Owning a home continues to be one of the biggest financial milestones for Indian families. A home loan not only helps you achieve this dream but also brings several tax-saving opportunities. However, with the introduction of the new tax regime and the 2025 Budget updates, the way tax deductions work for home credit has changed significantly.
Understanding these changes is essential for every borrower to make informed financial decisions and optimise their tax savings while repaying a loan.
Why Home Loan Tax Benefits Matter
A home credit is more than just a financial product; it’s an investment in long-term stability. The government has traditionally encouraged homeownership by offering tax benefits on both principal and interest repayment. These benefits reduced taxable income, making housing more affordable for many.
However, the Budget 2025 has reshaped the structure of these deductions, especially for those opting for the new tax regime. Borrowers must now carefully evaluate which regime, old or new, suits them best, depending on their deductions and total income.
Key Tax Benefit Changes Under the New Regime (2025)
Recent updates have modified how home loan tax deductions work. Here’s a breakdown of what has changed:
No Deductions for Principal Repayment
- Deductions under Section 80C, which previously allowed up to ₹1.5 lakh on principal repayment, have been discontinued under the new regime.
- Expenses like stamp duty and registration fees are also no longer deductible.
- Additional deductions under Sections 80EE and 80EEA (available for first-time homebuyers) have also been eliminated.
Interest Deduction Limited
- Under Section 24(b), interest deduction is no longer applicable for self-occupied homes.
- For let-out properties, interest deductions are still available, but you can only offset them against rental income, not against salary or other income sources.
- Unused losses can no longer be carried forward to subsequent years.
No Set-off for House Property Loss
- Previously, homeowners could deduct home loan losses from other income sources, such as salary, for additional tax benefits.
- Under the new tax regime, this set-off is no longer available, reducing the overall tax advantage of owning multiple properties.
These revisions aim to simplify the tax structure and make filing easier, especially for taxpayers earning up to ₹12 lakh annually, who benefit from the higher basic exemption limit introduced in Budget 2025.
Tax Benefits Still Available in Certain Cases
While the new regime limits deductions, some benefits remain under the old tax regime. Borrowers who continue under the old system can still claim:
- Deductions on principal repayment under Section 80C.
- Deductions on interest payment under Section 24(b).
- Tax benefits on joint loans, where each co-borrower can claim deductions individually.
Hence, if you are repaying a credit, it’s worth evaluating both regimes to see where you can save more.
Choosing the Right Tax Regime for Your Home Loan
Deciding between the old and new regimes depends on your financial situation. If you have significant deductions, such as home loan interest, insurance premiums, and investment-linked savings, the old regime may still offer better tax savings.
However, if you prefer simplicity, have fewer deductions, and fall in the ₹12 lakh income range, the new tax regime might be more beneficial due to its higher exemption limit and reduced paperwork.
In either case, reviewing your credit structure, EMI, and interest component before filing taxes is a smart move. Using online tax and loan calculators can help you make a data-driven choice.
The Broader Impact on Borrowers
These changes encourage borrowers to focus on affordability and long-term planning rather than relying solely on tax incentives. Even though deductions have decreased under the new regime, the ease of filing, flexible repayment options, and improved access to housing finance continue to make home loans a popular choice.
Conclusion
While tax benefits for home loans have evolved under Budget 2025, they remain an important aspect of financial planning. Borrowers should weigh their income, repayment capacity, and the available deductions under each regime to make the most of their investment.
For those seeking a smooth borrowing experience, Bajaj Finserv offers a reliable solution with no collateral, transparent terms and conditions, quick approval, competitive interest rates, flexible tenures, and a user-friendly process. Whether you choose the old or new regime, understanding the impact of these tax changes will help you manage your loan smartly and efficiently.
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