A home loan isn't just a way to buy property - under the old tax regime, it's also one of the few remaining ways to meaningfully cut your taxable income. Between Section 24(b) on interest and Section 80C on principal, a single self-occupied home loan can shelter up to ₹3.5 lakh of income every year.
This guide breaks down exactly what you can claim, how much tax it actually saves, and why the new tax regime changes the picture entirely.
Section 24(b) lets you deduct the interest portion of your home loan EMI from your taxable income, under the head "Income from House Property."
| Property Type | Maximum Interest Deduction | Notes |
|---|---|---|
| Self-occupied | ₹2,00,000 / year | Old tax regime only. Includes pre-construction interest, claimed in 5 equal instalments after possession. |
| Let-out (rented) | No upper cap | Full interest deductible against rental income. Loss set-off against salary capped at ₹2,00,000/year (old regime); no set-off against other income under the new regime. |
Important: you can only start claiming Section 24(b) once you have possession of the property - interest paid during construction accumulates and is released in 5 equal annual instalments starting the year construction completes.
The principal portion of your EMI, along with stamp duty and registration charges paid in the year of purchase, qualifies under Section 80C - up to ₹1,50,000 per year.
There's also a clawback to know about: if you sell the property within 5 years of possession, every Section 80C deduction you claimed on it gets added back to your taxable income in the year you sell.
Take a ₹50 lakh home loan at 8.5% over 20 years (EMI ₹43,391). In the first year, the interest and principal split looks like this:
This is the decision that matters most. Since the new tax regime became the default, home loan tax benefits are only available if you actively choose the old regime.
| Benefit | Old Regime | New Regime (default) |
|---|---|---|
| Section 24(b) - self-occupied | Available, up to ₹2L | Not available |
| Section 80C - principal | Available, up to ₹1.5L | Not available |
| Interest on let-out property | Fully deductible | Deductible only against rental income, no cap - but no loss set-off against salary |
| Section 80EE / 80EEA (first-time buyers) | Available if eligible | Not available |
The right choice depends on your numbers: the new regime offers lower slab rates and a higher standard deduction, but strips out every home-loan-linked benefit for a self-occupied property. As a rule of thumb, if your home loan interest alone exceeds ₹2 lakh a year and you're in the 20-30% tax bracket, the old regime is usually worth running the numbers on.
There's no shortcut here - the only reliable way to decide is to compute your actual tax liability under both regimes using your real interest and principal figures for the year.
Beyond the standard ₹2L + ₹1.5L, some first-time buyers qualify for extra deductions - but both come with sanction-date windows that have since closed, so they only apply if your loan was sanctioned inside the eligible period:
Since the 80EEA sanction window closed on 31 March 2022, a fresh home loan taken today does not qualify for it - only borrowers still repaying a loan sanctioned inside that window can claim it.
Use EMIPlan's free calculator to see the exact interest and principal you'll pay each year of your home loan - the numbers you need for Section 24(b) and 80C claims.
Calculate Your Home Loan EMI →Under the old regime, a self-occupied home loan can shelter up to ₹3,50,000 of income a year - ₹2,00,000 interest under Section 24(b) plus ₹1,50,000 principal under Section 80C. At a 30% tax slab, that's roughly ₹1,05,000 saved annually, though the exact figure depends on how much interest and principal you actually pay that year.
Not for a self-occupied property - the new tax regime removes both Section 24(b) and Section 80C deductions entirely for self-occupied homes. If the property is rented out, you can still deduct interest against rental income, but you can't set off any resulting loss against your salary the way the old regime allows.
Yes - if both are co-borrowers and co-owners, each can independently claim up to ₹2,00,000 in interest and ₹1,50,000 in principal, effectively doubling the household's deduction on the same loan.
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