What is Section 24 in the New Tax Regime?

What is Section 24 of the Income Tax Act?

Section 24 of the Income Tax Act covers deductions from income under “Income from House Property”. Section 24(b) specifically allows eligible taxpayers to claim a deduction for home-loan interest. Under the old tax regime, interest of up to ₹2 lakh may be deductible for a self-occupied property, subject to applicable conditions. The deduction depends on the property, loan purpose, and tax regime selected.

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Example Calculation: Old vs. New Tax Regime

Consider a taxpayer with annual income of ₹12 lakh who pays ₹2 lakh as eligible home loan interest on a self-occupied property. This example only illustrates the effect of Section 24(b) and does not calculate final tax liability.

Case 1: Under the Old Tax Regime

If the applicable conditions are satisfied, the taxpayer may claim the entire ₹2 lakh interest amount under Section 24b of the Income Tax Act.

• Annual income: ₹12,00,000
• Less Section 24(b) deduction: ₹2,00,000
• Income after this deduction: ₹10,00,000

Other eligible deductions, exemptions, and applicable tax rates would then determine the final taxable income and tax payable.

Case 2: Under the New Tax Regime

For a self-occupied property, the home loan interest deduction under Section 24(b) is not available under the new tax regime.

• Annual income: ₹12,00,000
• Section 24(b) deduction: Nil
• Income after this deduction: ₹12,00,000

Taxpayers should compare the complete set of deductions and applicable slab rates before choosing a regime.

What are the Key Changes in the New Tax Regime?

The new tax regime became the default regime from Assessment Year 2024-25, while eligible taxpayers can opt for the old regime subject to applicable rules.

For self-occupied properties, taxpayers under the new regime cannot claim the Section 24(b) deduction for home-loan interest. For let-out properties, interest on borrowed capital remains relevant when calculating income from house property, subject to applicable provisions.

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Applicability of Section 24 in the New Tax Regime

The applicability of Section 24 B income tax provisions under the new regime depends mainly on how the property is used.

For a self-occupied house, interest on borrowed capital cannot be claimed as a deduction under the new regime. For a let-out property, actual interest on borrowed capital can generally be deducted while calculating income from that property.

However, under the new regime, a resulting house-property loss from a let-out property cannot be adjusted against income under other heads or carried forward in the manner available under the old regime.

Deduction on Self-Occupied Property

Under the old tax regime, eligible interest on a home loan for a self-occupied property may qualify for tax deduction on home loan interest under Section 24, generally up to ₹2 lakh for qualifying purchase or construction loans taken on or after 1 April 1999. This benefit is unavailable for a self-occupied property when the taxpayer chooses the new tax regime.

Deduction on Let-Out or Deemed Let-Out Property

For a let-out property, interest paid on borrowed capital is deductible while calculating income from house property. Under the old regime, the actual interest amount may be claimed, although restrictions apply to how much house-property loss can be adjusted against other income in a year.

Under the new regime, interest on a let-out property is also considered in computing house-property income. However, any resulting loss cannot be set off against income under other heads or carried forward.

Additional Deduction for Affordable Housing

Section 80EEA is separate from Section 24b. It provides an additional deduction of up to ₹1.5 lakh on interest for certain qualifying affordable housing loans.

Eligibility includes conditions such as the loan being sanctioned between 1 April 2019 and 31 March 2022, the property's stamp-duty value not exceeding ₹45 lakh, and the taxpayer not owning another residential property on the loan-sanction date.

Eligible taxpayers may claim Section 80EEA in addition to the Section 24(b) deduction, subject to the provision's conditions and the tax regime under which the deduction is permitted.

Understand Section 24 Before Choosing Your Tax Regime

Section 24 can significantly influence the tax treatment of home loan interest, but its benefit depends on the property type and chosen tax regime. The distinction is particularly important for homeowners with self-occupied properties, as the new regime does not allow the same Section 24(b) interest deduction available under the old regime.

Taxpayers should review their loan interest, property usage, and other available deductions before choosing a regime.

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