New Tax Regime vs Old Regime: With the start of the new financial year, many taxpayers are reviewing their options for tax planning.
One common confusion is whether to continue with the Old Tax Regime or switch to the New Tax Regime.
While the New Regime offers lower tax rates, it generally doesn’t allow most deductions, including home loan benefits.
So, is there a way to still claim tax relief on home loan interest under the new system? The answer is yes, but only if certain rules are followed.
New Tax Regime Offers a Big Advantage
One major advantage of the New Tax Regime (NTR) is that income up to ₹12 lakh can be effectively made tax-free, while in the Old Regime, this limit is around ₹10 lakh even after applying all deductions.
On top of this, a new indirect way to claim tax exemption on home loan interest is now available under NTR — but it comes with a condition.
Claiming Home Loan Interest in the New Tax Regime
Under the NTR launched in 2020, the government simplified tax slabs but removed most deductions.
So, you can’t directly claim deductions under Section 24(b) for home loan interest — unless the house is a rented (Let-Out) Property.
This is the key condition:
Self-Occupied Property → No tax exemption on home loan interest
Let-Out Property (rented) → Interest can be adjusted as a loss under “Income from House Property”
How This Works – An Example:
Home Loan Interest Paid: ₹3,00,000
Rental Income Received: ₹1,00,000
Net Loss: ₹2,00,000 → This can be set off under the new regime.
So, even though there’s no direct deduction, the loss due to interest on a rented property can be adjusted against your total income, giving you the same benefit as a deduction.
Important Note: The maximum allowed set-off is ₹2 lakh per year, even if your actual interest is more (e.g., ₹5 lakh).
New vs Old Tax Regime: Quick Comparison
| Particular | Old Regime | New Regime |
|---|---|---|
| Standard Deduction (Salary) | ₹50,000 | ₹75,000 (from 2023) |
| Section 80C (Principal Repay) | Available | Not available |
| Section 24(b) (Interest) | Up to ₹2 lakh | Not available (with one exception) |
| Section 80EE/80EEA | Extra deduction possible | Not applicable |
Tips to Claim the Benefit:
Make sure the house is rented out (Let-Out status).
Keep records of rental income and interest payments.
Set off the loss of up to ₹2 lakh under “Income from House Property” in your return.
