As a salaried professional in India, your tax plan typically consists of two swings per year, i.e., rent (HRA) and housing loan. The snag: with the New Tax Regime being the default, a few exemptions/deductions act in a very different manner. This guide provides a clear comparison of home loan tax benefits and HRA tax benefits to help you choose the best option for long-term savings.
Why Comparing HRA and Home Loan Tax Benefits Matters
The correct route will not only save you several thousand dollars, but also help you choose the proper tax regime and decide whether to buy a new house, continue renting a home, or refinance. Most popular breaks, including HRA and 80C principal repayment,t are not relevant under the New Regime (115BAC) and therefore the first decision to make is which regime to use.
Which Is Better: HRA or Home Loan for Tax Savings?
Start with how each actually saves tax:
- HRA: Exemption = the lower of (i) actual HRA received, (ii) 50 percent of metro / 40 percent of non-metro, or (iii) the amount paid in rent less 10 percent of salary (salary = basic + DA + commission as turnover % as applicable). This may be strong in case your rent is high and you are in a metro.
- Home loan (Old Regime): Section 24(b) (interest deduction) (limited to ₹ 2 lakh for self-occupied properties) + Section 80C (principal) (limited to ₹ 1.5 lakh), with some exceptions for let-out properties and joint loans.
Rule of thumb: High rent + no loan tends to give HRA the benefit of the doubt; high interest outgo + ownership objectives tend to provide a loan under the Old Regime the benefit of the doubt. Test both scenarios before choosing your preferred tax regime.
Can We Claim Tax Benefit on HRA and Home Loan Together?
In specific scenarios, you can absolutely claim both HRA and home loan benefits together. Usually, when you own a home in one city (loan running) and you go out to work in another town (renting), you can take HRA exemption on the rented house and home-loan tax deductions on the owned home (according to the rules of the regime, evidence, and actual conditions).
In case your employer does not provide HRA, then Section 80GG may be applicable (under certain circumstances), and provided that you pay a rent of more than 1 lakh/annually. Your employer will request your landlord to provide their PAN. Hold rent receipts, a rent agreement, and banking evidence.
How Do Home Loan Tax Benefits Compare Between Old and New Tax Regimes in India (2025)?
When choosing between the Old and New tax regime, a stand alone factor for mortgage cases, is an ability to claim home loan tax deduction on interest and principal. Section 115BAC (New Regime), which is the default provision and provides a higher standard deduction, prevents most itemized deductions, such as HRA and 80C principal repayment. Even interest on a self-occupied home is not deductible under that section.
The Old Regime, in the meantime, retains the traditional combination of HRA tax benefits, Section 24(b) interest ( 2 lakh cap on self-occupied), and Section 80C principal ( 1.5 lakh)–and that generally would give more tax savings on home loan when you actually have a substantial interest/principal outlay.
Old vs New Regime (AY 2025-26): quick comparison
| What you’re claiming | Old Regime (you opt in) | New Regime (default, Sec 115BAC) |
| HRA exemption (u/s 10(13A) / Rule 2A) | Allowed (subject to standard “least of three” rule) | Not allowed |
| Home loan interest – self-occupied (Sec 24(b)) | Allowed up to ₹2,00,000 | Not allowed |
| Home loan interest – let-out property | Deductible; earlier, excess loss could be set off/carried forward (subject to limits) | Deductible only up to rental income; no set-off/carry-forward of loss |
| Home loan principal (Sec 80C, incl. stamp duty/registration) | Allowed up to ₹1,50,000 | Not allowed |
| First-time buyer add-ons (80EE, 80EEA) | Legacy windows only (80EE: loans sanctioned in FY16-17; 80EEA: 1 Apr 2019–31 Mar 2022) | Not available |
| Standard deduction from salary (Sec 16) | ₹50,000 | ₹75,000 |
When you are paying a significant amount of interest/principal, the mix of the Old Regime is usually more than the high standard deduction by the New Regime. Even with the 75,000 standard deductions and little or no deductions, the rate regime of the New Regime plus the 75,000 standard deduction will still prevail.
How Does Income Level Affect the Choice Between HRA and Home Loan Benefits?
The value of deductions is either further or reduced by your tax slab. The increases of slabs under the Old Regime are higher slabs being more affected by the higher slab rupee to rupee with HRA or 24(b)/80C; a lower slab- eg, slabs with only a few deductions- would tend to use the lower rates in the New Regime (without HRA/80C). When your interest in your rent or loan is high, pretend it is in either regime; it is worth doing it once a year before you commit to a year.
Which Saves More in the Long Run: HRA Deductions or Home Loan Benefits?
At taxes alone, interest outgo in the Old Regime will be sufficient to offset HRA savings. In contrast, under the New regime, HRA is no longer available, and loan benefits are reduced, except for the letting-out of the property. In addition to tax, consider equity accumulation, EMI commitment, mobility, and transaction costs. To most, the solution is to rent today, buy tomorrow, or rent it out, buy it, and then rent it out again, depending on one’s life stage and local economic conditions.
Final Thoughts (clear and conclusive)
Winding up, the Old Regime will generally be better in terms of home loan tax benefits, as it retains HRA (where it applies), Section 24(b) interest, and Section 80C principal, and in many cases, provides combined advantages that are higher than the flat benefits in the New Regime.
Select the New Regime only when your deductions are naturally low (no/low rent, small interest/principal) and the higher standard rate of deduction and the slab rates of the New Regime are better for your numbers compared to those of the Old Regime. In brief: choose the regime that permits you to receive the deductions that you already pay, a perfect way to achieve all tax savings on a home loan.
Ready to see what actually saves you more this year? Speak to NFS Loans for a quick eligibility check and a side-by-side HRA vs loan tax-impact snapshot tailored to your income, city, and property status. We’ll help you choose smart—and execute fast.