# Home Loan Tax Benefits Explained (FY 2025-26)

> How a home loan cuts your tax — Section 24(b) interest up to ₹2 lakh and Section 80C principal up to ₹1.5 lakh, and why the new regime changes the picture.

_By emi.me Editorial · Reviewed by emi.me Editorial · Updated 2026-06-25_
Source: https://emi.me/learn/home-loan-tax-benefits-explained/

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A home loan can cut your income tax in two ways, **but only under the old tax regime**: the interest you pay is deductible up to **₹2,00,000** a year for a self-occupied home under **Section 24(b)**, and the principal you repay counts under **Section 80C** within the overall **₹1,50,000** limit. The default new regime allows neither for a self-occupied home. These are FY 2025-26 (AY 2026-27) rules and this is general information, not tax advice.

## Section 24(b): the interest deduction

Section 24(b) lets you deduct the interest portion of your EMIs. For a **self-occupied** home the cap is ₹2,00,000 a year. For a **let-out** (rented) home there's no cap on the interest itself — but the net loss from house property that you can set off against your other income is limited to ₹2,00,000, with any excess carried forward for up to eight years.

Because [early EMIs are mostly interest](/learn/what-is-an-amortization-schedule/), most borrowers hit the ₹2 lakh cap easily in the first several years of a sizeable loan.

## Section 80C: the principal deduction

The principal you repay each year qualifies under Section 80C, up to ₹1,50,000. The catch is that this ceiling is **shared** with everything else under 80C — EPF, PPF, ELSS, life-insurance premiums, children's tuition and so on. If those already fill the ₹1.5 lakh, your loan principal adds nothing extra. Stamp duty and registration charges paid in the year you buy also count toward this limit.

## A worked example

Take a **₹30,00,000** home loan at **8.5%** over 20 years. In year one the [amortization schedule](/calculators/home-loan/) shows about **₹2,52,709** of interest and **₹59,707** of principal. The interest exceeds the ₹2 lakh cap, so your Section 24(b) deduction is **₹2,00,000**; the ₹59,707 of principal fits inside Section 80C.

For someone with a **₹15,00,000** salary choosing the old regime, deductions like these reduce the year's tax by roughly **₹93,600**. Run your own figures in the [home loan tax-benefit calculator](/calculators/tax-benefit/) — it reads the interest and principal straight from your loan schedule.

## The new-regime catch

Here's what trips people up. The **new regime is the default**, and for a self-occupied home it gives you *none* of the above. But it also has wider slabs and a rebate that makes income up to ₹12 lakh tax-free, so many borrowers still pay less under it — even after losing the deductions. Whether the old regime's deductions beat the new regime's lower rates depends entirely on your numbers; see [old vs new regime for home-loan borrowers](/learn/old-vs-new-tax-regime-for-home-loan/).

Because tax rules shift with every Budget, treat all of this as a starting point and confirm your position with a chartered accountant.