Buy a Life Insurance Plan in a few clicks
Create wealth through bonus payout from 1st policy year
A plan that offer guaranteed returns and financial protection for your family.
Kotak Guaranteed Fortune Builder
A plan that offers guaranteed income for your future goals.
Thank you
Our representative will get in touch with you at the earliest.
Pay 10,000/month for 10 years, Get 1,65,805/Year* for next 15 years.
ARN. No. KLI/23-24/E-BB/1201
Features
Ref. No. KLI/22-23/E-BB/999
Section 24 of the Income Tax Act allows deductions on home loan interest, reducing tax liability. However, the new tax regime removes this benefit, impacting homeowners. Taxpayers must compare both regimes to make informed financial decisions.
Section 24 of the Income Tax Act, 1961, provides tax benefits on the interest paid on home loans, helping taxpayers reduce their taxable income. Under the old tax regime, individuals could claim deductions of up to ₹2 lakh per year on interest payments for self-occupied properties. However, with the introduction of the new tax regime, these deductions are no longer available, impacting homeowners’ tax-saving opportunities. Understanding these changes is crucial for making informed financial decisions when choosing between the old and new tax regimes.
Scenario:
Rajesh takes a home loan of ₹40 lakh at an interest rate of 8% per annum for 20 years. His annual interest payment is approximately ₹3.2 lakh.
Case 1: Under the Old Tax Regime
Case 2: Under the New Tax Regime
Impact:
With the introduction of the new tax regime, there have been significant alterations to the provisions of Section 24. Some of the key changes include:
Under the previous tax regime, taxpayers could claim deductions under various sections, including Section 24, by opting for itemized deductions. However, the new tax regime offers a standard deduction instead of itemized deductions, thereby affecting the applicability of Section 24.
Taxpayers now have the option to choose between the old tax regime and the new tax regime based on their preferences and financial circumstances. The choice of regime directly impacts the eligibility and quantum of deductions available under Section 24.
The new tax regime offers lower tax rates but limits the availability of certain deductions and exemptions, including those under Section 24. Taxpayers need to weigh the benefits of lower tax rates against the reduced deductions under the new regime.
Despite the changes introduced in the new tax regime, Section 24 continues to play a significant role in providing tax relief to homeowners. Here is how Section 24 applies in the new tax regime:
In the case of a self-occupied property, taxpayers can claim a deduction of up to ₹2 lakh on the interest paid on the home loan under Section 24. This deduction is available irrespective of whether the property is under construction or already constructed.
For properties that are let-out or deemed to be let-out, taxpayers can claim a deduction for the entire interest paid on the home loan. There is no upper limit on the deduction under Section 24 of the Income Tax Act for let-out properties.
In addition to the regular deduction under Section 24, taxpayers purchasing affordable housing properties may be eligible for an additional deduction of up to ₹1.5 lakh on the interest paid on the home loan. This additional deduction is subject to certain conditions and criteria.
The changes in Section 24 and the introduction of the new tax regime have implications for taxpayers, especially those with housing loans. Here is how taxpayers are affected by this change:
Taxpayers need to evaluate whether it is beneficial for them to opt for the old tax regime with higher deductions under Section 24 or the new tax regime with lower tax rates but reduced deductions.
Homebuyers need to factor in the tax implications of their housing loans while planning their finances. Understanding the deductions available under Section 24 can help taxpayers make informed decisions regarding their investments and tax-saving strategies.
Taxpayers must ensure compliance with the provisions of Section 24 and maintain accurate documentation of their home loan transactions to claim deductions effectively. Any discrepancies or non-compliance may lead to penalties or legal issues.
Section 24 in the new tax regime has undergone significant changes, impacting the deductions available on housing loan interest. Taxpayers must familiarize themselves with these changes and assess their implications on their tax liabilities and financial planning. By understanding the applicability of Section 24 and making informed choices between the old and new tax regimes, taxpayers can optimize their tax-saving strategies and achieve better financial outcomes.
1
Complying with Section 24 is crucial as it ensures proper tax deductions for home loan interest.
2
To claim deductions, documents like loan sanction letters, interest certificates, and property ownership proof are required.
3
Deductions for under-construction properties are limited until completion within 5 years.
4
Limits apply depending on property occupancy and the regime chosen (the new regime excludes self-occupied deductions).
Pay 10,000/month for 10 years, Get 1,65,805/Year* for next 15 years.
ARN. No. KLI/23-24/E-BB/1201
Features
Ref. No. KLI/22-23/E-BB/999
The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The content has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Further customer is the advised to go through the sales brochure before conducting any sale. Above illustrations are only for understanding, it is not directly or indirectly related to the performance of any product or plans of Kotak Life.
Start saving today and enjoy guaranteed returns with our Savings Plans!