NTR or OTR, Which is Best If You Are Giving Home Loan EMI


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Arpit Kulshrestha

Which Tax Regime is Best for Home Loan Holders?

Deciding between the old and new tax regimes is crucial when thinking about taking a mortgage. Home loan holders can take advantage of deductions under Sections 24 and 80C of the Income Tax Act. It describes that they may deduct up to Rs. 4,00,000 in deductions, including Rs. 2 lacks in interest, Rs. 1.5 lakh in 80C deductions, and Rs. 50,000 in ordinary deductions.

If a person’s income as per the aforementioned deductions is less than Rs. 10 lacks, they can take advantage of the old tax system. The new tax regime has lower tax rates up to a limit of Rs. 15 lacks, thus those whose income exceeds Rs. 10 lacks will be subject to the 30 per cent income tax slab rate and may take advantage of it. However, it is not only about money. There may be some other deductions as well.

Borrowers having a home loan may profit from opting for the old tax regime. As per the old rules and regulations, borrowers are allowed to deduct up to Rs 2 lakh annually in interest paid on home loans as well as principal repayment deductions under Section 80C. The absence of these deductions under the new tax regime may result in enough tax savings for borrowers who have taken home loans.

Finally, What should you do?

In the end, everything relies on the situation that an individual faces. For instance, if they are qualified for deductions as mentioned above, the previous tax system might be advantageous for them such as HRA and NPS. However, if they just have a home loan and no other additional deductions, the new tax regime may be more attractive for them. Therefore, it is crucial to consider and evaluate all deductions and think about tax savings before making a choice.

A home loan is a crucial consideration when deciding between the old and new tax regimes. Borrowers can greatly benefit from the old system thanks to the deductions allowed for interest and principal repayment. However, other deductions can also be applicable, so it’s imperative to consider all of your options. According to Dasari, “Taxation is not just about compliance, but also about making the right choices to reduce your tax liability.”

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