Home loan Interest deduction under the New Tax Regime is on ICAI’s Budget 2025.
Most salaried individuals purchase their homes through loans . the interest paid on these loans is generally higher than the rental income , resulting in a net loss from house property . Not allowing interest duduction for self occupied property has adversly affected salaried persons who have borrowed money to acquire a house , ICAI says .Home loan Interest deduction under the New tax Regime has become the default regime for filling taxes .
While the new tax regime has become the default regime for filling taxes , many salaried taxpayers are still relying on the old regime . the reasons ?
The new regime has removed several deductions that they can claim to reduce their total tax outgo.
One such deduction that is stopping many taxpayers from switching to the new tax regime is related to home loan interest.
A salaried employee opting for the old regime can claim a deduction of home loan interest up to ₹2 lakh for self-occupied property. However, this deduction is not allowed under the new tax regime.
The new tax regime provides some concessions in the case of let-out property. For instance, there is no restriction on home loan interest deduction from the taxable rental income under section 24 of the Income-tax Act. However, interest is generally higher than rental income, which results in a loss to the property owner. But this loss cannot be set off against income from any other head nor can It be carried forward under the new tax regime .
: The ICAI said that not allowing interest deduction for self-occupied property has adversely affected salaried persons who have borrowed money to acquire a house.
“Also, for let-out property, even though there is no restriction on interest deduction u/s 24, loss under the head ‘income from house property’ cannot be set-off against income under any other head; nor can it be carried forward to the next year for set-off against income, if any, from house property,” it added.
What ICAI recommends
ICAI has submitted three recommendations regarding the taxation of income from house property under the new tax regime.
First, the ICAI has recommended the government to permit interest deduction up to ₹2 lakh under the new tax regime.
Second, the ICAI has said that set-off of loss from house property against income under other heads should also be allowed.
Third, in case there is no income under any other head, then the loss should be allowed to be carried forward for set-off against income from house property for eight subsequent assessment years, the ICAI said.
Homebuyers are required to withhold 1% of the purchase value as Tax Deducted at Source (TDS) when the cost of the property is ₹50 lakh or more. The process of depositing the TDS is simple and convenient when the seller is a resident Indian. However, the rules get complicated when the seller is an NRI.
