Tax exemption: You will get tax exemption on home loan interest in the new tax regime! Follow this rule

New Tax Regime vs Old Regime: The government started the New Tax Regime (NTR) in 2020. In this, the tax slab was simplified, but in return many deductions and exemptions were removed. The big question was whether tax exemption will be available on interest on housing loan in this new system or not? The answer has been found.

New Tax Regime vs Old Regime: It is a new financial year and if you want to do tax planning in a new way, then get ready. It is time for investment declaration. But, are you confused whether to stay in the old tax regime or shift to the new tax regime. Because, in the new tax regime, not all tax deductions can be claimed. In such a situation, will you get the benefit in the new tax regime or the old one? If seen, the benefit is in the new tax regime. Because, income up to Rs 12 lakh is completely tax free. At the same time, even after applying all the deductions in the old, only up to Rs 10 lakh can be made tax free. At the same time, another great benefit has been added in the New Tax Regime. You can claim tax exemption on the interest of your home loan. No no, this exemption cannot be claimed directly. There is a rule for this. You can claim tax exemption only if you follow those rules. Let’s understand the whole math.

Follow the rule to get discount on home loan interest

The government started the New Tax Regime (NTR) in 2020. In this, the tax slab was made easier, but in return many deductions and exemptions were removed. The big question was whether tax exemption will be available on interest on home loan in this new system or not? The answer has been found. Tax exemption can be claimed on home loan interest. But, for that, the rule of let out property has to be followed. It is very important to understand the new tax rules and its exceptions. Only then will you get the benefit.

New Tax Regime vs Old Regime: Difference in exemptions

Particular	Old Regime	New Regime
Standard Deduction	₹50,000 (salary)	Now ₹75,000 (updated in 2023)
Section 80C (Principal Repay)	It is available	not get
Section 24(b) (Interests)	Discount up to ₹2 lakh	not found (with one exception)
Section 80EE/EEA (Extra Int.)	Separate discounts possible	Closed or merged

 

Will there be a discount on home loan interest in the new tax regime?

Straight answer: No- You do not get interest deduction under Section 24(b). In the New Tax Regime, only standard deduction, NPS employer contribution, and some selected allowances are valid. But there is an exception- If you have given your house on rent, then you can get benefit. Understand it like this, if the house on which you have taken a home loan is not Self-Occupied but Let-Out Property (rented), then you can adjust the net loss in the calculation of House Property Income, which includes the interest component.

Understand with an example

Interest paid = ₹3,00,000
Rental Income = ₹1,00,000
Net Loss = ₹2,00,000 → You can adjust this loss in NTR.
Meaning, deduction of home loan interest may not be possible directly, but can be availed indirectly through “set off”.

What is the meaning of this?

If the house is self-occupied → no exemption
If the house is on rent (Let-Out) → loss can be set-off in rental income
If your expenditure is more than ₹2 lakh, then it will not be adjusted with your other income head (limit). The government has imposed a limit. You can do such “set-off” only up to ₹2 lakh in a year, even if your interest expenditure is ₹5 lakh.

Disclaimer:

In the New Tax Regime, there is generally no direct tax exemption on home loan interest. But if the house is on rent, then you can avail the benefit of set-off in net income by deducting the expenses and interest on it. This rule is of the Income Tax Department. In case of any kind of confusion, please consult your financial advisor.

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