A home loan comes with real tax benefits in India — but which ones you can actually claim depends on a choice most borrowers don't realise they're making every year: old tax regime or new tax regime. Get that choice wrong and you could be leaving a substantial deduction on the table without knowing it. Here's what each section of the Income Tax Act actually covers.
Section 24(b): deduction on interest paid
Section 24(b) lets you deduct the interest paid on a home loan for a self-occupied property, up to ₹2 lakh per financial year. This applies to the interest component of your EMI, not the principal, and the full ₹2 lakh ceiling is available regardless of how large your actual interest outgo is — if you pay ₹3.5 lakh in interest in a year, you can still only claim ₹2 lakh under this section. Critically, this deduction is only available if you file under the old tax regime.
Section 80C: deduction on principal repayment
Section 80C lets you deduct the principal component of your home loan EMI, up to ₹1.5 lakh per financial year. The catch is that this ₹1.5 lakh cap is shared across all your 80C investments combined — PF contributions, ELSS mutual funds, life insurance premiums, PPF, and principal repayment all draw from the same ₹1.5 lakh bucket, not separate ones. If you're already maxing out 80C through other investments, your loan principal repayment may not add any additional benefit.
One detail that catches first-time buyers off guard: stamp duty and registration charges paid on the property are also eligible under Section 80C, but only in the financial year you actually pay them, and still within that same combined ₹1.5 lakh ceiling.
Put together: up to ₹3.5 lakh a year, and double for joint loans
Combining Section 24(b)'s ₹2 lakh interest deduction and Section 80C's ₹1.5 lakh principal deduction gives a maximum combined benefit of ₹3.5 lakh per financial year for a single borrower under the old regime, assuming the 80C limit isn't already used up elsewhere. If the loan is taken jointly — say, with a spouse — and both co-borrowers are also co-owners of the property, each of you can claim these deductions independently against your own income, effectively doubling the combined household benefit to roughly ₹7 lakh a year.
| Section | Covers | Annual limit | Regime |
|---|---|---|---|
| 24(b) | Interest on home loan (self-occupied) | ₹2 lakh | Old regime only |
| 80C | Principal repayment + stamp duty/registration (year paid) | ₹1.5 lakh (shared cap) | Old regime only |
| Combined, single borrower | — | Up to ₹3.5 lakh | Old regime only |
| Combined, joint loan + joint ownership | — | Up to ₹7 lakh (household) | Old regime only |
The catch: the new tax regime doesn't allow any of this
Since the 2023-24 financial year, the new tax regime is the default for all taxpayers in India unless you actively opt into the old one. And the new regime does not permit either the Section 24(b) interest deduction or the Section 80C principal deduction for a self-occupied property. If you simply file your return without choosing, you may automatically lose access to both benefits described above — not because you did anything wrong, but because the default changed and claiming these deductions now requires an active, deliberate opt-in to the old regime at the time of filing.
This makes the regime choice itself one of the most consequential decisions a home loan borrower makes each year, and it's worth running the numbers both ways — old regime with these deductions versus new regime's lower slab rates without them — rather than assuming either one is automatically better.
The new tax regime being the default since 2023-24 means a home loan borrower who files on auto-pilot can quietly lose ₹3.5 lakh or more in annual deductions simply by not opting into the old regime. The benefit still exists in law — it just isn't given to you automatically anymore.
A disclaimer worth taking seriously
This article explains how these sections generally work, but tax law changes, carries exceptions, and interacts with your specific income, other deductions, and filing history in ways a general guide can't fully capture. This is not tax advice. Confirm your specific numbers and which regime suits you with a qualified chartered accountant before filing.
