House Property Loss Set-off Under Old Act vs New Act: Checklist, Due Dates & Common Mistakes
By Finin2min Research DeskUpdated Jun 2026Income-tax Act 2025Home Loan
Millions of home loan borrowers use house property loss — created by home loan interest exceeding rental income — to reduce their salary tax. The Income-tax Act 2025 retains this mechanism but renumbers the sections and tightens regime interaction. The ₹2 lakh annual cap on set-off against other income heads is unchanged. What has changed is how you elect the old regime to access this benefit from Tax Year 2026-27 onwards. This guide provides the full comparison, worked examples, and a filing checklist.
Use the Income Tax CalculatorModel the tax impact alongside this guide.
Under both the old Act and the new Act, a taxpayer who suffers a loss under "Income from House Property" (due to home loan interest exceeding net rent or self-occupied property deemed value) can set off this loss against income from other heads — but only up to ₹2 lakh per year. The balance unabsorbed loss carries forward for 8 years.
Parameter
Old Act — Section
New Act (2025) — Section
Amount/Rule
Self-occupied property — interest deduction
Section 24(b)
Section 194(b)(ii)
Max ₹2L per year
Let-out property — interest deduction
Section 24(b)
Section 194(b)(ii)
Actual interest (no cap)
Standard deduction on NAV
Section 24(a)
Section 194(b)(i)
30% of NAV
HP loss set-off cap vs other heads
Section 71(3A)
Section 72(3)
₹2L per year
Carry forward of unabsorbed HP loss
Section 71B
Section 72(4)
8 years — HP income only
HP loss set-off in new concessional regime
Section 115BAC(2)(i)
Chapter XX (default regime)
NOT ALLOWED
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New Regime = No House Property Loss Set-off: Under the new concessional tax regime (now the default from Tax Year 2026-27 under the Income-tax Act 2025), you CANNOT set off house property loss against salary or any other income. You also cannot claim the ₹2L self-occupied property interest deduction. To access both, you must explicitly opt for the old regime by filing Form 124 (investment declaration to employer) at the beginning of Tax Year 2026-27 (if salaried) or with your ITR (if non-salaried).
How House Property Loss Is Created — A Refresher
House property loss arises when deductions under the house property head exceed the taxable rent (or zero, for self-occupied properties):
Self-occupied property: Annual value is deemed nil (₹0). But interest on home loan is allowed as deduction up to ₹2L. This creates a loss of up to ₹2L per year which can be set off against salary.
Let-out property: Gross rent minus municipal taxes gives Net Annual Value (NAV). Minus 30% standard deduction and actual home loan interest. If result is negative — house property loss.
Two self-occupied properties: Under the new Act, you can designate up to 2 properties as self-occupied (one additional property allowed — the deemed NAV rule for the second SOP was removed from AY 2020-21 and continues). Both can claim ₹2L interest deduction but combined set-off against salary is still capped at ₹2L total.
Worked Example — Home Loan Borrower, Tax Year 2026-27
Priya earns ₹18,00,000 salary. She has a home loan on her self-occupied flat with annual interest of ₹2,80,000. She opts for the old tax regime by filing Form 124 (investment declaration to employer).
Calculation
Amount (₹)
Gross salary income
18,00,000
Standard deduction (Section 16 equivalent — new Act Section 155(b))
(75,000)
Net salary
17,25,000
House property income — self-occupied (annual value = nil)
0
Less: Home loan interest allowed
(2,80,000)
House property loss
(2,80,000)
HP loss set-off against salary — capped at ₹2L
(2,00,000)
Adjusted gross total income
15,25,000
Less: 80C deductions (PF, PPF, LIC etc.)
(1,50,000)
Net taxable income
13,75,000
Carry forward of balance HP loss (₹2.8L - ₹2L)
₹80,000 (8 yrs)
Case Study: Ankit's Two Properties — Old Regime vs New Regime Math
Senior Engineer, Hyderabad — Two Home Loans, Tax Year 2026-27
Ankit earns ₹25L salary. He has two home loans: flat A (self-occupied) with ₹2.4L interest, flat B (let-out at ₹14,400/month = ₹1,72,800/year) with ₹2.8L interest.
Old Regime (Form 124 (investment declaration to employer) opted):
Flat A: HP loss = ₹2L (interest capped at ₹2L for self-occ)
Flat B: NAV = ₹1,72,800 − 30% (₹51,840) = ₹1,20,960 − ₹2,80,000 interest = HP loss of ₹1,59,040
Total HP loss = ₹2L + ₹1.59L = ₹3.59L. Set-off cap = ₹2L only. Carry forward: ₹1.59L
Net salary after set-off: ₹25L − ₹75K SD − ₹2L = ₹22.25L. Tax ~₹4.7L
Old Regime Tax
~₹4.7L
New Regime Tax (no HP loss)
~₹3.75L
Despite two home loans, Ankit's total tax is lower in the new regime because the new slab structure (5%/10%/15%/20%) and higher ₹75K standard deduction outweigh the HP loss benefit. This is the emerging reality for most borrowers with loans below ₹50L at ~9% interest.
When House Property Loss Set-off Still Makes Old Regime Better
The old regime with HP loss set-off outperforms the new regime when:
High loan outstanding: Large interest payments (above ₹2.4L/year), especially in early years of a high-value loan
Multiple deductions stack up: HRA + 80C + 80D + home loan interest together create significant old-regime benefit
Let-out property: Actual interest on let-out is unlimited deduction — rental income is low, creating a large HP loss
Effective tax benefit calculation: HP loss benefit = ₹2L × your marginal tax rate. At 30% slab = ₹60,000 tax saving per year.
Common Mistakes to Avoid — Tax Year 2026-27
Mistake
Consequence
Correct Approach
Filing in new regime without realising HP loss is not allowed
Miss ₹2L set-off — excess tax paid
Compare regimes; opt old via Form 124 (investment declaration to employer) if beneficial
Claiming ₹2.8L interest instead of ₹2L cap for self-occupied
Excess deduction claim — notice under Section 143
Cap at ₹2L; carry forward balance ₹80K
Not filing ITR on time — HP loss carry forward denied
Lose 8-year carry-forward benefit
File by 31 August 2026 (new due date under new Act for Tax Year 2026-27)
Claiming HP loss set-off without interest certificate from bank
Deduction disallowed in scrutiny
Obtain Form 16B/Provisional Certificate from lender before ITR
Two self-occupied properties — claiming ₹2L interest on both
Total set-off cap is still ₹2L — excess demand
Combined HP loss capped at ₹2L set-off per year
Due Dates Relevant to HP Loss Claims — Tax Year 2026-27
Event
Date
Form 124 submission to employer (old regime opt-in with deduction claims)
April 2026 / on joining
Advance tax 1st instalment (if HP income/loss changes total liability)
15 June 2026
Advance tax 2nd instalment
15 September 2026
Advance tax 3rd instalment
15 December 2026
Advance tax 4th instalment
15 March 2027
ITR filing due date (non-audit, Tax Year 2026-27)
31 August 2027 (new Act)
Belated/revised ITR deadline
31 March 2028
House Property Loss — Key Takeaways
₹2L annual cap on HP loss set-off against other income — unchanged in new Act (Section 72(3))
Only available under old regime — must opt via Form 124 (investment declaration to employer)
Let-out property: actual interest (unlimited) but loss set-off still capped at ₹2L
Balance HP loss carries forward 8 years — set off only against HP income
New Act ITR due date: 31 August (was 31 July) — gives extra month to gather interest certificates
Compare regimes: for most borrowers with loans under ₹50L, new regime may be cheaper despite losing HP loss
Yes — but only under the old tax regime (opt in via Form 124 (investment declaration to employer)). The cap is ₹2L per year (Section 72(3) of new Act). The balance loss carries forward for 8 years. Under the new concessional regime (default), house property loss cannot be set off against salary at all.
Section 194(b)(ii) of the new Act retains the ₹2L annual cap on home loan interest deduction for self-occupied properties — available only under the old regime. In the new concessional regime, no such deduction is available. For let-out properties, actual interest is deductible (no cap) but total HP loss set-off against other income remains limited to ₹2L/year.
8 years — identical to the old Act. The carried-forward loss can only be set off against house property income in future years, not against salary, capital gains, or business income. The carry forward requires filing your ITR on time. Missing the due date (31 August for Tax Year 2026-27) causes the current year's HP loss to lapse.