You can still claim this deduction under new tax regime

You can still claim this deduction under new tax regime

New Delhi: Finance Minister Nirmala Sitharaman in her Budget Speech announced new tax regime which allows taxpayers to file taxes at lower rates if they forego all deductions/exemptions. While the proposed new personal tax regime has lower tax rates if you forgo some key tax breaks, there are some deductions which you can still claim under the new tax regime.

Note that one can claim an income tax deduction on interest paid on the home loan. While in the new regime this deduction is not available, the Budget document says that this rule applies to self-occupied property only. This means that interest paid on home loan for a let-out house will be allowed as deduction even under the new regime.

Tax experts have also confirmed this. Aarti Raote, Partner at Deloitte India was quoted in Business Line report saying,  “Under the new tax regime, taxpayers who own a house that is rented out will be able to claim deduction on the interest they pay for buying that house against the rental income.” The usual standard deduction of 30 per cent on net rental income will also continue in the new regime.

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It is worth mentioning that there are other restrictions on tax breaks on let-out property under the new regime. As per the rules, if interest deduction results in a loss under the head “income from house property”, this loss cannot be set off against any other head of income such as salaries, in the new regime. In the old regime, this is allowed up to Rs 2 lakh in a financial year.

Also, in the new regime, loss under the head “income from the house property” cannot be carried forward to subsequent years for set-off purposes. This is allowed under the old regime. This means that a taxpayer who has let out his house can reduce the taxable rental income, thanks to the interest deduction, but the benefits are less when compared to the old regime.

This is because if the interest cost exceeds the net rental income, the loss from house property can neither be set-off against other heads of income nor carried forward to future years. In case the amount of such interest is less than net rental income (after allowing standard deduction of 30 per cent), full deduction will be available even under the new scheme.

Also, if a person has more than one house property, then the loss from one house property on account of home loan interest can be set off against rental income from another house property. This is allowed to the extent it does not result in a total ‘net loss’ under the head house property.

Source:- timesnownews

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