A home loan is the only retail debt that the Income Tax Act actively rewards. Used right, the deductions across Section 80C, Section 24(b), and Section 80EEA can save you ₹50,000-₹1,50,000 in tax annually. The new tax regime changes some of this — here's the 2026-relevant breakdown.
The three sections you need to know
| Section | What's deductible | Annual cap | Old regime | New regime |
|---|---|---|---|---|
| 80C | Principal repayment | ₹1,50,000 (shared with PF, ELSS, LIC) | Yes | No |
| 24(b) | Interest paid | ₹2,00,000 (self-occupied) / no cap (let-out) | Yes (self-occ + let-out) | Only let-out |
| 80EEA | Additional interest (first-time buyers) | ₹1,50,000 | Yes | No |
Section 80C — principal repayment
Up to ₹1.5 lakh of your home-loan principal repayment in a financial year qualifies for deduction under Section 80C. The catch: this ₹1.5 lakh ceiling is shared with PPF, EPF, ELSS mutual funds, life insurance premiums, and tuition fees. If you're already maxing 80C with PF + ELSS, the home-loan principal adds zero further benefit.
Stamp duty and registration charges paid in the year of purchase also qualify under 80C — a one-time benefit.
Section 24(b) — interest payment
The bigger benefit. Up to ₹2 lakh of home-loan interest in a financial year is deductible if the property is self-occupied. For a let-out (rental) property, there is NO cap on interest deduction (subject to the overall ₹2L loss cap from house property).
For a typical ₹50L loan at 8.5% in year 1, interest paid is ~₹4.20 lakh. ₹2L gets deducted under 24(b); the remaining ₹2.20L is "lost" on a self-occupied property unless you let it out.
Section 80EEA — first-time buyer bonus
An additional ₹1.5 lakh of interest deduction (over and above Section 24(b)) for first-time homebuyers, subject to:
- Loan sanctioned between 01-Apr-2019 and 31-Mar-2022 (closed for new sanctions but existing borrowers can claim till loan ends).
- Property stamp duty value ≤ ₹45 lakh.
- Borrower didn't own any other house on the date of sanction.
If you bought a sub-₹45L property during the window, total interest deduction available: ₹2L (24b) + ₹1.5L (80EEA) = ₹3.5L per year.
The new tax regime trap
From FY 2024-25, the new tax regime is the default. Under the new regime, almost all of the above deductions are gone — except interest on let-out property under 24(b).
This means a self-occupied homeowner under the new regime gets ZERO tax benefit from their home loan. The savings claimed in marketing copy ("₹3.5L tax benefit annually!") apply only to old regime filers.
Decision rule: if your gross income is ₹15-25L and you have substantial deductions (home loan interest + 80C + medical insurance + HRA if applicable), the OLD regime usually still wins. Run the math both ways before filing.
The let-out angle
If you rent out your second property, the entire interest paid (no ₹2L cap, but capped at ₹2L overall house-property loss) is deductible. Adding rental income net of standard 30% deduction often makes the property tax-positive within the first 5 years.
Joint loan — double the benefit
If your spouse is a co-applicant AND a co-owner of the property, both can claim Section 24(b) and Section 80C separately. On a ₹2 lakh interest scenario per spouse, joint claim doubles total deduction to ₹4 lakh.
Must-haves: both names on the property registration, both contributing to EMI from their respective accounts, both filing income-tax returns.
How to claim — practical steps
- Get the annual interest certificate from your bank (downloadable in NetBanking after April 1).
- Note the principal repaid and interest paid figures.
- Enter principal under Section 80C in your ITR. Enter interest under "Income from House Property" → loss adjustment.
- If first-time buyer, claim the additional ₹1.5L under Section 80EEA.
- Keep the annual interest certificate for 7 years (audit safety).
Compare loans across SBI, HDFC, and other lenders. Use our EMI calculator to model your repayment schedule.
Frequently Asked Questions
Can I claim deductions during the under-construction period?
No principal deduction. Interest paid during construction can be claimed in 5 equal instalments starting the year construction completes (called "pre-EMI interest").
What if I sell the property within 5 years?
The 80C deductions claimed are reversed and added to your income in the sale year. Hold for 5+ years to keep the benefit.
Does PMAY interest subsidy affect deductions?
The subsidy is treated as a separate benefit; it does not reduce the interest base for 24(b) calculation. You can claim both.
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Loans Editor, OnePaisa Editorial
Prasanth writes on borrowing for OnePaisa — personal, home, car and business loans, and the credit-score questions that decide what a borrower is actually offered. Interest rates, processing fees and eligibility rules in his guides come from lender schedules of charges and official product pages, are cross-checked against OnePaisa's verified lender data, and are dated so readers can see how current they are. A rate that a lender publishes as a range is published here as a range, never as a single teaser number.
Work published under this byline follows OnePaisa’s editorial standards — how our guides are researched, fact-checked against primary sources, and corrected.