New Tax Regime Home Loan Benefit: Section 24(b) Deduction Still Available In 2026

The new tax regime is often sold as “clean and deduction-free”, but that line is not fully accurate. A Budget 2026-season explainer by NDTV Profit points out that home loan interest can still be claimed in the new regime, mainly when the house is rented (let-out) and the claim is made under Section 24(b) while computing “Income from House Property”.

In January 2026, a familiar confusion has returned. Many taxpayers think the new regime under Section 115BAC blocks every deduction, so home loans give zero tax relief. NDTV Profit, in a report published on January 12, 2026, says this is a half-truth. 

The new regime removes most exemptions and deductions, but it is not fully deduction-free. The important thing is where the benefit sits: Section 24(b) applies inside the “house property” computation, not through the usual Chapter VI-A basket.

The Actual Rule: Where Home Loan Interest Still Cuts Tax?

If a taxpayer has let out a property, they can still claim interest paid on home loans under Section 24(b), under the “Income from House Property” head. But the NDTV Profit report also makes it clear that this benefit is not available for self-occupied homes in the new regime.

The Income Tax Department’s own FAQs back this up. It explicitly says that in the new tax regime, “Interest on borrowed capital for Self-occupied property” is not allowed as a deduction. It even references the commonly claimed Rs. 2,00,000 interest claim and says taxpayers must opt for the old regime if they want it.

Before getting into examples, this quick table helps.
 

For example, the report says, if home loan interest is ₹5,00,000 and rental income is ₹4,00,000, only ₹4,00,000 can be set off, while the remaining ₹1,00,000 deduction depends on the limits applicable for the relevant assessment year.

If rental income is ₹6,00,000 and interest paid is ₹5,00,000, the full ₹5,00,000 is typically deductible, and tax applies on the remaining ₹1,00,000.

Also, NDTV Profit flags a compliance angle: during ITR filing, taxpayers must provide lender name, loan account number, sanction date, total interest paid and proof, or risk notices or rejection.

What Changed Earlier: Why Loss Set-Off Is The Real Catch?

This is where many taxpayers get stuck. The home loan benefit on a rented house looks attractive on paper, but it becomes less powerful when interest exceeds rent, because the “loss” cannot always reduce the overall taxable income like before.

CBDT’s Circular No. 3/2025, dated February 20, 2025, sets out the TDS framework and repeats the new-regime approach to computing total income. It states that income is computed without any loss under the head “Income from house property” with any other head of income.

In plain terms, if the house property calculation shows a loss because interest is higher than rent, that loss generally does not freely reduce salary income in the new regime, which is what NDTV Profit also underlined.

It also helps to remember that the new regime became the default for many taxpayers from AY 2024-25 onwards. The Income Tax Department’s ITR-2 FAQ says Finance Act 2023 amended Section 115BAC to make the new regime the default, and taxpayers must opt out if they want the old regime.

A separate “Common ITR Issues” FAQ PDF on the portal similarly notes that from AY 2024-25, the new regime became the default and most Chapter VI-A deductions are not claimable except limited sections.

One more important detail for readers is that the new regime still has certain built-in reliefs. The Income Tax Department FAQ states standard deduction of Rs 50,000 is available under both regimes from AY 2024-25, and mentions the new-regime rebate logic around Rs 7 lakh.

Here is the slab snapshot from CBDT Circular No. 3/2025 for FY 2024-25 (AY 2025-26).
 

These slab rates matter because many taxpayers choose the new regime for the lower rates, but then realise later that their older home-loan-driven planning does not fit anymore.

What Stakeholders Are Highlighting Right Now?

The Income Tax Department’s FAQs state it clearly: SOP interest deduction is not allowed in the new regime, and Chapter VI-A deductions are mostly blocked (with limited exceptions).

NDTV Profit’s January 12, 2026 report says the rented-property benefit exists but is tighter because set-off and carry-forward flexibility is reduced in practice. LoansJagat, in its home-loan tax exemption guide updated December 29, 2025, also advises taxpayers to keep documents like the interest certificate and loan agreement ready, and notes the new regime does not give SOP interest relief, while let-out interest can still be claimed.

Conclusion

The new tax regime is not fully “no-deductions”, but home-loan relief is now situational. For Budget 2026 planning, the simplest thumb rule remains: self-occupied home loan interest does not reduce tax in the new regime, but let-out interest can still work under Section 24(b), with tighter loss rules.