Home Loan Tax Benefits: Section 24(b), 80C and the Old vs New Regime

Individuals in India now choose between two income-tax regimes. The new regime is the default: it generally offers lower tax rates but removes most deductions. The old regime keeps deductions such as those for home loans, insurance and provident fund, but its rates are higher for many income levels.

This choice decides everything else in this guide. Under the new regime, the home-loan deductions for a self-occupied house — the interest deduction and the principal and stamp-duty deductions — are not available. So if you stay in the new regime, a loan on the house you live in brings no income-tax deduction at all.

The old regime makes sense only if your total deductions are large enough to outweigh its higher rates. Home-loan interest and principal are often among the largest deductions a salaried person has, so buying a home can tip the balance — but not always. It depends on your income and your other deductions.

At the time of writing, salaried taxpayers without business income can generally choose their regime each year when they file their return; the rules on switching are stricter for people with business income. Confirm the current rules with your CA.

Under the old regime, the interest part of your EMIs (monthly loan instalments) on a loan for a self-occupied house can be deducted from your income up to ₹2 lakh a year, under Section 24(b). Self-occupied means the house you or your family live in, as opposed to one you rent out.

A few practical points:

• The limit applies to the interest for the year, not your full EMI. In the early years of a long loan, most of each EMI is interest; later, as the principal share grows, the interest falls. The year-by-year schedule in our EMI calculator shows the split for your loan.
• You need a certificate from your lender showing the interest and principal paid in the year. Lenders usually issue a provisional one during the year and a final one after it ends.
• If the house is let out, different rules apply — both to how much interest you can claim and to how any resulting loss is set off against your other income — and they differ between the two regimes. That is a conversation to have with your CA.

The principal part of your EMIs counts under Section 80C — again, under the old regime only. So can the stamp duty and registration charges you pay when buying the house, in the year you pay them; our guide to stamp duty and registration explains those charges.

The catch is that Section 80C has one overall limit of ₹1.5 lakh a year, shared with many other things: provident fund contributions, life-insurance premiums, PPF, tax-saving mutual funds, children's tuition fees and more. If your provident fund already uses most of that limit, your principal repayments may add little or nothing.

Two conditions worth knowing:

• Principal repaid while the house is still under construction generally doesn't qualify; the deduction applies once construction is complete. Check this with your CA if you are buying a house that isn't finished yet.
• If you sell the house within a holding period set by the law, principal deductions already claimed under 80C can be reversed and added back to your income in the year of sale.

An illustration, with round numbers. Suppose that in one year you pay ₹2.4 lakh of interest and ₹1 lakh of principal on a self-occupied home, and your provident fund already uses ₹1 lakh of your 80C limit. Under the old regime, your interest deduction stops at ₹2 lakh, and only ₹50,000 of the principal adds any benefit, because 80C tops out at ₹1.5 lakh. Your own numbers will differ; the point is that the limits, not the size of your EMI, decide what you can claim.

If you buy with your spouse or another family member, a joint loan can increase the household's total benefit. Co-owners of the property who are also co-borrowers on the loan can each claim the home-loan deductions within their own limits. Under the old regime, that means each can claim interest up to their own Section 24(b) limit and principal within their own Section 80C limit.

To make this work cleanly:

• Be both a co-owner on the sale deed and a co-borrower on the loan. Being only one of the two can undermine the claim.
• Keep the ownership shares clear in the sale deed, and keep records showing that each of you actually contributes to the EMIs, ideally from your own bank accounts. Claims generally follow ownership share and actual payment, and the right split for your situation is worth settling with a CA.
• Remember that the regime choice is personal. One of you might be better off in the old regime while the other stays in the new one, in which case only the person in the old regime claims these deductions.

Joint ownership has other consequences too — for inheritance, resale and future borrowing — so decide on it for the right reasons, not for tax alone.

If you take a loan for a house that is still being built — whether from a developer or on your own plot — you will usually pay interest for months or years before you can live in it. This pre-construction interest isn't lost. Under the old regime, it is claimed in five equal instalments, starting in the year construction is finished.

In practice, one-fifth of the total pre-construction interest can be claimed in the year of completion and in each of the following four years, alongside that year's regular interest. For a self-occupied house, these instalments count within the same yearly interest limit rather than on top of it.

Some practical cautions:

• Keep every interest certificate from the construction period, because you will need them for claims years later.
• The full interest deduction on a self-occupied house also depends on construction being completed within a period set by the law; if it runs late, the allowable amount can fall sharply. Ask your CA about the current conditions.
• A loan used only to buy a plot, with no house yet, is treated differently — see our guide to plot loans versus home loans.

There is no universal answer, but the method is simple: calculate your tax both ways, each year, with your real numbers.

1. List your income for the year, including salary, rent and interest.
2. Add up what you could deduct under the old regime: home-loan interest up to the limit, 80C items including principal and any stamp duty paid that year, and any other deductions you are eligible for.
3. Work out the tax under the old regime with those deductions, and under the new regime without them.
4. Choose the lower, and tell your employer so the right tax is deducted through the year.

Watch for changes when you buy. If you move from a rented home into the house you have bought, you stop paying rent, and with it you may lose the house rent allowance (HRA) exemption that was part of your old-regime deductions. The home-loan deductions may simply replace it rather than add to it.

Run the numbers again every year. Your interest falls as the loan ages, your salary changes, and Budgets change the slabs and rules. The regime that suited you in the first year of your loan may not suit you a few years later.

Good records make every claim easier, and your CA will ask for them:

• the registered sale deed and, for a new house, the completion or occupancy certificate or possession letter;
• stamp duty and registration receipts;
• the loan sanction letter and the lender's annual interest-and-principal certificates;
• proof of who paid the EMIs, if the loan is joint.

One more caution. The section numbers in this guide are the long-familiar ones. India's income-tax law has since been rewritten under a new Income-tax Act that took effect in April 2026 and renumbers many provisions, so your CA and the tax forms may use different section numbers. When you eventually sell, capital gains rules come into play as well — our capital gains tax guide covers that side.

A short session with a CA before you buy, not just at filing time, is worth it — especially if you are choosing between joint and single ownership, or between a ready and an under-construction home. And if it helps to plan around real properties, Siddaganga Real Estate can share details of houses and MUDA-approved plots in Mysuru and help you gather the documents your CA and lender will need.