NewsStocksNew Tax Regime Retains Home Loan Interest Deduction for Rented Properties Under Section 24(b)New Tax Regime Retains Home Loan Interest Deduction for Rented Properties Under Section 24(b)
The new tax regime retains home loan interest deductions for rented properties under Section 24(b), contradicting the belief that it offers no deductions. However, the benefit is significantly restricted compared to the old regime, with limited options for adjusting losses against other income sources and minimal carry-forward provisions. Proper documentation is essential for successful claims.
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A common misconception about India's new tax regime is that it eliminates all deductions, but this assumption proves incorrect when examining home loan interest provisions. Section 24(b) of the Income Tax Act continues to provide relief for taxpayers with rented properties, though with significant restrictions compared to the previous regime.
Section 24(b) Deduction Mechanism
Under the new tax regime, taxpayers who have let out their properties can still claim interest paid on home loans under the "Income from House Property" head through Section 24(b). However, this benefit applies exclusively to rented properties and remains unavailable for self-occupied homes.
The deduction framework operates differently from the old regime's more flexible structure. While taxpayers can claim interest deductions, the treatment of any resulting losses has become more restrictive.
Income vs Interest Payment Scenarios
The practical application of Section 24(b) depends heavily on the relationship between rental income and interest payments:
| Scenario | Rental Income | Interest Payment | Typical Treatment |
|---|---|---|---|
| Loss Situation | ₹4.00 lakh | ₹5.00 lakh | Limited deduction, restricted loss adjustment |
| Profit Situation | ₹6.00 lakh | ₹5.00 lakh | Full interest deduction, tax on balance |
When rental income falls short of interest payments, the resulting loss under "Income from House Property" cannot be freely adjusted against salary or other income sources, unlike the old regime. Additionally, such losses typically cannot be carried forward, significantly reducing the provision's effectiveness.
Documentation and Compliance Requirements
Taxpayers claiming this deduction must provide comprehensive documentation during ITR filing, including:
- Lender name and complete details
- Loan account number
- Loan sanction date
- Total interest paid during the assessment year
- Supporting proof and certificates
Inaccurate or incomplete information can result in ITR rejection or notices from the Income Tax Department, making proper documentation crucial for successful claims.
Practical Limitations and Considerations
The new regime's approach to house property losses creates practical challenges for taxpayers. When interest payments exceed rental income, the excess amount's treatment depends on specific assessment year rules and Central Board of Direct Taxes clarifications. While some years may allow limited set-off or carry-forward provisions, these typically don't extend across different income heads.
This restriction makes the deduction considerably less beneficial than under the old regime, where losses could be more freely adjusted against other income sources. Taxpayers should avoid assuming blanket entitlements and should consult official guidance or tax professionals before relying on this provision for tax planning purposes.
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