The Union Budget presented on February 1, 2026, has brought significant updates for people planning to buy or build homes. Finance Minister Nirmala Sitharaman introduced the new Income Tax Act, 2025, which replaces the old law from 1961 to make taxes simpler for everyone. A major highlight of this budget is the change in how home loan interest is treated for tax deductions, aimed at providing better financial relief to property owners.
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How Does the New Home Loan Rule Work?
The government has made an amendment to Section 22(2) of the new tax code. While the deduction limit for interest on home loans for self-occupied properties remains at ₹2 lakh, the new rule makes it much clearer and beneficial. It explicitly states that the interest paid during the period before the construction was completed or the property was acquired is now included in this deduction limit.
This pre-construction interest will not be lost. Homeowners can claim it in five equal annual installments. This claiming process starts from the year in which the construction is finished or the house is acquired. This benefit is available for both self-occupied homes and properties that are let out on rent, ensuring fair treatment for all types of owners.
When Will These Changes Apply?
These new provisions will officially come into effect from April 1, 2026. This applies to the Tax Year 2026-27 and onwards. The new Income Tax Act, 2025, is designed to be much easier to read, with the volume of text reduced by about 50% compared to the old act. This is done to reduce confusion and legal disputes.
Aside from the home loan changes, the budget also brought relief regarding filing dates. The government has proposed extending the Income Tax Return (ITR) filing deadline for non-audit cases to August 31. This change is intended to give common taxpayers more time to prepare their documents and file their returns without stress.
