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SECTION 54F Long-Term Capital Gains Exemption for Any Asset What is Section 54F? Section 54F of the Income Tax Act, 1961 is one of the most powerful tax-saving provisions available to individual taxpayers and Hindu Undivided Families (HUFs) in India. It provides an exemption from Long-Term Capital Gains (LTCG) tax arising from the sale of any long-term capital asset — other than a residential house property — provided the taxpayer invests the net sale consideration in a new residential house property. Unlike Section 54, which is restricted to gains from a residential property, Section 54F casts a much wider net. Whether you have sold shares, mutual fund units, gold, jewellery, commercial property, agricultural land (in certain cases), bonds, or any other long-term capital asset, you can potentially claim exemption under this section by reinvesting in a residential home. Key Highlight: Section 54F is applicable on the NET SALE CONSIDERATION (not just the capital gain), making it uniquely structured and extremely beneficial for taxpayers with high-value long-term asset sales. Historical Background and Purpose Section 54F was introduced by the Finance Act, 1982, with the legislative intent of encouraging homeownership among Indian citizens. The Government of India recognized that individuals who sell capital assets often generate significant liquidity and providing a tax incentive for reinvesting in residential property simultaneously promotes both savings and housing infrastructure. Over the years, several amendments have been made — most significantly by the Finance Act 2023 and Finance Act 2024 — introducing the cap of ₹10 crore on exemption, clarifying conditions, and tightening compliance norms. Who Can Claim Section 54F? Eligibility Criteria Understanding who qualifies for claiming Section 54F exemption is the first and most important step. The following eligibility parameters must be satisfied: Eligible Assessees Individual Taxpayers (Resident or Non-Resident Indians) Hindu Undivided Families (HUFs) NOT applicable to Companies, Firms, LLPs, Trusts, or AOP/BOI Nature of Capital Asset Sold (Transferor Asset) The asset sold (referred to as the ‘original asset’) must be: A Long-Term Capital Asset (LTCA) — held for more than 24 months in most cases (12 months for listed securities, equity shares, equity-oriented mutual funds) Any asset OTHER than a residential house property (which would qualify under Section 54 instead) Examples: Listed/unlisted shares, equity mutual funds, debt mutual funds, gold, silver, jewellery, commercial property, plot of land, bonds, debentures, cryptocurrency (subject to classification), art, artefacts Investment in New Residential House Property The taxpayer must invest the ‘net consideration’ received from the sale into purchasing or constructing a new residential house property in India. Conditions to Claim Section 54F Exemption (2026) The following conditions must be strictly fulfilled as per the law updated up to 2026: Condition 1 – The Asset Must Be a Long-Term Capital Asset The asset sold must qualify as a Long-Term Capital Asset. The holding period thresholds are: Asset Type Holding Period for LTCA Status Listed Equity Shares / Equity MF Units More than 12 months Unlisted Shares More than 24 months Immovable Property (Land/Building) More than 24 months Gold / Jewellery / Debt MF More than 24 months Bonds / Debentures (unlisted) More than 36 months Condition 2 – The Seller Must Not Own More Than One Residential House On the date of transfer (sale) of the original asset, the taxpayer must not own more than ONE residential house property (other than the new one being purchased). If the taxpayer owns two or more residential houses on the date of sale, the exemption under Section 54F is NOT available. Important 2026 Note: The Finance Act 2023 expanded this to allow ONE additional residential property. This was further clarified by CBDT Circular issued in 2024, stating that ownership of exactly one residential house at the time of transfer does not disqualify the claim. Condition 3 – Time Limit for Purchase or Construction Purchase: Within 1 year BEFORE or 2 years AFTER the date of transfer Construction: Within 3 years AFTER the date of transfer The new house must be located within India Condition 4 – Net Consideration Must Be Invested Unlike Section 54 where only the capital gain needs reinvestment, under Section 54F the entire ‘net consideration’ (i.e., the full sale proceeds minus brokerage/transfer expenses) must be invested to claim FULL exemption. If only a part is invested, the exemption is proportionate. Formula for Proportionate Exemption: Exempt Capital Gain = (Capital Gain × Amount Invested in New Property) ÷ Net Sale Consideration Condition 5 – Section 54F Exemption Capped at ₹10 Crore (w.e.f. AY 2024-25) As per the Finance Act 2023 (applicable from AY 2024-25 onwards), the maximum exemption claimable under Section 54F is capped at ₹10 crore. This means if the cost of the new residential house exceeds ₹10 crore, the exemption will still be limited to ₹10 crore only. For AY 2026-27: This ₹10 crore cap continues to apply. Any investment in a new house exceeding ₹10 crore will not fetch additional exemption. Condition 6 – The New Property Must Not Be Sold Within 3 Years If the new residential property purchased or constructed under Section 54F is sold or transferred within 3 years from the date of purchase/construction, the exemption previously claimed will be withdrawn and will be taxable as capital gains in the year of such sale. How to Calculate Section 54F Exemption – Step-by-Step with Examples Step 1: Compute Long-Term Capital Gain Long-Term Capital Gain (LTCG) = Sale Consideration – Cost of Acquisition (Indexed) – Cost of Improvement (Indexed) – Transfer Expenses Note: For assets sold after 23 July 2024 (Budget 2024 amendment), taxpayers can choose between 12.5% LTCG rate without indexation or 20% with indexation. For properties, only 12.5% without indexation is available for new transactions. Step 2: Compute Net Consideration Net Consideration = Full Value of Consideration – Expenses Incurred Wholly and Exclusively for Transfer (e.g., brokerage, legal fees) Step 3: Determine Exemption Amount Case A – Full Exemption: If Net Consideration is FULLY invested in a new residential house Exemption = Entire LTCG (subject to ₹10 crore cap) Case B – Partial

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Income Tax on Dividend from Shares & Mutual Funds

Leave a Comment / Income Tax / Usama Shaikh

Income Tax on Dividend from Shares & Mutual Funds Why Dividend Taxation Matters in 2026 Dividends have long been a cherished source of income for equity investors in India. Whether you hold shares of Infosys, Reliance Industries, HDFC Bank, or units of an equity mutual fund, the dividend income you receive is subject to income tax. The rules governing dividend taxation in India underwent a fundamental transformation with effect from 1 April 2020, when the Dividend Distribution Tax (DDT) regime was abolished and replaced with the classical system of taxation in the hands of the shareholder or unit-holder. For Financial Year 2025-26 (Assessment Year 2026-27), these rules remain fully operative under the Income Tax Act, 1961. Every investor — resident individual, HUF, NRI, or corporate entity — must understand how dividend income is treated, what TDS applies, which exemptions are available, and how to correctly report it in the Income Tax Return (ITR). This comprehensive guide covers every dimension of dividend taxation in India for the year 2026, including worked examples in Indian Rupees (₹), updated TDS rates, deductions, and practical planning strategies. What Is Dividend Income? — Definition Under Indian Law Definition Under Section 2(22) of the Income Tax Act, 1961 Under Section 2(22), ‘dividend’ includes: Any distribution of accumulated profits (whether capitalised or not) by a company to its shareholders — in cash or in kind Distribution of debentures, debenture-stock, deposit certificates, or bonus shares to preference shareholders Distribution on liquidation of the company Distribution on reduction of share capital Any payment made by a closely held company by way of loan or advance to a shareholder holding substantial interest (deemed dividend — Section 2(22)(e)) Types of Dividends Covered Type of Dividend Source Taxable? Interim Dividend Paid during the financial year before final accounts Yes — taxable in year of receipt Final Dividend Declared at AGM after year-end Yes — taxable in year of declaration Special / One-Time Dividend Declared for specific events Yes Mutual Fund Distribution (Dividend Plan) Distributed by AMC Yes — now called IDCW Deemed Dividend (Sec 2(22)(e)) Loan/advance from closely held company Yes — taxed as dividend Bonus Shares Capitalisation of reserves Not taxable as dividend at receipt From DDT to Classical Taxation — The 2020 Shift and Its FY 2026 Implications The Old DDT Regime (Up to 31 March 2020) Under the Dividend Distribution Tax (DDT) regime, companies and mutual funds paid a tax of approximately 20.56% (including surcharge and cess) on dividends declared. Dividends received by shareholders up to ₹10 lakh per annum were exempt from tax under Section 10(34). Dividends above ₹10 lakh attracted an additional tax of 10% under Section 115BBDA. The New Classical System (From 1 April 2020 — Applicable FY 2026) The Finance Act, 2020 scrapped DDT and Section 10(34) exemption entirely. From 1 April 2020, dividends are: Fully taxable in the hands of the recipient at their applicable income tax slab rate Subject to TDS by the paying company or mutual fund Required to be declared in the ITR under the head ‘Income from Other Sources’ (Section 56(2)(i)) ⚡ Key Point: There is NO exemption for dividend income in FY 2026. Every rupee of dividend received from shares or mutual funds is taxable. Under Which Head Is Dividend Income Taxed? Primary Head — Income from Other Sources Dividend income from shares (both listed and unlisted companies) and from mutual fund units is generally taxed under the head ‘Income from Other Sources’ as per Section 56(2)(i) of the Income Tax Act, 1961. Exception — When Shares Are Held as Stock-in-Trade If shares are held as stock-in-trade (i.e., you are a trader, not an investor), dividend income may be treated as business income and reported under ‘Profits and Gains of Business or Profession’ (PGBP). In such cases, deduction for all related expenses is allowable. Deemed Dividend Under Section 2(22)(e) Deemed dividend from closely held companies (loans/advances to major shareholders) is also taxed under ‘Income from Other Sources’. The company does not pay this; it is taxable in the hands of the shareholder who received the loan. Tax Rates on Dividend Income — FY 2025-26 (AY 2026-27) For Resident Individuals and HUFs — Slab-Based Taxation Dividend income is added to the total income of the individual and taxed at the applicable income tax slab rate. Under the New Tax Regime (default from FY 2024-25): Total Income Slab Tax Rate (New Regime) Tax Rate (Old Regime) Up to ₹3,00,000 Nil Nil ₹3,00,001 – ₹7,00,000 5% 5% (up to ₹5L) / 20% (₹5-7L) ₹7,00,001 – ₹10,00,000 10% 20% ₹10,00,001 – ₹12,00,000 15% 30% ₹12,00,001 – ₹15,00,000 20% 30% Above ₹15,00,000 30% 30% Note: Health & Education Cess of 4% is applicable on the total tax amount. Surcharge applies for income above ₹50 lakh (10%), ₹1 crore (15%), ₹2 crore (25%), and ₹5 crore (37% under old regime; capped at 25% for new regime). For Domestic Companies Dividend received by domestic companies from other domestic companies is taxable at the applicable corporate tax rate (22% under Section 115BAA for domestic companies opting for the new regime, or 25%/30% otherwise). Intercorporate dividends received by domestic companies are, however, eligible for deduction under Section 80M (see below). For Foreign Companies Dividend income received by a foreign company from an Indian company is taxable at 20% under Section 115A (plus surcharge and cess), unless a lower rate is prescribed under the applicable Double Taxation Avoidance Agreement (DTAA). For Non-Resident Indians (NRIs) Dividend income received by NRIs from Indian companies is taxable at 20% under Section 115A (plus applicable surcharge and cess). TDS is also deducted at 20% (plus surcharge and cess) at source. NRIs may benefit from lower DTAA rates with their country of residence. TDS on Dividend from Shares — Section 194 (FY 2026) TDS Under Section 194 Under Section 194 of the Income Tax Act, any domestic company paying dividend to a resident shareholder is required to deduct TDS. Key provisions: Parameter Details Applicable Section Section 194 Who deducts TDS? The dividend-paying company

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Securities Transaction Tax (STT) Rates 2026

Leave a Comment / Income Tax / Usama Shaikh

Securities Transaction Tax (STT) Rates 2026 Securities Transaction Tax (STT) in India Securities Transaction Tax (STT) is a direct tax levied on the purchase and sale of securities listed on recognised stock exchanges in India. Introduced by the Finance Act, 2004, and effective from 1 October 2004, STT was designed to replace the long-term capital gains (LTCG) tax on listed equity shares and equity-oriented mutual funds — though LTCG has since been reintroduced. Despite that, STT continues to play a pivotal role in India’s tax ecosystem for financial markets. For the Financial Year 2025-26 (Assessment Year 2026-27), the Government of India has maintained and slightly revised STT rates in line with the Union Budget 2025-26. This comprehensive guide covers every aspect of STT — from its legal framework and applicable rates to its impact on traders, investors, and mutual fund participants in India. Legal Framework and Governing Authority Statutory Basis STT is governed under Chapter VII of the Finance (No. 2) Act, 2004. The Central Board of Direct Taxes (CBDT) under the Ministry of Finance administers and oversees STT collection and compliance. Who Collects STT? STT is collected by the Stock Exchange (such as BSE or NSE) or the Mutual Fund House at the time of the transaction. It is then deposited with the Central Government by the 7th of the following month. Recognised Stock Exchanges Covered Bombay Stock Exchange (BSE) National Stock Exchange (NSE) Metropolitan Stock Exchange of India (MSE) National Commodity & Derivatives Exchange (NCDEX) — for equity derivatives What Securities Are Covered Under STT? STT applies to the following financial instruments when transacted on a recognised stock exchange: Equity Shares (Delivery-based and Intraday) Derivatives — Equity Futures and Options Units of Equity-Oriented Mutual Funds Unlisted shares sold under an Initial Public Offering (IPO) or Offer for Sale (OFS) which get listed subsequently — at the time of subscription Business Trust Units (e.g., InvITs, REITs) STT Rates 2026 — Complete Rate Table The following table summarises all applicable STT rates effective for FY 2025-26 (AY 2026-27) as per the Finance Act 2025-26: Transaction Type Taxable Amount STT Rate Who Pays Equity Delivery — Purchase Purchase Price 0.1% Buyer Equity Delivery — Sale Sale Price 0.1% Seller Equity Intraday — Sale Sale Price 0.025% Seller Equity Futures — Sale Sale Price 0.02% Seller Equity Options — Sale (Premium) Premium Value 0.1% Seller Equity Options — Exercise Intrinsic Value (Settlement Price) 0.125% Buyer Equity MF Units — Redemption / Sale Redemption/Sale Value 0.001% Seller Unlisted Shares — IPO/OFS Subscription Issue Price 0.2% Seller (Company) Business Trust Units — Sale Sale Price 0.001% Seller Note: STT on equity options was increased from 0.0625% to 0.1% on premium, and options exercise STT was increased from 0.125% — both changes per Finance Act 2024 remain applicable in FY 2026. Futures STT was raised from 0.0125% to 0.02% effective 1 October 2024 and continues in FY 2026. STT Calculation Examples with Indian Rupee Amounts Example 1: Equity Delivery Purchase and Sale Suppose you buy 200 shares of Reliance Industries at ₹2,800 per share and sell them at ₹3,000 per share. STT on Purchase = 200 × ₹2,800 × 0.1% = ₹560 STT on Sale = 200 × ₹3,000 × 0.1% = ₹600 Total STT = ₹1,160 Example 2: Equity Intraday Trading You buy 500 shares of HDFC Bank at ₹1,600 and sell the same day at ₹1,620 (intraday). STT on Sale only = 500 × ₹1,620 × 0.025% = ₹202.50 No STT on intraday purchase Example 3: Equity Futures You sell 1 lot (75 units) of Nifty Futures at ₹23,500 per unit. STT on Sale = 75 × ₹23,500 × 0.02% = ₹352.50 Example 4: Equity Options — On Premium You sell 1 lot (75 units) of Nifty Call Option at a premium of ₹250. STT on Sale = 75 × ₹250 × 0.1% = ₹18.75 Example 5: Options — On Exercise You exercise a Nifty Call Option with settlement price of ₹23,800 per unit (1 lot = 75 units). STT on Exercise = 75 × ₹23,800 × 0.125% = ₹2,231.25 Example 6: Equity Mutual Fund Redemption You redeem Equity MF units worth ₹5,00,000. STT = ₹5,00,000 × 0.001% = ₹5 STT and Capital Gains Tax — The Important Link STCG (Short-Term Capital Gains) If STT has been paid on sale of listed equity shares or equity-oriented mutual fund units, then STCG is taxed at a special rate of 20% (increased from 15% per Budget 2024, effective 23 July 2024 onwards). This continues for FY 2026. LTCG (Long-Term Capital Gains) LTCG on listed equity shares and equity-oriented mutual funds exceeding ₹1.25 lakh per financial year is taxed at 12.5% (without indexation). This applies only when STT has been paid on both acquisition and sale. Business Income (Traders) For taxpayers who treat F&O or intraday equity trading as business income, STT paid is allowed as a deductible business expense under Section 36(1)(xv) of the Income Tax Act, 1961, provided the income is not claimed under the capital gains head. Key Changes in STT — Budget 2025-26 (Effective FY 2026) The Union Budget 2025-26 (presented on 1 February 2025) did not introduce fresh changes to STT rates. However, the following revisions made in the previous year’s budget remain applicable: Change Old Rate New Rate (FY 2026) Effective Date Equity Futures — Sale 0.0125% 0.02% 1 Oct 2024 Equity Options — Sale (Premium) 0.0625% 0.1% 1 Oct 2024 STCG Tax Rate (STT paid) 15% 20% 23 Jul 2024 LTCG Tax Rate (STT paid) 10% 12.5% 23 Jul 2024 LTCG Exemption Limit ₹1 lakh ₹1.25 lakh 23 Jul 2024 Impact of STT on Different Categories of Market Participants 1. Long-Term Equity Investors For buy-and-hold investors, STT at 0.1% on both buy and sell is a relatively small transaction cost. It is not deductible as an expense but contributes to establishing the eligibility for the concessional LTCG rate of 12.5%. 2. Intraday Traders Intraday traders pay STT only on the sell side at 0.025%. While the rate is

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LTCG Exemption Limit ₹1.25 Lakh – Everything You Need to Know for FY 2026-27

Leave a Comment / Income Tax / Usama Shaikh

LTCG Exemption Limit ₹1.25 Lakh – Everything to Know for You Need FY 2026-27 Category: Personal Finance | Taxation | Equity Investments What Is the LTCG Exemption of ₹1.25 Lakh? For millions of Indian retail investors who participate in equity markets and mutual funds, the Long-Term Capital Gains (LTCG) tax is one of the most impactful aspects of personal taxation. The good news for FY 2026-27 is that the exemption limit stands at ₹1.25 lakh — meaning your long-term capital gains up to this amount in a financial year are completely tax-free. Whether you are a salaried employee investing in SIPs, a businessperson holding blue-chip stocks, or a retiree depending on equity dividends and redemptions — understanding this exemption can directly save you thousands of rupees every year. This comprehensive guide, updated for FY 2026-27 as per Indian tax laws amended through the Union Budget 2024, will walk you through every angle of the LTCG exemption. What Changed in Budget 2024? In the Union Budget presented on 23 July 2024, Finance Minister Nirmala Sitharaman revised the LTCG exemption threshold from ₹1 lakh to ₹1.25 lakh per financial year. Additionally, the LTCG tax rate on equity and equity mutual funds was raised from 10% to 12.5%, effective from 23 July 2024. These changes together shape the LTCG taxation landscape for FY 2025-26 and FY 2026-27. What Is Long-Term Capital Gain (LTCG)? A capital gain is the profit earned from the sale of a capital asset. When this asset is held beyond a specified holding period, the resulting profit is classified as a Long-Term Capital Gain (LTCG). The holding period and applicable tax rules differ depending on the type of asset. Holding Period Criteria for LTCG in India (FY 2026-27) Asset Type Holding Period for LTCG LTCG Tax Rate Listed Equity Shares More than 12 months 12.5% (no indexation) Equity Mutual Funds (Equity > 65%) More than 12 months 12.5% (no indexation) Debt Mutual Funds (post Apr 2023) Treated as STCG (slab rate) As per income slab Unlisted Shares More than 24 months 12.5% (no indexation) Immovable Property (Land/Building) More than 24 months 12.5% (no indexation) Gold / Physical Assets More than 36 months 12.5% (no indexation) Bonds / Debentures (listed) More than 12 months 12.5% (no indexation) Note: Indexation benefit on immovable property and gold was removed in Budget 2024. Only the flat 12.5% rate now applies for most assets without indexation. LTCG Exemption Limit of ₹1.25 Lakh – FY 2026-27 Explained Under Section 112A of the Income Tax Act, 1961, LTCG arising from the sale of listed equity shares, equity-oriented mutual funds, and units of a business trust are exempt up to ₹1.25 lakh in a financial year. Any gain above this threshold is taxed at 12.5% without the benefit of indexation. Key Conditions for Claiming the ₹1.25 Lakh Exemption The asset must be listed on a recognized Indian stock exchange (BSE/NSE). Securities Transaction Tax (STT) must have been paid both at the time of purchase and sale (for equity shares). The holding period must be more than 12 months from the date of acquisition. The exemption applies per individual (or HUF, firm, company) per financial year — it cannot be carried forward. The exemption applies per taxpayer — meaning husband and wife can each claim ₹1.25 lakh separately. This exemption is available only under Section 112A — not for LTCG on property, gold, or unlisted shares. Grandfathering Provision (Pre-2018 Holdings) For equity shares or equity mutual fund units acquired before 31 January 2018, the cost of acquisition is deemed to be the higher of: (a) the actual cost of purchase, or (b) the lower of the fair market value (FMV) as on 31 January 2018 and the actual sale consideration. This ensures that gains accumulated before the reintroduction of LTCG tax on 1 April 2018 remain exempt. How to Calculate LTCG and Apply the ₹1.25 Lakh Exemption Step-by-Step Calculation Formula Determine the Sale Consideration (actual sale price). Identify the Cost of Acquisition (or FMV as on 31 Jan 2018, if applicable). Compute LTCG = Sale Consideration – Cost of Acquisition. Deduct ₹1,25,000 (the exemption under Section 112A). Apply 12.5% tax on the remaining taxable LTCG. Add applicable surcharge and 4% Health & Education Cess. Illustration 1 – Equity Shares (Gains Within Exemption Limit) Particulars Amount (₹) Purchase Price (FY 2023-24) ₹3,00,000 Sale Price (FY 2026-27) ₹4,20,000 LTCG (Gross) ₹1,20,000 Less: Exemption u/s 112A ₹1,20,000 Taxable LTCG ₹0 LTCG Tax Payable NIL ✅ Illustration 2 – Equity Mutual Fund (Gains Exceeding Exemption) Particulars Amount (₹) SIP Units Redeemed (held > 12 months) — Total Redemption Proceeds ₹7,00,000 Total Cost of Acquisition ₹4,50,000 LTCG (Gross) ₹2,50,000 Less: Exemption u/s 112A ₹1,25,000 Taxable LTCG ₹1,25,000 Tax @ 12.5% ₹15,625 Add: 4% Health & Education Cess ₹625 Total LTCG Tax Payable ₹16,250 💡 Illustration 3 – Married Couple Strategy If both husband and wife have invested and earned LTCG independently, each can claim ₹1.25 lakh exemption separately. A couple together can therefore enjoy up to ₹2.50 lakh of LTCG tax-free per year — with zero tax liability, provided each has gains below the exemption threshold. LTCG vs. STCG – Key Differences for FY 2026-27 Feature LTCG (Listed Equity) STCG (Listed Equity) LTCG (Property) Holding Period > 12 months ≤ 12 months > 24 months Tax Rate 12.5% 20% 12.5% Exemption Limit ₹1.25 lakh/year No exemption No exemption Indexation Benefit No No No (removed 2024) Set-Off Allowed LTCG only STCG & LTCG LTCG only Section 112A 111A 112 Smart Tax Planning Strategies Using the ₹1.25 Lakh LTCG Exemption Strategy 1 – Tax Harvesting (LTCG Harvesting) Tax harvesting is the practice of systematically booking long-term capital gains up to ₹1.25 lakh every financial year and then reinvesting the proceeds in the same or similar securities. This resets your cost of acquisition to a higher base, reducing future taxable gains. Sell equity mutual fund units or shares with gains of up to ₹1.25 lakh before 31 March 2027. Reinvest immediately in the same fund or

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Home Loan Deduction:

Leave a Comment / Income Tax / Usama Shaikh

Home Loan Deduction – New vs Old Regime: The Ultimate 2026 Tax Guide for Indian Borrowers 1. Understanding the Two Tax Regimes in India (AY 2026-27) India’s income tax landscape currently offers taxpayers two regimes to file their returns. Each has a fundamentally different philosophy on deductions, exemptions, and slab rates. The Old Tax Regime The Old Tax Regime (also called the Regular Regime) has been the backbone of Indian personal taxation for decades. It features higher tax slab rates but allows taxpayers to claim a wide array of deductions and exemptions — including all home-loan-related deductions under Chapter VI-A and Section 24(b) of the Income Tax Act, 1961. Income Slab (INR) Tax Rate (Old Regime) Up to ₹2,50,000 Nil ₹2,50,001 – ₹5,00,000 5% ₹5,00,001 – ₹10,00,000 20% Above ₹10,00,000 30% Surcharge + Health & Edu. Cess As applicable The New Tax Regime (Default from AY 2024-25) The New Tax Regime, introduced in Budget 2020 and made the default regime from AY 2024-25 (Finance Act 2023), offers significantly reduced slab rates but eliminates most deductions and exemptions. It was further sweetened in Budget 2024 (Finance Act 2024) applicable for AY 2025-26 and AY 2026-27. Income Slab (INR) Tax Rate (New Regime AY 2026-27) Up to ₹3,00,000 Nil ₹3,00,001 – ₹7,00,000 5% ₹7,00,001 – ₹10,00,000 10% ₹10,00,001 – ₹12,00,000 15% ₹12,00,001 – ₹15,00,000 20% Above ₹15,00,000 30% Standard Deduction (Salaried) ₹75,000 (New Regime from AY 2025-26) Rebate u/s 87A Up to ₹25,000 (for income up to ₹7,00,000) KEY CHANGE 2026: The New Regime is the default. If you do NOT specifically opt for the Old Regime before filing your ITR (or through your employer’s Form 12BB), you will automatically be assessed under the New Regime — and you will lose all home loan deductions. Always make a conscious choice. 2. Home Loan Deductions Available Under the Old Tax Regime The Old Tax Regime provides three major deduction heads for home loan borrowers. Together, these can help you save lakhs of rupees in taxes every year. A. Section 24(b) — Deduction on Home Loan Interest Section 24(b) of the Income Tax Act allows a deduction on the interest component of your home loan EMI. This is available under both Self-Occupied and Let-Out property scenarios. Property Type Maximum Deduction Under Section 24(b) Key Condition Self-Occupied Property (SOP) ₹2,00,000 per year Loan taken on or after 01/04/1999; construction/acquisition completed within 5 years Let-Out / Deemed Let-Out Property No upper limit — full interest deductible Rental income must be declared; loss can be set off subject to ₹2L cap from AY 2018-19 Pre-construction interest Deductible in 5 equal instalments From the year in which construction is completed Loan taken before 01/04/1999 Maximum ₹30,000 per year only Older cap; rarely applicable in 2026 Practical Example — Section 24(b) Mr. Ramesh has a self-occupied flat in Pune. His home loan interest for FY 2025-26 is ₹2,40,000. Under the Old Regime, he can claim only ₹2,00,000 as deduction (the maximum cap for SOP). At a 30% tax slab, his tax saving = ₹2,00,000 × 30% = ₹60,000 per year. The ₹40,000 excess interest above ₹2L is NOT deductible for SOP. B. Section 80C — Deduction on Principal Repayment Under Section 80C, the principal portion of your home loan EMI qualifies as a deduction. However, Section 80C has an overall combined ceiling of ₹1,50,000 per year across all eligible investments (PPF, ELSS, LIC premium, NSC, Tuition Fees, etc.). Parameter Details Maximum Deduction ₹1,50,000 per year (combined 80C limit) Who Can Claim Individual / HUF borrowers; co-borrowers can claim proportionally Property Condition Property must not be sold within 5 years of possession; if sold, deductions are reversed Type of Loan Any scheduled bank, housing finance company, cooperative bank, NHB, HUDCO Under-Construction Property NOT allowed — only after possession / completion certificate Stamp Duty & Registration Also eligible under Section 80C (one-time, in the year of purchase) Practical Example — Section 80C (Principal) Ms. Priya pays an EMI of ₹35,000/month on her Mumbai flat. Of this, ₹15,000/month is principal repayment = ₹1,80,000/year. She can claim only ₹1,50,000 under 80C (the cap). If she has no other 80C investments, the full ₹1,50,000 is available. Tax saving at 30% slab = ₹1,50,000 × 30% = ₹45,000 per year. C. Section 80EEA — Additional Interest Deduction for First-Time Buyers Section 80EEA was introduced to encourage affordable housing purchases. It provides an additional interest deduction OVER AND ABOVE the ₹2,00,000 limit of Section 24(b). Eligibility Criterion Requirement Loan Sanction Date Between 01/04/2019 and 31/03/2022 (Note: extended deadline has lapsed — see 2026 update below) Stamp Duty Value of Property Must not exceed ₹45,00,000 First-Time Buyer Taxpayer should not own any other residential property on the date of loan sanction Maximum Deduction ₹1,50,000 per financial year (in addition to Section 24b) Overlap with 80EE Cannot claim both 80EE and 80EEA simultaneously 2026 UPDATE — Section 80EEA: The sunset date for new loan sanctions under 80EEA was 31/03/2022. No new loans sanctioned after this date are eligible. However, if your loan was sanctioned before 31/03/2022, you CONTINUE to enjoy this deduction every year as long as the loan is being repaid. Borrowers with pre-2022 affordable housing loans can still claim up to ₹3,50,000 total interest deduction (₹2L under 24b + ₹1.5L under 80EEA) in AY 2026-27. D. Section 80EE — Additional Deduction for First-Time Buyers (Older Loans) Section 80EE (now largely superseded by 80EEA) provided an additional ₹50,000 deduction for first-time buyers whose loans were sanctioned between 01/04/2016 and 31/03/2017 and property value was below ₹50 lakh with loan amount up to ₹35 lakh. If you borrowed in that window and are still repaying, you may continue to benefit. 3. Home Loan Deductions Under the New Tax Regime (AY 2026-27) CRITICAL FACT: Under the New Tax Regime, virtually all home loan deductions are DISALLOWED. Specifically, deductions under Section 80C (principal), Section 24(b) for self-occupied property (interest), Section 80EEA, and Section 80EE are NOT available. What IS Allowed Under New Regime for Home Loan? Deduction / Benefit

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