Home Loan Tax Benefits 2026: What Section 24 and 80C Actually Let You Claim (Old vs New Regime)

On a self-occupied home, the old tax regime lets you deduct up to ₹2 lakh of loan interest a year (Section 24(b)) and up to ₹1.5 lakh of principal repaid (Section 80C, shared with your other 80C items). The new regime, now the default, allows neither. Figures are as of October 2026 from the Income Tax Department's own pages.

Which Act applies

The Income-tax Act, 2025 came into force on 1 April 2026 (its section 1(3)). A return for FY 2025-26 (assessment year 2026-27) is still governed by the 1961 Act, so the old section numbers below apply to the return you file now. For income from FY 2026-27, the corresponding provisions are:

These mappings are from the Department's section pages. The ₹2 lakh and ₹30,000 interest limits, the ₹1.5 lakh 80C-type limit and the five-year transfer rule carry over unchanged.

What each regime allows

The new-regime let-out row differs from some summaries. Section 115BAC (now 202) disallows set-off of house-property loss against other heads, and sub-section (3) says the loss is deemed given full effect with no deduction in later years. The Department's tax-rates page says the same: such loss will not be carried forward.

Conditions that catch people out

• ₹2 lakh needs completion in time: the loan must be taken on or after 1 April 1999 and the house acquired or built within five years from the end of the financial year of borrowing. Otherwise the limit is ₹30,000. You also need the lender's interest certificate.
• Pre-construction interest: interest for the period before the year of completion is claimed in five equal instalments, starting with the completion year. The cap still applies to the total. Example: ₹3,00,000 of pre-EMI interest gives ₹60,000 a year for five years, and that ₹60,000 plus the current year's interest must stay within ₹2 lakh.
• Two self-occupied homes: allowed since AY 2020-21, but the aggregate interest cap stays ₹2 lakh (or ₹30,000), not per house.
• 80C covers principal, not interest: the section excludes expenses allowable under Section 24. Stamp duty and registration fee also count, in the year paid.
• Selling within five years: if you transfer the house before five years from the end of the financial year of possession, the 80C deductions claimed earlier are added to income in the year of transfer. The section does not claw back 24(b) interest.
• Section 80EEA: an extra ₹1,50,000 only for loans sanctioned 1 April 2019 to 31 March 2022, stamp duty value up to ₹45 lakh, no other house owned on the sanction date, and not claimable alongside 80EE. A 2026 loan does not qualify.
• Co-owners: the Department says co-owners with definite shares are assessed separately, each on their share. Claim only for interest and principal you actually pay, in line with your ownership share.

What the deduction is worth

Old-regime slabs for an individual under 60 are 5% (₹2.5 to 5 lakh), 20% (₹5 to 10 lakh) and 30% (above ₹10 lakh), plus 4% cess. Surcharge is ignored below. A full ₹3,50,000 deduction (₹2 lakh interest plus ₹1.5 lakh principal) saves:

Whether that beats the new regime depends on your whole income, so run both. Our salaried regime comparison does a full example. For a rented home see Section 24(b) on let-out property, for a second house see second home loan tax benefits, and if you also pay rent see HRA and home loan interest together.

Worked example: a let-out flat with a large loan

Should tax change how you repay the loan?

Take an assumed ₹50 lakh loan at 8.5%, 20 years. The EMI is ₹43,391 and total interest is ₹54.14 lakh (formula: EMI = P × i × (1+i)^n ÷ ((1+i)^n − 1), i = 8.5% ÷ 12, n = 240). In year 1 you pay ₹4.21 lakh interest and ₹0.99 lakh principal. Annual interest stays above ₹2 lakh for years 1 to 14 (it first drops below in year 15), so on the old regime, prepaying in the early years does not reduce your 24(b) deduction, since you are over the cap anyway. Only late in the loan does prepaying cost you some deduction.

Prepay or invest? The loan costs 8.5% a year compounded monthly, about 8.84% effective, and prepaying earns that rate for certain. Investing ₹10,000 a month instead only wins if your after-tax return is above roughly 8.8%. Value at month 240 of prepaying then investing the freed EMI, against investing ₹10,000 a month throughout:

Interest from a bank deposit taxed at 31.2% needs a pre-tax return of about 12.85% to net 8.84%. Market returns are not guaranteed and the table ignores any tax saved on interest once it falls below ₹2 lakh. The sum above also assumes your emergency fund and insurance are already in place.