Should home loan be the only factor to see while choosing between old and new income tax regime? Under the new tax regime, the basic exemption limit was hiked to Rs 12.75 lakh for salaried individuals. This could potentially make traditional tax planning less relevant for many, since several deductions are no longer available. For those looking to opt for a home loan interest deduction, the old regime may still be better, but only if other deductions are also high
Budget 2025 significantly altered the tax landscape for salaried individuals. With the government raising the basic exemption limit to Rs.12 lakh under the new tax regime, a large section of taxpayers may now find themselves with little or no tax liability without having to claim a single deduction. For many, this effectively makes traditional tax planning redundant.#sr_widget.onDemand p, #stock_pro.onDemand p{font-size: 14px;line-height: 1.28;} .onDemand .live_stock{left:17px;padding:1px 3px 1px 5px;font-size:12px;font-weight:600;line-height:18px;top:9px} #sr_widget.onDemand .sr_desc{margin:0 auto 0;} #sr_widget.onDemand .sr_desc{color: #024d99;margin-top:10px;} #sr_widget.onDemand .crypto .live_stock .lb-icon{8px 6px 5px 3px !important} #sr_widget.crypto.onDemand a.text{border-bottom:1px solid #ccc;padding-bottom:5px;display:block;width:100%} #sr_widget.onDemand .sr_desc .text p, #stock_pro.onDemand .sr_desc .text p{font-size:12px;font-weight:400;}
#Operation Sindoor
India responds to Pak's ceasefire violation; All that happened
India-Pakistan ceasefire reactions: Who said what
Punjab's hopes for normalcy dimmed by fresh violations
The new regime is designed to offer simplicity and ease of compliance. But these come at a price. Several deductions that were core to tax-saving strategies in the old regime are no longer available. These include house rent allowance (HRA), leave travel allowance (LTA), tax-saving investments under Section 80C, such as the Public Provident Fund (PPF) and equity-linked savings schemes (ELSS), and health insurance premiums under Section 80D.
Among the most significant losses for many is the deduction for home loan interest. In the old regime, under Section 24(b), taxpayers could claim a deduction of up to Rs.2 lakh per year on interest paid towards a home loan for a self-occupied property. Additionally, the principal repayment on a home loan qualified for deduction under Section 80C, alongside investments like ELSS and PPF. All these benefits often made the old regime more appealing for home loan borrowers.
This dual benefit, on both interest and principal repayment, has long been a key reason for homebuyers to prefer the old tax regime. Does it still make sense to stick to it solely because you are repaying a home loan?
Does the old tax regime suit you better?
a:hover{text-decoration:none;} .liveEventMain_widget{margin-top:15px;padding-top:24px;border-top:2px solid #000;position:relative;font-family:Montserrat;} .liveEvent_slider{position:relative;overflow:hidden;} .liveEvent_slider ul{white-space:nowrap;list-style:none;margin-top:12px;} .liveEvent_slider ul.sliderContainer{margin-bottom:30px;} .liveEvent_slider ul li{white-space:normal;width:282px;vertical-align:top;display:inline-block;margin-right:12px;border-radius:12px;box-shadow: 0px 4px 12px 0px #2407461F;background-color:#fff;overflow: hidden;} .images_wrap{position:relative;} .images_wrap .cover_img{object-fit:cover;object-position:center;border-top-left-radius:4px;border-top-right-radius:4px;} .images_wrap .author_img{position:absolute;left:10px;top:13px;border-radius:10px;} .images_wrap::before{background-image: linear-gradient(180deg, rgba(11, 11, 46, 0) 20.31%, rgba(11, 11, 46, .6) 61.46%, #0b0b2e);content: "";height: 100%;left: 0;position: absolute;right: 0;width: 100%;} .liveEventMain_widget .details{padding:12px;} .liveEventMain_widget .category{font-size:12px;line-height:14px;font-weight:700;color:#6a11b0;margin-bottom:8px;} .liveEventMain_widget .course_name{font-size:16px;line-height:20px;font-family:Faustina;-webkit-line-clamp:2;overflow:hidden;height:40px;display:-webkit-box;-webkit-box-orient:vertical;font-weight:600;color:#000;} .liveEventMain_widget .details .author_name{font-size:13px;line-height:16px;color:#333;font-weight:400;margin-top:4px;-webkit-line-clamp:2;overflow:hidden;height:32px;display:-webkit-box;-webkit-box-orient:vertical;} .liveEventMain_widget .view{border: 1.5px solid #D51131; display: block; padding: 8px 0; text-align: center; border-radius: 4px; font-size: 14px; line-height: 16px; color: #D51131; margin-top: 12px; width: 100%; font-family: Montserrat; font-weight: 600; cursor: pointer;} .liveEventMain_widget .view span{display: inline-block; width: 6px; height: 6px; border-top: 1.5px solid #ed193b; border-left: 1.5px solid #ed193b; transform: rotate(90deg); position: relative; left: 5px; top: -2px;} .liveEventMain_widget .view span::after{content: ''; display: inline-block; width: 11px; border-top: 1.5px solid #ed193b; transform: rotate(45deg); position: absolute; top: 3px; left: -2px;} .liveEventMain_widget .arrow_btn{width: 26px; height: 25px; position: absolute; z-index: 11; background-size: 312px; cursor: pointer;} .liveEventMain_widget .nextprev-btn{display:inline-block;width: 100%; position: absolute; top: 59%;} .liveEventMain_widget .prev-btn{background-position: -212px -2px;left: -12px;} .liveEventMain_widget .next-btn{background-position: -241px -2px; right: -3px;left:unset;} .liveEventMain_widget .arrow_btn.disable{opacity:0.5;} .liveEventMain_widget .ts-dots{display:inline-block;position:absolute;top:34px;right:10px;} .liveEventMain_widget .ts-dots ul{display:inline-block;} .liveEventMain_widget .ts-dots li{width:7px;height:7px;border-radius:50%;background-color:#cdcdcd;margin:0 2px;display:inline-block;} .liveEventMain_widget .ts-dots li span{display:none;} .liveEventMain_widget .ts-dots li.active{background-color:#ed193b;} .liveEventMain_widget .topContain { display: flex; align-items: center; gap: 6px; } .liveEventMain_widget .topContain .imgBox { max-width: 40px; } .liveEventMain_widget .topContain .logoTitle { font-family: "Montserrat", "Verdana"; font-weight: 700; font-size: 20px; line-height: 100%; } .liveEventMain_widget .topContain .logoSubTitle{ position: relative; font-size: 18px; font-weight: 500; line-height: 1.2; color: #747474; margin-left: 24px; } .liveEventMain_widget .topContain .logoSubTitle:before{ content:''; position: absolute; left: -13px; top: 0; width: 1px; height: 100%; background-color: #838383; } .liveEventMain_widget .liveEvent_slider .liveEventCardContainer{ } .liveEventMain_widget .liveEvent_slider .liveEventCardContainer .liveEventCard{ display: flex; } .liveEventMain_widget .liveEvent_slider .liveEventCardContainer .liveEventCoverImg{ }
Live Events
If your deductions match or exceed the threshold for your income level, the old tax regime will yield higher savings.Other deductions count too
The answer is not a simple yes or no. It depends on your income level and the total deductions you are eligible for. “The more deductions you have, the more it will make sense for you to stay in the old tax regime,” says Sudhir Kaushik, Founder, TaxSpanner. com. Let’s say you are paying a home loan interest of Rs. 3 lakh a year. The maximum benefit you can avail of is only Rs.2 lakh, even if the interest is significantly higher than that. Also, if Section 80C is underutilised (no PF, insurance, or ELSS), the old regime’s appeal weakens, as the Rs.1.5 lakh principal deduction may not be fully claimed, especially at the beginning of the home loan tenure. Combining interest deduction with HRA, PPF, or NPS contributions can tilt the scale.
“This is where the concept of a breakeven point comes in,” says Mumbai-based Chartered Accountant Nitesh Buddhadev, Founder of Nimit Consultancy. It helps determine which tax regime is more beneficial regardless of your home loan interest. All you need to do is calculate this point based on your income level.
Broadly, the less you earn, the greater percentage of your income should comprise deductions for the old tax regime to make sense. For example, if your income is Rs.14 lakh per annum, your deductions should comprise close to 41% of your salary; 39% if your income is Rs.17 lakh per annum; and 38% if it is Rs.20 lakh per annum
Benefit in new tax regime too
Home loan borrowers can benefit under the new tax regime as well. “Many borrowers are not aware that even under the new regime, they can avail of interest benefits under certain conditions,” says Buddhadev.As per Section 24(b), if you own a let-out property, you are allowed to claim a deduction on the interest paid on the home loan. However, this benefit is not available for self-occupied homes under the new tax regime. Consider the case of Sandeep Adepu, who wanted to understand how home loan deduction would work under the new regime.
Adepu earns Rs 1 lakh annually in rent but pays Rs. 5 lakh in interest. With Rs.1 lakh of rental income and Rs.5 lakh of interest outgo, he reports a property loss of Rs.4 lakh. However, the maximum interest he can claim under new regime is to the extent of net taxable rent received this year, i.e., Rs. 1 lakh. If your rent is lower than the interest paid, the difference can also be added to the property’s cost of acquisition at the time of sale—reducing capital gains tax.
For instance, Adepu can add the Rs. 4 lakh excess interest to his acquisition cost when he sells the house. On the other hand, if his interest payment was Rs.50,000, the remaining Rs.50,000 from the Rs.1 lakh rent would become taxable and added to his income and taxed at the applicable slab rate. While the new tax regime allows interest deductions, it does not permit principal repayment claims under Section 80C, unlike the old regime.
Ultimately, choosing between the old and new tax regimes depends on your income and deductions. The old regime offers home loan benefits, but the new one may yield better savings for many.
#sr_widget.onDemand p, #stock_pro.onDemand p{font-size: 14px;line-height: 1.28;} .onDemand .live_stock{left:17px;padding:1px 3px 1px 5px;font-size:12px;font-weight:600;line-height:18px;top:9px} #sr_widget.onDemand .sr_desc{margin:0 auto 0;} #sr_widget.onDemand .sr_desc{color: #024d99;margin-top:10px;} #sr_widget.onDemand .crypto .live_stock .lb-icon{8px 6px 5px 3px !important} #sr_widget.crypto.onDemand a.text{border-bottom:1px solid #ccc;padding-bottom:5px;display:block;width:100%} #sr_widget.onDemand .sr_desc .text p, #stock_pro.onDemand .sr_desc .text p{font-size:12px;font-weight:400;}
This story originally appeared on: India Times - Author:Faqs of Insurances
