ITR Filing FY25: How Taxation on Home Loan Repayment Between Old and New Regime Differs?

When filing your ITR for FY 2024–25, one of the key decisions you’ll need to make is whether to choose the old or new tax regime. This decision significantly impacts your ability to claim deductions, particularly on home loan repayment under Section 24 of the Income Tax Act.

Let’s break down how this deduction works under each regime and when it makes sense to opt for the old regime especially if you’re paying home loan EMI on a self-occupied property.

Home Loan Interest and Principal Deduction Under the Old Tax Regime

If you opt for the old tax regime, you can claim a deduction of up to ₹2 lakh per financial year on interest paid for a self-occupied property. This benefit is available under Section 24(b), provided the home loan is taken for purchase or construction.

Additionally, for let-out (rented) properties, there is no upper limit you can claim the full interest amount as a deduction.

This means that the old regime allows itemised deductions such as home loan repayment and others like Section 80C, 8EEA, etc.

Home Loan Interest Deduction Under the New Tax Regime

The new tax regime, introduced in Budget 2020 and made default from FY 2023–24 onward, offers lower tax slabs but removes most exemptions and deductions.

For self-occupied properties you cannot claim any deduction on interest paid on a home loan under Section 24.

However, for let-out properties the deduction is still allowed, and you can claim the entire interest paid, without any ceiling.

As per the Income Tax website:

“Interest on borrowed capital for self-occupied property is not allowed as a deduction under the new tax regime. If a taxpayer wants to claim this, they must opt for the old regime while filing ITR.”

This means that in the new tax regime, most of these itemised deductions are not allowed. Instead, the government provides a standard deduction.

Which Regime to Choose?

Let’s say Ramesh, 35, took a ₹50 lakh home loan in FY 2024–25 for a self-occupied flat. His annual interest outgo is ₹2.3 lakh. Here's how the deduction plays out:

• If Ramesh files under the old regime: He can claim ₹2 lakh deduction under Section 24 and further deductions under 80C.
• If he opts for the new regime: He gets no deduction on this interest component, though he may benefit from lower tax rates if he has fewer deductions overall.

Income Tax Comparison: Home Loan Deductions Only (FY 2024-25)

How to Claim Section 24 Deduction in ITR FY25 as per Old Regime?

If you wish to claim interest on a home loan for a self-occupied property:

1. Choose the old regime while filing ITR.
2. For ITR-1 or ITR-2: Select “Yes” for opting old regime.
3. For ITR-3, 4, or 5: Choose “Yes, within due date” in the “opting out” field.
4. Report the interest amount under “Income from House Property”.

Read More: ITR Filing FY 2025–26: How Much Money Can You Gift to a Family Member Tax-Free in India?

Conclusion

For taxpayers with home loans on self-occupied properties, the tax regime you select directly affects your ability to claim deductions on home loan repayments. The new regime might suit those with fewer investments, while the old regime may still benefit individuals with large EMIs and multiple deductions.

Evaluate both options before filing your ITR this year. A smart choice could mean lower taxes and better financial planning.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.