How Budget 2025 Will Impact Home Loan Tax Deductions

The Union Budget 2025 has brought significant updates for homeowners and potential homebuyers in India. With a focus on increasing affordability and promoting home ownership, the government has announced changes that will directly impact tax deductions related to home loans.

Consequently, it is important that everybody who has a running house loan or intends to apply for one sooner should be aware of these changes.

Key Highlights of Budget 2025

• Enhanced tax benefits for home loan borrowers.
• Commitment to making housing more accessible.
• Revised provisions under Section 80C of the Income Tax Act.

These changes aim to support middle-income families and first-time homebuyers, providing greater financial relief.

Also Read: Home Loan: All You Need to Know

Increased Home Loan Tax Deductions

One of the most notable announcements in Budget 2025 is the enhanced home loan tax deductions. The deduction on the interest component of home loans under Section 24(b) has been increased to INR 3 lakh from the previous INR 2 lakh. This change is expected to provide much-needed relief to homeowners burdened by high interest rates.

Additionally, the deduction on the principal component under Section 80C remains capped at INR 1.5 lakh. However, the government’s continued emphasis on home loan tax benefits makes owning a home more financially viable.

What Does This Mean for Homebuyers?

The changes introduced in the Union Budget 2025 will have several positive implications for homebuyers:

Higher tax savings

With increased deductions on interest payments, homeowners can save more on taxes.

Encouragement for first-time buyers

The additional tax benefits will motivate more individuals to invest in property.

Boost to the real estate sector

Greater demand for housing is likely to stimulate growth in the real estate market.

Understanding Section 80C Deduction for Home Loans

Section 80C of the Income Tax Act allows taxpayers to claim deductions on various investments and expenses, including the principal repayment of home loans. The 80C deduction for home loan principal repayment remains at INR 1.5 lakh per year.

This deduction is applicable to a housing loan. However, to claim this benefit, the property must not be sold within 5 years from acquisition. Selling the property before this period will result in the reversal of the tax benefits claimed.

Additional Home Loan Tax Benefits

Apart from the deductions under Section 80C, home loan borrowers can also enjoy the following home loan tax benefits:

• Section 24(b): Deduction of up to INR 3 lakh on interest payments for self-occupied properties.
• Section 80EEA: An additional deduction of INR 1.5 lakh for first-time homebuyers purchasing affordable housing (subject to conditions).

Together, these provisions provide substantial tax relief and make homeownership more attractive.

Benefits for Existing Home Loan Borrowers

Existing borrowers can also take advantage of the updated provisions in the Union Budget 2025:

• Lower tax liability – The increased deduction limits will reduce the taxable income for many borrowers.
• Encouragement to prepay loans – With greater tax incentives, borrowers may be motivated to prepay their loans and save on interest costs.

Also Read: Home Loan Tax Benefits for Women

The Bottom Line

The Budget 2025 shows a clear intent to promote homeownership and provide financial relief to taxpayers. The changes in home loan tax benefit provisions are a step in the right direction, offering significant savings for both new and existing borrowers.

If you are planning to invest in property or are already servicing a home loan, now is the time to reassess your finances and maximise the available tax benefits. Understanding the nuances of 80C deduction for home loans and other relevant provisions will help you make informed decisions.

Apply now for a home loan to take advantage of the new tax benefits and make your dream home a reality.

Additionally, if you want to calculate your monthly EMIs easily, use an Online EMI calculator to make calculating EMIs super easy.

FAQs

Q.1. How much will the tax be reduced if I take a home loan?

A. Home loan tax benefits can be claimed under the Income Tax Act of India, 1961. Customers can claim a deduction of up to INR 1.5 lakhs per financial year on the principal amount under Section 80C and of up to INR 2 lakhs per financial year on the interest paid under Section 24(b).

Q.2. What is the new tax regime in 2025?

A. In the Budget 2025 announcement, Finance Minister of India, Nirmala Sitharaman, said that people earning up to INR 12 lakh will not have to pay income tax under the new tax regime.

Q.3. Is a housing loan tax exemption in the new tax regime?

A. Deductions introduced under the new tax regime 2025-26 include:

• Section 24(b) — This section allows a deduction for interest paid on a housing loan for a let-out (rented) property. Taxpayers can claim this deduction under the new tax regime.
• Section 80CCD (2) — This section provides a deduction for the employer's contribution to the National Pension Scheme (NPS), capped at 14% of the salary for government employees and 10% for others.

Q.4. Can we claim house rent in the new tax regime?

A. The house rent allowance (HRA) exemption is only available if you live in rented accommodation. However, the HRA exemption is not applicable under the new tax regime.

Q.5. What are the new income tax rules for home loan interest?

A. As per section 80EE, you can claim a home loan interest deduction of up to INR 50,000 per financial year until you fully repay the loan

Disclaimer:

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