New Tax Regime: What it Means for Homeowners
Thank you for reading this post, don't forget to subscribe!A key tax break for nearly 60 lakh Indian taxpayers is gone under the new income tax regime. This change, which Chartered Accountant Kanan Bahl highlighted on LinkedIn, means a potential loss of up to ₹60,000 in annual tax savings for many, especially those in the 30% tax bracket.
The old tax regime offered significant deductions for homeowners, including:
- A deduction of up to ₹2 lakh on interest paid for self-occupied home loans. This was a major benefit that helped many taxpayers reduce their taxable income.
- Deductions under Section 80C for principal repayment and stamp duty.
- The ability to offset a “loss under house property” against other income.
In contrast, the new regime, which is now the default option, takes a different approach. While it offers lower tax slabs, it removes the deduction for home loan interest on self-occupied properties. It also denies all Section 80C deductions. The only deductions that remain for homeowners are for municipal taxes and a standard 30% deduction on Net Annual Value (NAV).
For those with multiple properties, the rules can get even more complicated. If you own two or more houses, any additional property is considered “deemed to be let out” and is taxed based on a “notional rent,” even if it is not rented out.
As Bahl points out, with frequent changes in tax laws, tax planning should not be your sole investment strategy. The shift in tax policy for home loans is a clear example, as the ₹2 lakh cap on interest deduction was only introduced in 2016, replacing an era of unlimited set-off.
This change prompts a critical question for taxpayers: is the simplicity of the new regime worth sacrificing the long-standing deductions of the old one? For many homeowners, the answer may be no.
