# Old vs New Tax Regime for Home Loan Borrowers

> The home-loan deductions live in the old regime, but the new regime's wider slabs often win anyway. How the break-even works, with a worked FY 2025-26 example.

_By emi.me Editorial · Reviewed by emi.me Editorial · Updated 2026-06-25_
Source: https://emi.me/learn/old-vs-new-tax-regime-for-home-loan/

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The home-loan tax deductions — Section 24(b) interest and Section 80C principal — exist **only in the old regime**. But that does not mean the old regime wins. The **new regime** (the default) has wider slabs and a Section 87A rebate that makes income up to **₹12 lakh** tax-free, so for many borrowers it produces a lower bill even after they give up the deductions. Which one wins depends entirely on your income and your total deductions. These are FY 2025-26 (AY 2026-27) figures and this is general information, not tax advice.

## Why it's a genuine contest

In the old regime your home loan can knock up to ₹3,50,000 off your taxable income (₹2 lakh interest + ₹1.5 lakh principal). That's valuable — but the old regime taxes what's left at its own slab rates, and its rebate only covers income up to ₹5 lakh. The new regime forgoes those deductions but taxes income at gentler rates and forgives tax entirely up to ₹12 lakh. You're trading **deductions** against **lower rates plus a bigger rebate**.

## A worked example (FY 2025-26)

Take a salaried borrower earning **₹15,00,000**, with a self-occupied home loan giving the full **₹2,00,000** interest and **₹1,50,000** principal deductions, plus ₹50,000 of other 80C.

| Regime | Taxable income | Estimated tax |
| --- | --- | --- |
| Old (with deductions) | ₹11,00,000 | ₹1,48,200 |
| New (no deductions) | ₹14,25,000 | ₹97,500 |

Even after claiming every home-loan deduction, the **new regime is about ₹50,700 cheaper** here, because its lower rates more than offset the deductions lost. Change the income or the deductions and the answer can flip — which is the whole point of checking.

## How to choose

Run your own numbers in the [home loan tax-benefit calculator](/calculators/tax-benefit/), which estimates the tax under both regimes from your actual loan schedule. As a rough guide, the old regime tends to win when your *total* deductions (home loan + 80C + 80D + HRA, etc.) are large relative to your income; the new regime tends to win when they're modest. Salaried taxpayers can pick the better regime each year.

Because the slabs and rebate change with each Union Budget, re-check after the next one — and confirm the final call with a chartered accountant. For the mechanics of the deductions themselves, see [home loan tax benefits explained](/learn/home-loan-tax-benefits-explained/).