss can only be carried forward for 8 years to be set off against future rental income.

Should You Switch to the New Regime?

The choice depends on your:

Total income
Amount of eligible deductions (80C, 80D, HRA, home loan, etc.)
Whether the home is self-occupied or let-out
Whether you prioritize simplicity or maximum tax savings

In most cases, if you're paying a significant home loan EMI, the old regime offers greater tax benefits.

Actionable Insights for Taxpayers

Don’t assume your home loan will help under the new regime.
Use income tax calculators to compare both regimes before filing.
Submit deduction proofs to your employer if opting for the old regime — new CPC rules require them for processing.

Final Word

The new tax regime offers simplicity, but not necessarily savings — especially for those with home loans. The decision should not be based solely on lower slab rates but on net taxable income after all eligible deductions.

At Infosential LLP, we help you evaluate both options and file your returns efficiently. Connect with us to optimize your tax structure in line with your financial goals.