Home loan tax benefits: old vs new tax regime

The home loan tax benefits (old regime)

• Interest (Section 24(b)): up to ₹2 lakh a year for a self-occupied home. Interest paid before construction is complete can be claimed in five equal parts from the year construction finishes, within the same limit.
• Principal (Section 80C): up to ₹1.5 lakh a year, shared with other 80C items such as EPF, PPF and life insurance. Stamp duty and registration paid in the year of purchase also count.
• Joint loans: each co-owner who is also a co-borrower and pays the EMIs can claim their own limits, so a couple can claim up to twice as much.
• Let-out property: interest is deductible without the ₹2 lakh cap, but a loss from house property can be set off against other income only up to ₹2 lakh a year (the rest is carried forward).

What you get under the new regime

For a self-occupied home: nothing. No interest deduction and no 80C. In exchange, slab rates are lower and fewer deductions are needed to pay less tax.

For a let-out property, interest can still be deducted from that property's rental income, but a resulting loss can't be set off against your salary or other income.

How much the deductions are worth

The most a single borrower can save in a year on a self-occupied home, under the old regime, if they use the full ₹2 lakh interest and ₹1.5 lakh principal limits (and nothing else already fills their 80C):

In practice, many salaried people already fill most of their ₹1.5 lakh 80C limit through EPF, so the extra benefit from principal is often small. The interest deduction is usually the bigger one.

Which regime should you choose?

1. Add up all deductions you'd claim under the old regime: home loan interest, 80C, HRA (if any), health insurance and others.
2. Work out your tax under both regimes. The Income Tax Department's website has a free tax calculator.
3. Choose the lower one. Large home loan interest plus other deductions often favours the old regime; few deductions usually favour the new one.
4. Salaried employees can usually switch regimes every year when filing their return.

A note on the new Income-tax Act

The Income-tax Act, 2025 replaced the 1961 Act from 1 April 2026 and renumbers many sections (for example, the 80C deduction is now under a new section number). Published guidance indicates that the home loan deductions and limits described here continue unchanged, and most people still refer to them by the old names. Tax rules change, so confirm the current position with a tax adviser or the Income Tax Department before filing.

Plan your loan

See your EMI and yearly interest with the home loan EMI calculator; its yearly schedule shows how much interest you pay each year, which is what the ₹2 lakh limit applies to. Thinking of prepaying instead of keeping the loan for the tax benefit? Try the prepay vs invest calculator.

Frequently asked questions