Home Loan Tax Benefits in India (FY 2025–26): Section 24(b), 80C, 80EE, 80EEA and What Actually Works

Buying a home in India is a big milestone, emotional and financial. Home loans also come with tax benefits, but the real benefit depends on your tax regime, income level, property use, and loan stage.

This guide explains what you can actually claim in FY 2025–26 (AY 2026–27), what does not work for most people anymore, and how to evaluate it realistically.

Quick overview (for most salaried home buyers)

• If your home is self-occupied, home-loan tax benefits work mainly in the Old Tax Regime (OTR).
• In the New Tax Regime (NTR), you generally cannot claim:
  • Section 24(b) interest deduction for self-occupied property
  • Section 80C principal repayment
  • Section 80EE / 80EEA additional interest deductions
• In NTR, salaried people still get a standard deduction, which is why many people find NTR competitive even without deductions.

Step 1: Start with the right choice, Old vs New Tax Regime

Under the New Tax Regime (NTR)

For self-occupied property:

• Section 24(b) interest deduction: Not allowed
• Section 80C principal repayment: Not allowed
• Section 80EE / 80EEA: Not allowed
• Standard deduction for salary: Allowed

For let-out property:

• Interest can reduce rental income, but house property loss cannot be used to reduce salary/other income in the same year under NTR in most cases.

Under the Old Tax Regime (OTR)

• Section 24(b): Allowed
• Section 80C: Allowed
• Section 80EE / 80EEA: Allowed, only if you meet conditions

How your EMI really works (why timing matters)

Each EMI has two parts:

• Interest (your borrowing cost)
• Principal (loan repayment)

In the initial years of long-tenure loans, the interest component is usually much higher than principal. This matters because:

• Section 24(b) is about interest, so it is most valuable early
• Section 80C is about principal, and many people don’t get extra benefit because 80C is already used up

Section 24(b): The core home loan tax benefit

Section 24(b) allows a deduction for interest paid on a home loan.

A) Self-occupied property (SOP)

Maximum deduction: up to ₹2,00,000 per year (under conditions)

Key rules you should know

• Deduction starts only after possession, not during construction.
• If the property is under construction, interest paid during that period is treated differently (see below).
• Completion timelines matter. If conditions are not met, the higher limit may not apply in some cases.

Pre-construction interest (common confusion)

Interest paid before possession is not lost. You can claim it in 5 equal instalments, starting from the year you get possession, subject to Section 24(b) limits.

B) Let-out property (LOP)

• Interest deduction can be claimed against rental income.
• But if interest pushes you into a loss, the ability to use that loss to reduce other income depends on set-off rules and can be restricted.

Section 80C: Principal repayment (often overestimated)

Section 80C allows deduction for:

• Principal repayment
• Stamp duty and registration charges (only in the year they are paid)

But the total Section 80C cap is ₹1,50,000 per year, shared across many items.

Why 80C often gives “no extra benefit”

Many salaried people already exhaust 80C through:

• EPF
• life insurance premiums
• PPF / ELSS
• children’s tuition fees (eligible categories)

So home loan principal repayment often adds no incremental tax benefit.

Important rule people miss

• If you sell the property too early (commonly discussed as within 5 years in many filing explainers), deductions claimed under principal repayment can get reversed and become taxable.

Section 80EE: First-time buyer benefit (rare today)

Section 80EE provides an additional interest deduction of ₹50,000 per year, over and above Section 24(b).

Conditions (all must match)

• You must be a first-time home buyer
• Loan amount ≤ ₹35 lakh
• Stamp duty value ≤ ₹45 lakh
• Most importantly: the loan had to be sanctioned in a specific notified window (this is why most buyers today do not qualify)

Section 80EEA: Affordable housing additional interest (more searched, still condition-heavy)

Section 80EEA was designed around affordable housing and offers an additional interest deduction (subject to conditions).

Important points

• It is not automatic for first-time buyers.
• It has specific eligibility rules tied to property value limits, ownership conditions, and sanction date windows.
• If you are exploring this, do not assume eligibility based on “first home” alone.

80EE vs 80EEA (difference)

• 80EE: extra deduction up to ₹50,000, older conditions and older sanction window, rarely relevant now.
• 80EEA: larger possible additional deduction, affordable-housing focused, still time-bound and condition-heavy.

Old vs New regime: Home loan deductions at a glance

Joint home loans: when "double benefit" actually works

Joint loans can increase deductions, but only if structure and documents match.

To claim deductions individually:

• Both borrowers must be co-owners
• Both must be co-borrowers
• Deductions should match ownership share and actual EMI contribution
• The interest certificate should clearly support the structure

Also, the combined claim by both co-owners cannot exceed the actual interest/principal paid. Allocation should be logical.

HRA + Home Loan together: can you claim both?

Yes, many people claim both HRA and home loan benefits in the same year, but your situation should make sense.

Common valid scenarios:

• Your house is in one city, but you live on rent in another due to job
• Your home is not actually occupied by you for genuine reasons
• The home is still under construction and you live on rent

If you want to avoid common filing mistakes here, refer: Claiming HRA: common mistakes and tax benefits.

Second house, deemed let-out, and “two self-occupied” confusion

If you own more than one house, taxation can change based on:

• which house you treat as self-occupied
• whether the second house is actually rented
• whether the law treats it as “deemed let-out” in your situation

This matters because interest deductions can look large on paper, but the actual benefit depends on income and set-off rules.

Home Loan Breakeven Table

This table is illustrative and meant for direction, not a promise. It assumes salaried income, FY 2025–26 slabs, NTR includes standard deduction, and in OTR, Section 80C is already exhausted through other items.

Insight: At lower salary levels, OTR is rarely better unless your interest outgo is substantially high and you also have other deductions. At around ₹12.75 lakh, OTR almost never makes sense purely for tax savings.

Who actually benefits most from home loan deductions?

People who usually benefit more

• Higher-income earners choosing OTR
• Buyers in early years of large loans (high interest component)
• Joint borrowers with clean co-ownership and clean documentation
• Let-out or second-home cases where rental income and set-off rules support it

People who usually benefit less

• Taxpayers in NTR with self-occupied homes
• Salaried people who already max out Section 80C
• Buyers expecting tax savings to justify buying the home

Common mistakes to avoid

• Buying a house mainly for tax savings
• Assuming 80EE / 80EEA applies automatically
• Ignoring regime comparison
• Overestimating 80C benefit
• Claiming joint loan benefits without aligned co-ownership and payment reality

Tax benefits should support your decision, not drive it.

Quick checklist before you file

• Which regime did you pick, NTR or OTR?
• Is the property self-occupied, let-out, or second/deemed let-out?
• Do you have possession, or is it still under construction?
• Is your 80C already exhausted through EPF/insurance/PPF/ELSS?
• Are you claiming 80EE / 80EEA, and do you actually match the sanction window and property conditions?
• For joint loans, are you both co-owner + co-borrower, and is allocation sensible?
• If claiming HRA + home loan, do the facts and documents support why you rent?

If you want to keep your filing checks clean before submitting ITR, refer: AIS vs TIS vs Form 26AS before filing ITR.

Final takeaway

Home loans do offer tax benefits, but only inside strict rules.

• Section 24(b) is the main benefit, and it is mainly useful in OTR
• Section 80C is often already used up, so incremental benefit can be small
• 80EE and 80EEA are not automatic, they depend on strict eligibility and time windows
• Under NTR, most benefits disappear for self-occupied homes

Buy a home for affordability and life goals. Let tax benefits remain a bonus, not the justification.

FAQs

1. Can I claim anything if my home is still under construction?

For self-occupied property, Section 24(b) starts only after possession. Pre-construction interest can be claimed later in 5 instalments after possession, subject to limits.

2. Can I claim both 24(b) and 80C?

Yes, in OTR you can claim 24(b) for interest and 80C for principal, within their caps and conditions.

3. I am a co-borrower but not a co-owner. Can I claim deduction?

This is risky. Co-borrower alone is not a clean base. Ownership alignment makes the claim much stronger.

4. Can I claim HRA and home loan together?

Yes, possible in genuine cases, but your reason for renting should be consistent and documentable.

5. Does home loan tax benefit make OTR always better?

No. NTR can still be better if your deductions are low or your home loan interest is not high enough to offset the regime difference.

Related Reads:

Tax Planning in India: Definition, Types, Benefits & Common Methods
Tax Planning for Salaried Employees in India (2026 Guide)

Disclaimer: This article is for informational and educational purposes only. It does not constitute tax, legal, or financial advice. Tax rules can change, and the right treatment depends on your facts. Consult a qualified tax professional for advice specific to your situation.