For taxpayers who have an on-going home loan, the interest paid on such loans helps them lower tax liability in the existing income tax structure. However, under the new income tax regime proposed in Budget 2020, the interest paid on housing loan is not available for deduction for self-occupied houses. But for taxpayers who have rented out their house property, there is good news. Interest paid on housing loan taken for a rented out property can be claimed as deduction under section 24(b) even in the new proposed tax regime.
Budget 2020 has proposed a new tax regime with lower tax slab rates along with removal of almost all deductions, exemptions. A tax payer has been given the option of moving to this new regime for fiscal 2020-21 or continuing with the existing income tax structure. While most tax breaks are not available in the new tax regime, tax break on interest paid on housing loan for rental property can still be claimed.
Here’s is all you need to know about claiming this deduction in the proposed tax regime and what you need to be careful about while claiming this deduction.
Let Out/deemed to let out house property
If you have let out your house property and are earning a rental income, then you can claim deduction of the home loan interest paid on such property from the rental income earned. Thus, even under the new tax regime, taxpayers who are landlords can claim the tax-benefit of the interest paid.
Here is the benefit that landlords can claim under the proposed new tax regime:
They can claim a standard deduction of 30% from the net rental income. Net rental income would be the total rental income (i.e. higher of expected rent or rent received / receivable ) in a financial year less the municipal taxes paid in the financial year
After claiming the standard deduction as mentioned above, they can deduct the interest paid on home loan taken for the property which is rented out.