For twenty years the home loan was the centrepiece of Indian tax planning: ₹2 lakh of interest under Section 24(b), ₹1.5 lakh of principal under 80C, sometimes another ₹1.5 lakh under 80EEA, and the whole package could be worth over a lakh in tax every year. Most of that architecture is old-regime only, and since the new regime became cheaper for most salaried people in 2025, a lot of borrowers are discovering their loan no longer saves what it used to. This guide lays out each benefit, the conditions on it, what changes when the property is let out, and the honest comparison for a borrower deciding between regimes.
The benefits, mapped by regime
| Benefit | Section | Limit | Old regime | New regime |
|---|---|---|---|---|
| Interest - self-occupied house | 24(b) | ₹2,00,000 a year | Yes | No |
| Interest - let-out house | 24(b) | No cap on the deduction; loss set-off against other income capped at ₹2,00,000 | Yes | Yes, but the loss cannot be set off against salary or carried forward |
| Principal repayment | 80C | ₹1,50,000 (shared with PF, PPF, ELSS etc.) | Yes | No |
| Stamp duty and registration | 80C | Within the same ₹1,50,000, in the year paid | Yes | No |
| Additional interest, affordable housing | 80EEA | ₹1,50,000 - loans sanctioned 1 Apr 2019 to 31 Mar 2022 only | Yes (existing loans) | No |
| Additional interest, first-time buyers | 80EE | ₹50,000 - loans sanctioned in FY 2016-17 only | Yes (existing loans) | No |
The one line that survives in the new regime is interest on a let-out property - and even that is hobbled, because the resulting loss cannot be set off against your salary. Everything else requires the old regime.
Section 24(b) for a self-occupied house
Income from a house you live in is treated as nil, and the interest you pay on a loan taken to buy, build, repair or reconstruct it creates a loss from house property of up to ₹2 lakh, which you set off against salary or other income. Conditions:
- The loan was taken on or after 1 April 1999 for purchase or construction. Loans for repairs, or older loans, are capped at ₹30,000.
- Construction or purchase is completed within five years from the end of the financial year in which the loan was taken. Miss the deadline and the cap drops to ₹30,000.
- You have an interest certificate from the lender showing the year's interest.
Since 2019 a taxpayer may treat two houses as self-occupied. Budget 2025 simplified the condition further: a house you own but cannot occupy for any reason is treated as self-occupied without needing to justify why. Both houses share the single ₹2 lakh interest cap.
The value: at the old regime's 30% band, ₹2 lakh of interest saves ₹62,400. At 20%, ₹41,600. On a ₹50 lakh loan at 8.5% the first-year interest is about ₹4.2 lakh - more than double the cap - so the ₹2 lakh ceiling binds for almost every new borrower.
Let-out property: no cap, but a set-off limit
If you rent the house out, the arithmetic changes. Rental income is taxed after a flat 30% standard deduction (Section 24(a)) and municipal taxes; the entire loan interest is then deductible under 24(b) with no ₹2 lakh cap. A worked example:
| Item | Amount |
|---|---|
| Annual rent received | ₹3,60,000 |
| Less: municipal taxes paid | − ₹12,000 |
| Net annual value | ₹3,48,000 |
| Less: 30% standard deduction | − ₹1,04,400 |
| Less: interest on loan (full) | − ₹4,20,000 |
| Loss from house property | − ₹1,76,400 |
Under Section 71, a house-property loss can be set off against salary and other income only up to ₹2 lakh a year. Anything beyond that is carried forward for eight years, but can then be set off only against future house-property income. In the example the whole ₹1,76,400 is absorbed this year.
In the new regime, the deduction of let-out interest still exists, but the loss cannot be set off against salary at all and cannot be carried forward. In practice, the interest reduces your rental income to zero and the excess is simply lost. A landlord with a big loan and a modest rent gets far less from the new regime than the old.
Under construction and pre-construction interest
No 24(b) deduction is available while the house is under construction. Interest paid from the date of the loan until the end of the financial year before the year of completion is "pre-construction interest", and it is deductible in five equal instalments starting from the year the construction completes - within the ₹2 lakh cap for a self-occupied house, together with that year's regular interest.
Example: loan taken June 2024, interest of ₹3 lakh paid during FY 2024-25 and FY 2025-26, possession in August 2026 (FY 2026-27). Pre-construction interest = ₹6 lakh, claimable at ₹1,20,000 a year from FY 2026-27 to FY 2030-31. But FY 2026-27's regular interest is already ₹4 lakh, so the self-occupied cap of ₹2 lakh is already exhausted and the pre-construction instalment adds nothing. It only helps if the house is let out, or the regular interest is under ₹2 lakh.
Principal repaid during construction does not qualify under 80C either - the 80C benefit begins when the house is complete. Buyers of under-construction flats often pay EMIs for two or three years with no tax benefit at all.
80C: principal, stamp duty and the five-year rule
The principal component of your EMIs is deductible under Section 80C within the ₹1.5 lakh limit that PF, PPF, ELSS, insurance and tuition fees also share. Salaried people with a decent PF contribution often have little 80C room left, which is why the principal benefit is smaller than it sounds.
Stamp duty and registration charges are also allowed under 80C, in the year they are paid, within the same limit. On a ₹60 lakh purchase in most states that is ₹3-4 lakh - far more than the limit - so in the year of purchase the 80C bucket is usually filled by stamp duty alone.
The condition: do not sell within five years of the end of the year of possession. If you do, every 80C principal deduction claimed is added back to your income in the year of sale. Interest deductions under 24(b) are not reversed.
Joint loans: each co-borrower claims separately
If two people are both co-owners and co-borrowers, each can claim 24(b) interest up to ₹2 lakh and 80C principal up to ₹1.5 lakh, in proportion to their share of the loan. A couple with a 50:50 loan paying ₹5 lakh of interest can together deduct ₹4 lakh - the reason joint loans are the norm for couples in the old regime. Being a co-borrower without ownership, or a co-owner without servicing the loan, gets nothing.
Both must actually pay: the share claimed should match contributions from each person's account, and the lender's certificate should list both names.
Old or new regime when you have a home loan?
The loan alone does not decide it. Take a ₹20 lakh salary with ₹2 lakh of self-occupied interest and ₹1.5 lakh of 80C (principal + PF): the old regime's tax is ₹3,04,200 against the new regime's ₹1,92,400. Even adding 80D and ₹50,000 of NPS - the "full kit" of ₹3.75 lakh - the old regime lands at ₹2,96,400. The home loan is necessary but not sufficient; what closes the gap is a large HRA exemption on top, which only renters in metros have.
Three situations where a borrower should look seriously at the old regime:
- You rent in a metro (large HRA) while paying interest on a house elsewhere - the combination of HRA and 24(b) is the strongest old-regime case there is.
- The house is let out with interest well above the rent, so the ₹2 lakh set-off against salary is available (old regime) instead of lost (new).
- Two earners with a joint loan, each claiming ₹2 lakh, and each already filling 80C.
Otherwise, run the numbers in the calculator with your actual interest certificate. For most single-income borrowers who live in the house, the new regime still wins, and the loan becomes what it always really was: a way to own a house, not a tax strategy.
Enter the interest from your lender's certificate along with 80C, 80D and HRA - the calculator tells you whether the old regime beats the new with your loan.
Compare regimes with your loan →Frequently asked questions
How much home loan interest can I claim under Section 24(b)?
Up to ₹2 lakh a year for a self-occupied house (old regime only), provided the loan was for purchase or construction and the property was completed within five years. For a let-out house the full interest is deductible, but the loss set off against other income is capped at ₹2 lakh.
Can I claim home loan interest in the new tax regime?
Not for a self-occupied house. For a let-out property, interest is deductible against the rent, but any resulting loss cannot be set off against salary or carried forward. 80C principal is not available in the new regime.
Is home loan principal repayment tax deductible?
Yes, under Section 80C in the old regime, within the shared ₹1.5 lakh limit, once the house is complete. Selling within five years of possession reverses the 80C claims.
Can I claim stamp duty and registration charges?
Yes, under 80C in the year of payment, within the ₹1.5 lakh limit and in the old regime only.
What is pre-construction interest?
Interest paid before the financial year in which construction is completed. It is deductible in five equal annual instalments starting from the year of completion, within the ₹2 lakh cap for a self-occupied house.
Can both husband and wife claim home loan tax benefits?
Yes, if both are co-owners and co-borrowers and both repay from their own funds. Each can claim up to ₹2 lakh of interest and ₹1.5 lakh of principal on their share, in the old regime.
Is Section 80EEA still available?
Only for loans sanctioned between 1 April 2019 and 31 March 2022. Borrowers who qualified then continue to claim the additional ₹1.5 lakh of interest each year in the old regime; no new loans qualify.