Under the old tax regime, a home loan gives you a deduction of up to ₹2 lakh a year for interest on a self-occupied home (familiar section 24(b)) and up to ₹1.5 lakh for principal repayment within the section 80C limit. Under the new regime, which is the default, there is no deduction for interest or principal on a self-occupied home, but interest on a let-out property is still deductible. From 1 April 2026 these provisions sit in the Income-tax Act, 2025, under new section numbers.
Key takeaways
- Old regime: interest on a self-occupied home up to ₹2 lakh a year; principal, stamp duty and registration within the ₹1.5 lakh 80C limit.
- New regime (default): no home loan deduction for a self-occupied home.
- Let-out property: full interest deductible in both regimes, but loss set-off against other income is limited.
- Interest paid before completion is claimed in five equal instalments from the year construction is completed.
- Co-borrowers who are also co-owners can each claim their own limits.
The deductions in one table
| Benefit | Old section (1961 Act) | New section (2025 Act) | Old regime | New regime |
|---|---|---|---|---|
| Interest, self-occupied home | 24(b) | 22 | Up to ₹2 lakh a year | Not allowed |
| Interest, let-out home | 24(b) | 22 | Actual interest | Actual interest |
| Principal, stamp duty, registration | 80C | 123 | Within ₹1.5 lakh overall | Not allowed |
| Extra interest for first-time buyers (loans sanctioned 2019-22) | 80EEA | 131 | Up to ₹1.5 lakh, if conditions met | Not allowed |
| Standard deduction on rent | 24(a) | 22 | 30% of net annual value | 30% of net annual value |
Interest on a self-occupied home
If you live in the house, or cannot because your job is elsewhere, its annual value is nil and you can deduct interest up to ₹2 lakh a year under the old regime. Since Budget 2025, you can treat up to two houses as self-occupied without conditions, but the ₹2 lakh interest limit is a combined limit across both.
The ₹2 lakh limit falls to ₹30,000 if the loan was not for purchase or construction (for example a repair loan), or if construction is not completed within five years from the end of the financial year in which the loan was taken. For buyers of under-construction homes, delayed possession can therefore reduce your tax benefit.
Pre-construction interest
Interest paid before the house is completed or acquired is not lost. It is added up and claimed in five equal parts, starting in the year construction is completed, within the overall limit for a self-occupied home.
Principal, stamp duty and registration
Principal repayment on a loan for buying or building a house counts towards the ₹1.5 lakh limit shared with PF, life insurance, PPF and similar items. Stamp duty and registration fee you pay in the year of purchase also count. If you sell the house within five years of the end of the year you took possession, the principal deductions claimed are reversed. With Tamil Nadu’s 7% stamp duty and 2% registration fee, first-year claims often hit the cap; see our stamp duty guide.
Let-out property
If you rent the house out, rent less municipal tax is the net annual value. You deduct 30% of that as a standard deduction plus the full interest paid, with no ₹2 lakh cap on interest. If the result is a loss, you can set off up to ₹2 lakh a year against salary or other income under the old regime and carry the rest forward for eight years. Under the new regime, the interest deduction on let-out property is allowed but the loss cannot be set off against other heads. See how rental income is taxed.
Old regime or new regime?
The new regime has lower slab rates and, from 2025-26, no tax for most individuals with income up to ₹12 lakh after the rebate. The old regime is worth comparing only if your deductions are large. A simple rule of thumb: add up home loan interest (up to ₹2 lakh), 80C items (up to ₹1.5 lakh), health insurance and HRA if any. If the total is modest, the new regime usually wins. Salaried taxpayers can switch every year when filing; those with business income have limited switches. Work the numbers with your chartered accountant.
Joint home loans
If a husband and wife are co-owners and co-borrowers, each can claim interest up to ₹2 lakh and principal within their own ₹1.5 lakh limit under the old regime, in proportion to their share. This can roughly double the benefit for a couple. Being a co-borrower without being a co-owner does not qualify. Read joint home loans and joint ownership for the pitfalls.
Documents to keep
- Annual interest and principal certificate from the lender.
- Sale deed and stamp duty receipt.
- Completion or occupancy certificate for under-construction purchases.
- Rent agreement and receipts, and property tax receipts, for a let-out house.
Employees should give these to the employer early in the year so TDS on salary reflects the deduction under the regime chosen.
Frequently asked questions
Can I claim home loan interest under the new tax regime?
Not for a self-occupied home. For a let-out home, interest is deductible from rental income, but any resulting loss cannot be set off against salary under the new regime.
Where is the 24(b) deduction under the Income-tax Act 2025?
Deductions from house property income, including home loan interest, continue in the house property chapter of the 2025 Act under a new section number. Check the official Act text or ask your CA for the exact reference. The 80C-type deduction for principal has also been renumbered.
Can both spouses claim home loan benefits?
Yes, if both are co-owners and co-borrowers and both pay the EMI. Each claims within their own limits under the old regime.
Is stamp duty deductible?
Under the old regime, stamp duty and registration fee for a residential house count within the ₹1.5 lakh limit in the year they are paid.
This article is general information as of September 2026, not legal, tax or financial advice. Rules and rates change; confirm with a qualified advocate, chartered accountant or the relevant department before you act.
References
- TaxClue: Home loan tax benefits under the Income-tax Act 2025
- ClearTax: Income-tax Act 2025 old vs new section numbers
- CBDT: FAQs on transition to the Income-tax Act, 2025
Choosing a home that fits your loan?
Our team can help you match EMIs, tax benefits and possession timelines with the right Coimbatore home.
