Home Loan Tax Benefit in New Tax Regime 2025: You Can Still Claim Exemption by Following This Rule
The New Tax Regime (NTR), introduced by the government in 2020, brought a major shift in the way individuals plan their taxes. While it simplified tax slabs and lowered tax rates, it also took away many traditional deductions and exemptions, leaving many taxpayers confused — especially about home loan interest benefits.
So, can you still claim a tax exemption on your home loan interest if you choose the New Tax Regime? The answer is yes — but there’s a catch! Let's understand the full details.
New Tax Regime vs Old Tax Regime: What's the Key Difference?
In the Old Tax Regime, taxpayers enjoyed various deductions under sections like 80C, 24(b), and 80EE/80EEA, including deductions on home loan principal and interest payments.
In contrast, the New Tax Regime initially removed most deductions, offering only lower tax rates and a few select allowances.
Here’s a quick comparison:
| Particulars | Old Regime | New Regime (Updated) |
|---|---|---|
| Standard Deduction | ₹50,000 | ₹75,000 (2023 Update) |
| Section 80C (Principal Repayment) | Available | Not Available |
| Section 24(b) (Interest on Home Loan) | Up to ₹2 lakh | Not Available (with an exception) |
| Section 80EE/EEA (Additional Interest Benefit) | Available | Merged/Closed |
Clearly, the New Tax Regime simplifies tax filing but limits traditional deductions. However, there's an exception when it comes to home loan interest.
How Can You Claim Home Loan Interest Exemption in the New Tax Regime?
While you cannot directly claim a deduction under Section 24(b) for a self-occupied house, you can claim a benefit if your property is let out (rented).
Here’s how it works:
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If the house for which you have taken a loan is rented out (Let-Out Property), the interest paid on the home loan can be adjusted against the rental income.
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You can report a net loss up to ₹2 lakh under the head "Income from House Property" even under the New Tax Regime.
Example to Understand Better:
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Home Loan Interest Paid: ₹3,00,000
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Rental Income Received: ₹1,00,000
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Net Loss: ₹2,00,000 (₹3 lakh – ₹1 lakh)
You can set off this ₹2 lakh loss against your other taxable income, thus reducing your overall tax liability.
Important Rule: Even if your actual interest is higher (say ₹5 lakh), the set-off is limited to ₹2 lakh per year as per government norms.
Key Takeaways:
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Self-Occupied Home: No direct exemption for home loan interest in New Tax Regime.
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Rented (Let-Out) Property: You can claim the set-off of net loss up to ₹2 lakh.
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Limit on Set-Off: Only ₹2 lakh per financial year, irrespective of higher actual interest paid.
Why Consider New Tax Regime Despite Limited Deductions?
The updated New Tax Regime (2025) now offers:
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Full tax exemption up to ₹12 lakh taxable income (after standard deduction and rebate).
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Lower tax rates compared to the old regime.
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Simpler filing process with fewer documentary requirements.
Thus, if you have a let-out property, you can still smartly use the home loan interest benefit in the New Tax Regime without switching back to the old one.
Final Word
The New Tax Regime may appear restrictive at first glance, but with proper planning — especially if you have rental income — it can offer significant tax savings.
However, individual cases may vary. Therefore, it is advisable to consult a financial advisor or tax expert before making your final choice.
Disclaimer: This information is based on current income tax laws. Always seek professional advice for your specific financial situation.
