Home loan tax benefits: Section 24(b), 80C and the new regime

The two main deductions

A home loan EMI has two parts, and each earns a different deduction under the old tax regime.

How much tax does it actually save?

Take a ₹50 lakh loan at 8.5% for 20 years. In the first year you pay about ₹4.21 lakh of interest and ₹99,500 of principal. The interest deduction is capped at ₹2 lakh; the principal counts in full towards 80C (if the 80C limit is not already used up by other investments).

At the 30% slab plus 4% cess, ₹2 lakh + ₹99,500 of deductions saves about ₹93,400 of tax in that year; at the 20% slab, about ₹62,300. The home loan EMI calculator shows this for your own loan and slab.

Conditions to keep in mind

• The house must be acquired or constructed within five years from the end of the financial year in which the loan was taken. If not, the Section 24(b) limit for a self-occupied home falls to ₹30,000.
• Interest paid before construction is completed is not lost: it is deductible in five equal instalments starting from the year you get possession, within the overall ₹2 lakh limit.
• The 80C principal deduction is reversed — added back to your income — if you sell the house within five years from the end of the year in which you took possession.
• The loan must be for buying or building the house (or, for a smaller ₹30,000 limit, for repairs). Interest on a loan taken for other purposes does not qualify.
• Keep the lender’s interest certificate each year; your employer and the tax return need it.

Joint home loans

When a house is co-owned and the loan is taken jointly, each co-owner who contributes to the EMIs can claim their share of interest up to ₹2 lakh and principal up to ₹1.5 lakh. A couple repaying a large loan together can therefore claim up to ₹4 lakh of interest deduction a year between them. The deduction follows ownership and repayment — a co-borrower who is not a co-owner cannot claim it.

Let-out and second homes

You can treat up to two homes as self-occupied; the ₹2 lakh interest limit applies to both together. For a let-out house, the full interest is deductible from the rent received (after a 30% standard deduction on the rent), with no cap. If this produces a loss, only ₹2 lakh of it can be set off against salary or other income in a year; the rest is carried forward for up to eight years against future house-property income.

Old regime or new regime?

The new tax regime, which is the default, does not allow the Section 24(b) deduction for a self-occupied home or the Section 80C deduction. For a let-out property, interest can still be deducted from rental income under the new regime, but a loss cannot be set off against other income or carried forward.

Whether the home loan makes the old regime worth choosing depends on your income and your other deductions. For many salaried people, the new regime’s lower slabs and higher rebate outweigh the home loan benefit; for those with large interest payments, HRA and full 80C use, the old regime can still win. Compare both with the income tax calculator.

A note on section numbers

The Income-tax Act, 2025 replaced the Income-tax Act, 1961 from 1 April 2026 and renumbered many provisions. This guide uses the long-familiar section numbers — 24(b), 80C — that appear on lender certificates and that most people search for. Confirm the current provisions with your tax adviser or the Income Tax Department before filing.

Frequently asked questions