Home Loan: What New Union Budget 2025 is Boon or Bane?

The recent Union Budget 2025 has introduced significant changes to tax provisions related to home loans in India. Here’s a concise overview:

1. Relaxation for Self-Occupied Properties:

• Taxpayers can now claim up to two houses as self-occupied without any conditions, with their annual value considered nil. (Source)
• This change simplifies tax calculations for individuals owning multiple properties.

2. Home Loan Interest Deductions:

• Under the old tax regime, deductions on home loan interest payments remain unchanged:
  • Section 24(b): Deduction up to ₹2 lakh per annum for self-occupied properties.
  • Section 80EEA: Additional deduction up to ₹1.5 lakh for first-time homebuyers, subject to specific conditions. (Source)
• However, under the new tax regime, these deductions are not available.

3. Simplified Income Tax Bill 2025:

• The government has introduced the Simplified Income Tax Bill 2025, aiming to replace the outdated Income Tax Act of 1961. (Source)
• This bill seeks to streamline tax provisions, making them more accessible and understandable for taxpayers.

4. Increased Tax-Free Income Threshold:

• The tax-free income limit under Section 87A has been raised from ₹700,000 to ₹1.2 million for FY 2025-26. (Source)
• This adjustment effectively reduces the tax liability for middle-income earners, enhancing their capacity for home loan repayments.

These reforms are designed to boost disposable income, encourage homeownership, and stimulate the real estate sector by making tax compliance more straightforward and taxpayer-friendly.