Big Relief for Homebuyers: New Tax Regime Now Allows Home Loan Deductions
Union Budget 2026: Home loan tax benefits are also available under the new system! Expectations are high that Budget 2026 will further improve the new income tax regime. According to Archit Gupta, Founder and CEO of ClearTax, the new system has become the preferred choice for many taxpayers, especially those earning below ₹25 lakh, due to fewer tax slabs and lower compliance.
However, around 26% of taxpayers still prefer the old tax regime. Gupta says this is because many have structured their long-term finances around benefits like HRA and home loan deductions, which are not available under the new system.
One key demand for Budget 2026 is to extend home loan interest deduction under Section 24(b) to the new tax regime. Currently, taxpayers can claim up to ₹2 lakh on home loan interest and ₹1.5 lakh on principal under Section 80C only in the old regime.
Gupta also highlights the need for more flexible retirement planning. While the new regime allows deductions on employer NPS contributions, investors rely on multiple options like EPF, PPF, and ELSS for long-term savings.
Another major demand is to make the entire 80% NPS withdrawal tax-free. Although the lump-sum withdrawal limit has been raised to 80%, only 60% is currently tax-free. Making the full 80% tax-free would significantly improve NPS benefits.
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