Skip to content
emi.me

Home Loan Tax Benefits Explained (FY 2025-26)

By emi.me Editorial Reviewed by emi.me Editorial Updated ; first published

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, 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 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 — 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.

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

Frequently asked questions

Are home loan tax benefits available in the new regime?
For a self-occupied home, no. The new regime — the default since FY 2023-24 — disallows the Section 24(b) interest deduction and the Section 80C principal deduction. Only a let-out property's interest can be set against its rental income. The ₹2 lakh and ₹1.5 lakh benefits exist only in the old regime.
What is the maximum home loan tax benefit?
Under the old regime, up to ₹2,00,000 a year of interest (Section 24(b), self-occupied) plus up to ₹1,50,000 of principal (Section 80C, shared with your other 80C items) — so ₹3,50,000 of deductions in a typical year. A let-out property's interest is uncapped, with the loss set-off against other income limited to ₹2,00,000.
Does the principal repayment really save tax?
Yes, but it shares the ₹1,50,000 Section 80C ceiling with EPF, ELSS, life insurance and the rest. If those already use the limit, extra principal adds no further 80C benefit. Stamp duty and registration paid in the year of purchase also count toward 80C.
Is this tax advice?
No. This is general information based on FY 2025-26 (AY 2026-27) rules, which change with each Union Budget. Your situation may differ — confirm with a qualified chartered accountant before relying on any number.