The Budget 2025 brings fresh updates on home loan exemption under the new tax regime. For many taxpayers, housing loans are a major part of financial planning. Understanding how the new regime treats home loan exemptions can help you make better tax choices. The home loan exemption and exemption for housing loan interest rules have changed in significant ways.
This article will explore all aspects of home loan tax benefits in both old and new tax regimes after Budget 2025.
Old or new regime, which has more benefits?
The financial year 2025-26 raises a common question – should you stay with the old tax regime or switch to the new one? Each has different advantages for home loan borrowers. The old regime offers more deductions but has higher tax rates. The new regime has lower rates but fewer exemptions. Your personal situation, especially your home loan status, matters greatly in this decision.
Check your eligibility for a Bajaj Finserv Home Loan to benefit from competitive interest rates and favourable terms. You may already be eligible, find out by entering your mobile number and OTP.
If there is no deduction in the new regime, then how to benefit?
Many believe the new tax regime removes all deductions. This is not fully true. While most deductions are gone, there are still ways to benefit. The new regime has lower tax rates that might offset some lost deductions. For home loan holders, understanding these nuances is vital. Some indirect benefits exist even without direct exemptions. The home loan exemption strategy differs in the new system but can still be advantageous in certain cases.
Income tax free up to Rs. 12 lakh
A major advantage of the new tax regime is tax-free income up to Rs. 12 lakh when combined with the standard deduction of Rs. 75,000. This makes it attractive for many taxpayers. In the old regime, even with all deductions, only up to Rs. 10 lakh can be made tax-free. This Rs. 2 lakh difference makes the new regime worth considering for many, including home loan borrowers looking at home loan exemption benefits.
Deduction on home loan interest too? How?
Can you get exemption for housing loan interest in the new regime? Yes, but not directly. The home loan exemption works differently now. Unlike the old regime where Section 24(b) offers direct deduction on self-occupied property interest, the new regime follows a special rule. Understanding this rule can help maximise your tax benefits even under the new system.
| Property Type | Interest Deduction (New Regime) | Set-Off Against Other Income? |
| Self-occupied | Not allowed | Not applicable |
| Let-out (rented) | Full interest allowed | No (only against house property income) |
Optimise your tax planning under the new regime while enjoying competitive interest rates with Bajaj Finserv. Check your loan offers today. You may already be eligible, find out by entering your mobile number and OTP.
Main exemptions in old vs new regime
Before making your choice, understand which exemptions remain in each regime:
Standard deduction and 80C
| Particular | Old regime | New regime |
| Standard Deduction | Rs. 50,000 (Salary) | Rs. 75,000 (Salary) |
| Section 80C (Principal Repayment) | Available up to Rs. 1.5 lakh | Not available |
The higher standard deduction in the new regime partially compensates for some lost benefits. However, the loss of 80C deduction affects home loan principal repayment benefits significantly.
Interest exemption 24(b) and 80EE/EEA
| Particular | Old regime | New regime |
| Section 24(b) (Interest) | Exemption up to Rs. 2 lakh (Self-Occupied Property) | Not available (with one exception) |
| Section 80EE/EEA (Extra Interest) | Separate exemption possible | Discontinued or merged |
These differences highlight how home loan exemption benefits vary between regimes. The exception in the new regime is crucial to understand.
How to benefit from home loan interest?
The truth about home loan exemption in the new tax regime: There is no direct deduction under Section 24(b) for self-occupied property. However, if your property is rented out, you can still benefit.
The home loan exemption strategy differs based on property status:
| Property status | New tax regime benefit |
| Self-occupied house | No tax exemption on interest |
| House on rent (Let-out) | Loss of rental income can be set-off against other income |
If you have let out your home with a home loan, you can adjust the net loss due to interest while calculating "income from house property." This allows for an indirect home loan exemption benefit.
For example:
- Home loan interest paid = Rs. 3,00,000
- Annual rental income = Rs. 1,00,000
- Net loss (from house property) = Rs. 2,00,000
Only loss up to Rs. 2 lakh will be adjusted against other income in a year, even if your actual loss (due to interest) is more. This limitation applies to the home loan exemption through the loss set-off route.
Check your eligibility for a Bajaj Finserv Home Loan with interest rates starting at 7.45%* p.a You may already be eligible, find out by entering your mobile number and OTP.
Income tax benefits on home loans in the old income tax regime
The old regime provides more straightforward benefits for home loan borrowers.
Tax benefit on principal amount of home loan
Under the old tax system, the principal component of your home loan EMI qualifies for deduction under Section 80C. This deduction applies to self-occupied property with a maximum limit of Rs. 1.5 lakh. If you own multiple properties with loans, you can claim exemptions on all, but the total cannot exceed Rs. 1.5 lakh. Additional expenses like stamp duty and registration charges also qualify under this section, making it valuable for recent home buyers.
Tax benefit on home loan interest rate
Section 24 of the Income Tax Act allows deduction on interest paid for self-occupied property up to Rs. 2 lakh per financial year. This home loan exemption applies even to a second home that is vacant or used by family members. Remember that the combined deduction for multiple properties cannot exceed Rs. 2 lakh.
To make the most of this benefit, check your loan offers from Bajaj Finserv to optimise your loan terms. You may already be eligible, find out by entering your mobile number and OTP.
More deduction on home loan tax interest rate for affordable housing
For affordable housing purchases, additional benefits apply beyond the standard Rs. 2 lakh interest deduction. You can claim an extra deduction of Rs. 1.5 lakh per year if:
- The loan is from an approved financial institution
- The property value does not exceed Rs. 45 lakh
- You do not own any other residential property when the loan is approved
Income tax benefits on home loans in the new income tax regime
In the new regime, exemptions on interest paid for self-occupied property are no longer available under Section 24. Additionally, Section 80C deductions are not allowed, eliminating exemptions on the principal amount. However, you can still claim exemption on interest paid for a home loan on a rental property through the loss set-off mechanism described earlier.
Should you opt for the old or new regime?
Your decision should consider multiple factors:
- Your total income level
- Current EMI repayments
- Other deductions you qualify for
- Long-term financial goals
For most home loan borrowers, especially those with significant interest payments, the old regime typically offers greater advantages. It provides more flexibility and options for deductions related to home loans. Before deciding, analyse your specific numbers carefully and consider seeking advice from a financial expert. Check your eligibility for a Bajaj Finserv Home Loan to make an informed decision. You may already be eligible, find out by entering your mobile number and OTP.
Conclusion
The Budget 2025 has brought significant changes to home loan exemption rules under the new tax regime. While direct deductions on interest for self-occupied properties are not available, indirect benefits exist for rented properties. The old regime continues to offer more straightforward home loan tax benefits through Sections 80C and 24(b).
Whether you opt for the old or new tax regime, understanding the home loan exemption rules is crucial for maximising your tax benefits. Consider your personal financial situation carefully before making this important decision. Check your loan offers from Bajaj Finserv today to start your journey toward homeownership with optimal tax planning. You may already be eligible, find out by entering your mobile number and OTP.
*Terms and conditions apply
Helpful resources and tips for home loan borrowers
|
|
Popular calculators for your financial calculations
Apply for a home loan in different cities
