- Date : 17/03/2023
- Read: 4 mins
Are you planning for a home loan or already have one? You must know about the latest income tax news for it.
This article briefly explains why sticking to the old home loan tax regime is better, covering the following points:
Why is the old tax regime better for home loans?
What are the available home loan dedications under the old tax regime?
What are the benefits of joint home loans under the old tax regime?
Why Is The Old Tax Regime Better For Home Loans?
The decision of whether to choose a home loan with a tax-deductible interest rate or not can have significant implications for a borrower's tax liabilities and overall finances.
It is commonly believed that the new tax regime has made it so that no benefits can be gained from the interest paid on a home loan. This, however, is untrue. Individuals can still take advantage of the benefits, but there is a catch: this only applies if the individual has rented his property. If the individual has a self-occupied property, they are not eligible for the same benefits.
Unlike those with let-out properties, individuals who own a self-occupied property may also benefit from the deduction of interest paid. However, this wasn’t the case under the old tax regime. Old tax regime allowed for a deduction in the tax rates, which isn’t allowed under new tax regime. Therefore, the old tax regime is more advantageous for home loans.
Also Read: New Tax regime or Old Tax Regime?
What Are The Available Home Loan Dedications Under The Old Tax Regime?
Taxpayers could benefit from a deduction of around 2 lakh rupees on the interest on a self-occupied home loan. In the case of rented properties, there was no limit on the amount of interest one can claim.
Taxpayers can also benefit from a deduction of up to 1.5 lakh rupees for the principal repayment on the home loan under Section 80C.
Taxpayers could benefit from claiming a deduction of up to 1.5 lakh rupees for the registration and stamp duty charges paid.
Claiming the benefit of deduction of up to 2 lakh rupees was allowed on the interest paid for the pre-construction period. Taxpayers could contend it from the completion year of the property’s construction in 5 equal installments.
What Are The Benefits Of Joint Home Loans Under The Old Tax Regime?
The old tax regime allowed both taxpayers to claim tax deductions on the principal and interest repayment for the home loans to a fixed limit.
It allows both taxpayers to share equal responsibility for paying back the loan, which helps reduce burdening.
It allows simplification of loan repayment in joint home loan cases as both the co-owners can contribute.
The new tax regime restricts individuals from benefitting from the interest paid for a home loan if they own a self-occupied property. However, they can benefit from the interest paid for the home loan if they own a let-out property. As a homeowner, you can claim a deduction of up to Rs 2 lakh on your home loan interest if you or your family resides in the house property in case of the old tax regime. You can deduct the entire home loan interest from your taxes if you have rented out your property.
The old tax regime allows individuals owning both self-occupied and let-out properties to benefit from the interest paid on home loans, making it better than the new regime for home loans.