A home loan in India offers two powerful tax deductions that together can reduce your taxable income by up to \u20b93.5 lakh per year under the old tax regime-one on the principal repayment and one on the interest paid.
Deduction on Interest Payment: Section 24B
- Deduction of up to \u20b92,00,000 per year on interest paid on a home loan for a self-occupied property
- For a let-out property, there is no upper limit on interest deduction (subject to set-off rules)
- The property must be constructed within 5 years from the end of the financial year in which the loan was taken
- Pre-construction interest is deductible in 5 equal instalments starting from the year of possession
Deduction on Principal Repayment: Section 80C
- Principal repayment on a home loan qualifies under Section 80C, within the \u20b91.5 lakh overall ceiling
- Stamp duty and registration charges also qualify under 80C in the year of payment
- The house must not be sold within 5 years of possession, else 80C benefits are reversed
Home Loan Under New Tax Regime
Section 24B (interest deduction) is not available for self-occupied property under the new tax regime. This single factor often pushes high home loan borrowers to retain the old regime.
Maximum Combined Savings
For a 30% taxpayer claiming \u20b92 lakh interest (Section 24B) + \u20b91.5 lakh principal (Section 80C), total deductions = \u20b93.5 lakh, saving approximately \u20b91,09,200 in taxes (including cess).
Joint Home Loan
If the home loan is taken jointly with a co-applicant (spouse), each co-owner can independently claim \u20b92 lakh interest deduction and \u20b91.5 lakh 80C deduction-effectively doubling the family\u2019s tax benefit.
Use the SaveTaxNow Calculator to calculate your home loan tax savings under old and new regimes.