Deduction available in New regime of Income tax from Rental Income under Section 115BAC

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Section 115BAC will be a default scheme to calculate tax under Income Tax Act from AY 2024-25 and if an individual and HUF wishes to pay tax as per Old regime they need to opt for it while filing the Income tax return.

The slab rates applicable under new regime from AY 2024-25 are as under:

There are various benefit/ deduction/ exemption not available in New regime, hence let’s discuss what deduction or exemption which will not be available to assessee who are having deduction or income under the head Income from House property if they file return as per New Regime.

As per sub section 2 of section 115BAC of the Act the following deduction shall not be available in relation to Income from house property:

Clause (b) of section 24 [in respect of the property referred to in sub-section (2) of section 23]

Section 24 clause (b) deals with deduction of interest payable in relation to borrowed capital for acquisition, construction, repairing, renewal or reconstruction of property.

However, as mentioned above such deduction shall not be available in relation to property referred to in sub-section 2 of Section 23 which refers to self occupied property.

Relevant extract of sub-section 2 of Section 23 is as under:

(2) Where the property consists of a house or part of a house which—

(a) is in the occupation of the owner for the purposes of his own residence; or

(b) cannot actually be occupied by the owner by reason of the fact that owing to his employment, business or profession carried on at any other place, he has to reside at that other place in a building not belonging to him,

the annual value of such house or part of the house shall be taken to be nil.

Hence, the only disallowance mentioned above in section 115BAC is in relation to interest on self occupied property.

Thus, the summary of deductions under Income from house property is as under:

1. In case of Rented property:

Standard deduction of 30% available.

Interest paid for rented property available.

2. In case of Self occupied property:

Standard deduction of 30% available.

Interest paid for self occupied property not available.

Rest all the limits for loss adjustment shall remain as available in old regime.

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