Home loan on a rented house? Here's what you can still claim under new tax regime

Published 10 July 2026 · finance

If you own a house that you have rented out and are still repaying a home loan, chances are you've wondered whether the new tax

If you own a house that you have rented out and are still repaying a home loan, chances are you've wondered whether the new tax regime has changed the tax benefits available on your loan. The good news is that the deduction continues, although the new regime treats it differently in certain situations. The good news is that taxpayers can still claim the entire interest paid on a home loan for a let-out property. However, while the deduction remains available, the way losses are treated under the new tax regime is different from the old one. That distinction could have a direct impact on your tax bill. Read Full Story FULL INTEREST DEDUCTION CONTINUES FOR LET-OUT PROPERTIES The Income-tax Act, 2025 has not taken away the deduction on home loan interest for rented properties. Tax experts say the method of calculating income from a let-out property remains largely unchanged. Taxpayers can continue to deduct municipal taxes paid, claim the standard deduction of 30% on the Net Annual Value and deduct the entire interest paid on the home loan while computing income from house property. "Taxpayers can claim home loan interest deductions on let-out properties under Section 24(b) under both the regimes," said Anita Basrur, Partner, Direct Taxation, Sudit K. Parekh. Sharing a similar view, Chakravarthy V., Cofounder & Executive Director, Prime Wealth Finserv Pvt. Ltd., said the Income-tax Act, 2025 has retained the existing provisions relating to let-out properties. "The Income-tax Act, 2025 continues to allow taxpayers to claim the full amount of interest paid on a home loan for a let-out property, with no upper monetary limit.

Taxpayers can continue to deduct municipal taxes, claim the 30% standard deduction and deduct the entire home loan interest without any monetary cap," he said. WHERE THE NEW REGIME DIFFERS Although the deduction itself remains intact, the treatment of losses is where the old and new tax regimes differ. Suppose the interest paid on your home loan, along with other eligible deductions, is more than the rental income earned during the year. In such a case, a loss arises under the head 'Income from House Property'. Under the old tax regime, taxpayers could adjust this loss, up to 2 lakh, against income from salary, business or other sources during the same financial year. This often resulted in lower taxable income and immediate tax savings. The new tax regime, however, does not permit such cross-head adjustment. Explaining the difference, Basrur said, "While the home loan interest from the rental income is allowed, if the interest and standard deductions exceed the rental income, the loss cannot be set off against any other income heads. Under the new regime, the tax utility of the interest is locked against the rental income." Chakravarthy V. also pointed out that the biggest change under the new regime relates to the treatment of losses rather than the deduction itself. "Where the home loan interest and other deductions exceed the rental income, the resulting loss can no longer be set off against salary, business income or income from any other head in the same financial year," he said. NO CHANGE IN THE WAY RENTAL INCOME IS CALCULATED According to tax experts, taxpayers often assume that the new Income-tax Act, 2025 has rewritten the rules for rented properties.