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

By Nitish Bharadwaj · Published Jul 10, 2026 · 6 min

Section 24(b) lets old-regime taxpayers deduct up to ₹2 lakh a year in home loan interest on a self-occupied property, and Section 80C separately allows up to ₹1.5 lakh of principal repayment — a combined ₹3.5 lakh deduction unavailable under the new regime. This guide breaks down pre-construction interest rules, the closed-cohort Section 80EEA benefit, the 5-year rule that reverses your 80C claim if you sell early, and how joint home loan co-borrowers can each claim the full deduction independently.

Every ITR season, the same confusion resurfaces: is home loan interest deductible under the new tax regime? It isn't — but the old regime's home loan benefit is actually two separate deductions, not one, and knowing the difference between Section 24(b) and Section 80C changes how much of your loan repayment you can actually claim.

The Two Separate Deductions: Section 24(b) and Section 80C

Section 24(b) covers the interest portion of your EMI, capped at ₹2 lakh a year for a self-occupied property. Section 80C covers the principal portion, capped at ₹1.5 lakh a year — but this cap is shared with every other 80C investment you make, including EPF, PPF, ELSS, and life insurance premiums. Both are available only under the old tax regime; the new regime, now the default since FY 2023-24, allows neither.

That last row is worth a closer look if you own a rented-out property with a large loan — the interest deduction itself has no cap in either regime, but what you can do with a resulting loss differs sharply by regime. Our dedicated guide to Section 24(b) on let-out property walks through a full worked example of exactly what that ₹2 lakh set-off limit costs a landlord who picks the new regime.

A ₹2.5 Lakh Interest Example: What the Old Regime Actually Saves You

Take a borrower paying ₹2.5 lakh in annual interest and ₹1.5 lakh in annual principal on a self-occupied home. Under the old regime, Section 24(b) caps the interest claim at ₹2 lakh (not the full ₹2.5 lakh paid), and Section 80C allows the full ₹1.5 lakh principal — a combined ₹3.5 lakh deduction. Under the new regime, both deductions are zero.

Pre-Construction Interest: Claimed in 5 Instalments, Not All at Once

If you paid EMIs (or interest on a loan) before the property's construction was complete and possession was handed over, that pre-construction interest isn't lost — it's totalled up and claimed in 5 equal yearly instalments starting from the financial year of possession. Crucially, these instalments still sit inside the same ₹2 lakh self-occupied cap under Section 24(b); they don't add extra room on top of it.

Section 80EEA: Still Alive, But Only for a Closed Cohort of Borrowers

Selling Within 5 Years Reverses Your 80C Claims — Not Your Interest Deduction

Joint Home Loan: Each Co-Borrower Claims the Full Deduction Independently

When two or more co-borrowers are also co-owners of the property, each can claim their own ₹2 lakh Section 24(b) interest deduction and ₹1.5 lakh Section 80C principal deduction separately — not split 50/50 by default, but in proportion to their actual share of ownership and loan repayment. For two co-owners on a large enough loan, that's up to ₹7 lakh in combined household deductions under the old regime, provided each person can show they actually contributed to the EMI from their own income.

Two Self-Occupied Properties: The ₹2 Lakh Cap Still Applies in Aggregate

Since FY 2019-20, a taxpayer can treat up to two properties as self-occupied with nil annual value, instead of being forced to treat the second one as "deemed let out" and taxed on notional rent. But the Section 24(b) interest cap doesn't double along with it — the ₹2 lakh limit applies in aggregate across both self-occupied properties combined, and any interest beyond that is simply forfeited for self-occupied claims rather than carried forward.

For a fuller picture of how the home loan benefit fits into your overall regime choice, our salaried old-vs-new tax regime comparison walks through a complete ₹15 lakh salary example, and our guide to reducing home loan interest and comparing HDFC, SBI, and ICICI home loan rates covers the borrowing side of the same decision. If you also pay rent for a different home you live in — common for anyone who bought this house in a hometown or Tier-2 city while working elsewhere — our guide to claiming HRA and home loan interest together covers exactly when both deductions can be claimed in the same year. One thing a home loan doesn't automatically give you: adequate insurance on the property itself — the bank-arranged cover most lenders require typically protects only their interest in the structure, not your contents. Our guide to home insurance in India breaks down what that bank-arranged policy actually leaves uncovered.