Income Tax Act 2025 Guide: Tax Year, 24(b) & ₹1L Deduction

Income Tax Act 2025 Guide: Tax Year, 24(b) & ₹1L Deduction (what I think you actually need to know)#

So… I didn’t plan on writing a whole “Income Tax Act 2025 guide” thing today. I was just sitting with coffee, scrolling through messages from friends like “bro which tax year is this for??” and “is that 24(b) home-loan thing still there or nah?” and then somehow I’m deep in spreadsheets and old ITR screenshots. Typical.

Anyway, here’s my very-human, slightly messy guide to (1) what “tax year” even means now, (2) Section 24(b) interest deduction on home loans, and (3) the whole “₹1L deduction” chatter people keep throwing around.

Quick heads-up though: I can’t do live web research from here, so I’m going off the law + what’s been consistently true through the 2024-25/2025-26 cycle. If you saw a brand-new 2026 notification or Finance Act tweak on Twitter/YouTube, PLEASE cross-check with the official Income Tax Dept site or a CA. Taxes are like that… one circular and your whole plan goes poof.¶

First things first: “Tax Year” vs “Assessment Year”… why do we still suffer this?#

Okay, in India we’ve historically had this confusing pair:

- Financial Year (FY): when you actually earn income. Like salary, freelancing, rent, whatever.
- Assessment Year (AY): the year after, when you file and the govt “assesses” that income.

Now you’ll also hear “Tax Year” floating around more, because the govt keeps trying to make language simpler (thank god). In plain terms, tax year = the year you earn the income. That’s basically FY.

So if you earned income from 1 April 2025 to 31 March 2026, that’s… your FY 2025-26 (also being called “Tax Year 2025-26” in simplified speak). And you file it in AY 2026-27.

I know, it’s like they designed it to make normal people cry. Even me and him (my friend) still mess it up sometimes and we’ve been filing returns for years.¶

Income Tax Act 2025… is it a brand-new law or just how people are talking?#

This part is… messy online.

Some folks say “Income Tax Act 2025” like it’s a whole new Act replacing the old one. The truth (as far as what’s publicly consistent till now) is: the main Income-tax Act is still the Income-tax Act, 1961, but it keeps getting amended every Finance Act.

Now, there has been talk for a while about simplifying/redrafting tax laws (you’ve probably heard the phrase “new direct tax code” every few years like it’s a season of a show that never releases). So people casually label the set of rules applicable in/around 2025 as “Income Tax Act 2025”.

So when you read “Income Tax Act 2025 guide”, 99% of the time they mean:

- rules applicable for FY 2025-26 OR
- changes introduced around Budget 2025

Not a totally brand new statute you need to re-learn from scratch. (Still, always check if something major passed later. India loves surprises.)¶

New tax regime vs old tax regime (yeah, we’re still doing this in 2026)#

I’m not even kidding, this is the #1 dinner table tax topic now. New regime, old regime. Which is better. Everyone has an opinion, and half of them are wrong but super confident.

Here’s the vibe:

- New regime: lower slab rates, but most deductions/exemptions are not allowed.
- Old regime: higher slab rates, but you can use deductions like 80C, HRA (if eligible), 24(b) (home loan interest), etc.

One IMPORTANT thing that many people miss: in recent years, new regime became the default for many taxpayers, but you can choose old regime (rules differ for salaried vs business income). If you run a business/profession, switching regimes has extra conditions and limits. So don’t just randomly flip every year because some reel told you to.

I personally still see a lot of salaried folks benefit from new regime if they don’t have big deductions. But if you have a home loan + decent 80C + other stuff, old regime can still win. Depends. Annoying answer, but true.¶

Section 24(b) explained like you’re my cousin texting at midnight#

Alright, Section 24(b) is the home loan interest deduction under the head Income from House Property.

If you have a house property (self-occupied or rented), and you pay interest on a housing loan, Section 24(b) is where you look.

Here’s the basic idea:

- For a self-occupied property (SOP): you can claim up to ₹2,00,000 of interest on home loan per year (subject to conditions).
- For a let-out property (rented out): interest deduction is allowed, but loss you can set off against other income is capped (there are rules that limit how much house property loss can reduce salary income in a year).

This is where people get dramatic: “Is 24(b) removed in new regime??”

In the new regime, you generally can’t claim 24(b) for a self-occupied property. Under old regime, you typically can.

So if your whole tax plan is based on home-loan interest, you basically can’t ignore regime choice.¶

But wait, what counts as “interest” under 24(b)?#

Interest is the interest component of your EMI, not the principal.

- Principal repayment is usually claimed under Section 80C (old regime)
- Interest payment is claimed under Section 24(b) (mostly old regime context)

Also, there’s this thing called pre-construction interest (interest paid before the construction is completed / before possession). You don’t claim it all at once, you claim it in chunks over multiple years (typically 5 equal installments) once the construction completes and you get possession.

People forget this all the time and then go “oh no I missed deduction” after 3 years. You might not have missed it, you just didn’t know the rule. Happens.¶

Common 24(b) mistakes (I’ve done at least one, not proud)#

• Claiming principal as interest. Like… no. The bank statement has both, check the certificate.
• Forgetting to get the home loan interest certificate from bank/NBFC. HR won’t accept vibes as proof.
• Confusing SOP vs let-out rules. The cap and set-off rules aren’t identical.
• Claiming deduction even when you selected the new regime, then wondering why refund got stuck or notice came. Oops.

Also, please keep documents. Not in your inbox chaos. Like in an actual folder. I say this as someone who once searched “interest certificate” in Gmail for 45 minutes and found everything except the certificate.¶

Okay now the spicy part: what is this “₹1L deduction” everyone is talking about?#

So, “₹1 lakh deduction” can mean different things depending on where you heard it. And that’s why people get confused.

Some possibilities:

1) They mean standard deduction (for salaried people) — which has been a big talking point in recent budgets.
2) They mean a special home loan interest benefit (but careful: 24(b) is ₹2 lakh for SOP under old regime, not ₹1 lakh).
3) They mean 80C is ₹1.5 lakh (not 1 lakh, but people round down randomly, which drives me nuts).
4) They mean 80D / other deductions but again those have different limits.

If someone just says “₹1L deduction” without naming the section, they’re basically doing tax astrology.

The only way to not get misled: ask them “which section?” If they can’t answer, ignore politely.¶

A simple-ish mental model I use (so I don’t lose my mind)#

When I’m trying to decide old vs new regime, I do a quick rough calc.

- If I’m salaried and don’t have much going on: new regime often feels smoother.
- If I have a home loan interest near that ₹2L level + 80C maxed + maybe health insurance: old regime can save real money.

But it’s not just about saving tax. Sometimes the new regime is worth it because you don’t need to buy random LIC policies you don’t even want just to “save tax”.

I’ve done that before. Bought a meh product in March because of panic. Bad idea. I’m older now, slightly wiser… slightly.¶

• Step 1: Add up deductions you can realistically claim (not imaginary ones you plan to do “later”).
• Step 2: Check home loan interest eligible under 24(b) (and whether you’re even allowed under the regime you want).
• Step 3: Compare total tax payable under both regimes using an actual calculator (or CA).
• Step 4: Choose, then stick to it for the year. Don’t keep switching mid-year in your head, it’ll drive you bananas.

Tax year 2025-26 timing: what you should be doing WHEN (rough calendar)#

This is the boring admin part, but honestly it saves you from last-minute panic.

April to June: I try to set up my “tax folder” (lol ambitious) and at least know if I’m going old or new.

July: usually ITR season stress. Websites crash, OTP doesn’t come, and suddenly everyone becomes a tax expert on WhatsApp.

Oct to Dec: good time to check if your TDS is on track and if Form 26AS / AIS is reflecting correctly.

Jan to March: the chaos period. Investment proofs. Rent receipts. Home loan certificate. Everyone running around.

If you’re reading this and it’s already March… um, good luck. But also you can still do a lot, just don’t do dumb purchases for deductions you don’t need.¶

CopyTaxes are not hard because math is hard. Taxes are hard because rules + paperwork + people saying confident nonsense = brain fog.

Let’s talk real-life 24(b) examples (because theory is cute, but life isn’t)#

Example A: You bought a flat, got possession, and it’s self-occupied.

- Your home loan interest for the year is ₹2.6 lakh.
- Under old regime, you generally can claim ₹2 lakh (cap for self-occupied).
- The extra ₹60k is… just extra. No deduction for that part.

Example B: Your property is rented out.

- Interest is ₹3.5 lakh.
- In principle, interest deduction can be higher, but the way losses set off against salary is limited per year, and remaining loss carries forward.

This is why “my friend said I’ll get full refund because big loan” is not always true.

Also, if you have two houses and you treat one as deemed let-out, things get more complicated. Not impossible, just… paperwork-y.¶

Stuff people in 2026 are doing more (and it affects your tax filing)#

One trend I keep noticing (in my circle at least):

- More side income: freelancing, consulting, affiliate money, small online stores.
- More people buying property outside their home city (hello remote work hangover).
- More folks choosing new regime because they’re tired of proof submission.

The tax department’s data matching has also gotten tighter over the years with AIS/TIS, so the old “eh who will know” mindset is… not great. Your bank interest, dividends, large transactions, it all shows up more than it used to.

Not trying to scare you. Just saying: if your AIS has something weird, fix it or at least understand it before filing.¶

My personal hot take on the ₹1L deduction hype#

I don’t love the way social media talks about deductions like they’re cashback offers.

“Get ₹1 lakh deduction!” sounds sexy, but what does it mean? Deduction reduces taxable income, not tax directly. So if you’re in, say, 20% slab, a ₹1 lakh deduction saves ~₹20k tax (plus cess etc). That’s still money, yes, but it’s not like the govt is handing you ₹1 lakh in your account.

Also… sometimes deductions push people into buying stuff they don’t need. I’ve seen friends lock money in bad instruments because an influencer said “save tax”. Please don’t.

If a deduction fits your life goals (home, insurance, retirement) then great. If it’s only for tax… meh.¶

Mini checklist before you file (so you don’t end up rage-filing at 1:40am)#

• Confirm the correct FY / Tax Year and AY. Write it on a sticky note if you have to.
• Download interest certificate for home loan (if claiming 24(b) under old regime).
• Check Form 26AS + AIS/TIS for mismatches (salary, interest, dividends).
• Make sure regime selection matches the deductions you’re claiming (this one is huge).
• Keep rent receipts / HRA proofs if you’re under old regime and claiming HRA.

And yeah, save copies of ITR + acknowledgement + computation. Future-you will kiss past-you on the forehead for it.¶

One more thing: I’m not a CA, I’m just… that friend who reads PDFs#

I have to say this because internet: I’m not your tax advisor. I’m just someone who got tired of feeling dumb every July and started reading sections, circulars, and way too many tax threads.

If you have complex stuff (multiple properties, foreign income, RSUs, business + salary, whatever), get a CA. Seriously. The fee is often less than the mistake cost.

But if you’re a normal salaried person with maybe one home loan and some deductions, you can understand enough to not get played by random “₹1L deduction” headlines.¶

Wrapping up: Tax Year + 24(b) + ₹1L deduction… it’s not impossible, just annoyingly worded#

So yeah. If you take anything from this ramble:

- Tax year is basically when you earned it (FY), and you file in the next AY.
- 24(b) is about home loan interest, and it’s a big deal mostly under the old regime.
- “₹1L deduction” is vague unless someone tells you the actual section. Don’t fall for it.

If you want, I can do a follow-up with a couple sample calculations (old vs new) because honestly that’s where it clicks.

Also if you’re into this kind of practical, real-people money talk, I’ve been browsing AllBlogs.in lately and found some surprisingly useful reads there. Worth a scroll when you’re bored… or when tax season panic hits again.¶