When a Bengaluru buyer signs up for a home loan in 2026, one of the first questions they ask is how much tax they will save. It is a fair question, but the honest answer starts with another one: which tax regime are you in? For a self occupied home, the familiar deductions on interest and principal live almost entirely in the old regime. A buyer who has moved to the new regime for its lower slab rates may find those home loan deductions are simply not available. Understanding this before you plan your finances is the difference between a real saving and a disappointment at filing time.

The short answer. Under the old tax regime, you can claim up to 1.5 lakh rupees a year on principal repayment under Section 80C and up to 2 lakh rupees a year on interest for a self occupied home under Section 24(b), a combined 3.5 lakh. Under the new regime, these deductions for a self occupied home are not available. The trade off is real: the new regime offers lower slab rates but drops these benefits, so the better choice depends on your full tax picture. Confirm it with a tax adviser before you rely on any number.

A home loan can offer two main deductions in the old tax regime, one on the principal you repay and one on the interest you pay. The principal repayment qualifies under Section 80C, and the interest under Section 24(b), each with its own annual limit. Together they can reduce your taxable income by a meaningful amount, which for a self occupied home reaches 3.5 lakh rupees a year at the maximum. There have also been additional interest deductions in the past under Sections 80EE and 80EEA for loans meeting specific conditions. The crucial caveat running through all of this is the choice of tax regime, which decides whether these benefits apply to you at all.

How much can you claim under Section 80C?

Under Section 80C you can claim up to 1.5 lakh rupees a year on the principal portion of your home loan repayment, within the old tax regime. The important detail is that this limit is shared. The same 1.5 lakh ceiling also covers common investments such as the public provident fund, equity linked savings schemes, life insurance premiums, and similar instruments. If those already use up much of your 80C limit, the principal repayment competes with them rather than adding on top. So while the headline is a 1.5 lakh deduction, the real benefit depends on how much of that limit your other investments already consume.

How much can you claim under Section 24(b)?

Under Section 24(b) you can claim up to 2 lakh rupees a year on the interest paid on a home loan for a self occupied property, again within the old tax regime. Interest is usually the larger part of your EMI in the early years, so this is often the more valuable of the two deductions. For a property that is let out rather than self occupied, the treatment differs and the simple 2 lakh cap on self occupied interest does not apply in the same way, which is one reason to take specific advice for a rented property. For most buyers of a home to live in, the 2 lakh interest deduction under the old regime is the headline benefit.

One point often missed concerns interest paid during construction. If you take a loan for an under construction home, the interest you pay before you get possession is treated separately, and it is generally allowed as a deduction in equal parts across a set number of years once the property is complete, subject to the overall limit for a self occupied home. This is why the year you take possession matters for your tax planning. A buyer who understands the pre construction rule can time claims sensibly rather than assuming every rupee of interest is deductible the moment it is paid.

How do the old and new tax regimes differ for a home loan?

The regimes differ sharply for a self occupied home. The old regime allows the Section 80C principal deduction and the Section 24(b) interest deduction, while the new regime does not permit these for a self occupied property, nor the additional interest deductions under 80EE or 80EEA. The new regime instead offers lower slab rates without most exemptions. This means the entire home loan deduction story for a home you live in is effectively an old regime story. Which regime saves you more depends on your income, your other deductions, and the size of your loan, so the only reliable way to decide is to compute your tax both ways for your own numbers.

A common instinct is to assume the old regime must win because it carries the home loan deductions, but that is not always true. If your loan is small, your interest low, or you have few other deductions, the new regime's lower slab rates can still leave you better off despite losing the home loan benefits. The point is not to pick a regime out of habit or on the strength of one deduction, but to run the actual arithmetic for the year in question. That comparison takes a few minutes with a calculator or an adviser and can be worth a real sum.

What about Sections 80EE and 80EEA?

Sections 80EE and 80EEA offered an additional deduction on home loan interest, over and above Section 24(b), but only for loans that met specific conditions within defined past windows. These were aimed at first time buyers and affordable housing, and they applied to loans sanctioned during particular periods rather than being open ended. For a new loan taken today, you should not assume this extra deduction is available, and under the new regime it does not apply at all. If you believe your loan might qualify under one of these provisions, confirm the current position with a tax adviser or the income tax department rather than relying on an old article.

What mistakes do buyers make claiming these benefits?

The most common mistake is assuming the deductions apply regardless of regime, then finding at filing that the new regime removed them for a self occupied home. Another is double counting the 80C limit, forgetting that principal repayment shares the same 1.5 lakh ceiling as other investments. Buyers also confuse self occupied and let out treatment, or claim interest before the construction is complete without understanding how pre construction interest is handled. Assuming an outdated 80EE or 80EEA benefit still applies is a further trap. Each of these is avoidable by checking the current rules for your regime and, for anything uncertain, taking professional advice. A short conversation with a tax adviser before you file usually costs far less than the deduction a confused claim can lose you.

Your home loan tax benefit checklist

Work through these seven steps as you plan.

1. Decide which tax regime you are filing under this year.
2. Remember self occupied deductions apply mainly in the old regime.
3. Check how much of your 80C limit other investments already use.
4. Estimate your annual interest for the Section 24(b) deduction.
5. Treat a let out property separately, as its rules differ.
6. Do not assume 80EE or 80EEA applies to a new loan.
7. Compute your tax both ways and confirm with a tax adviser.

Where do you confirm the current rules?

Confirm the current rules with a tax adviser or the income tax department, because your regime choice and property use change the answer, and the rules are updated from time to time. Tax benefits are only one piece of the money side of a purchase. Understand what you can borrow first, using our guide to home loan eligibility and FOIR, and if you are buying from a resident seller, read our guide to the TDS you must deduct on a property purchase. These pieces fit together whether you are buying a compact flat or a larger home in a project such as Sobha Galera in Kannamangala.

Frequently asked questions

Can I claim home loan tax benefits under the new tax regime?

For a self occupied home, generally no. The new tax regime does not allow the Section 80C principal deduction or the Section 24(b) interest deduction for a self occupied property, nor the additional deductions under 80EE or 80EEA. These benefits live in the old regime. The new regime offers lower slab rates instead.

How much tax can I save on a home loan?

Under the old regime, you can claim up to 1.5 lakh on principal under Section 80C and up to 2 lakh on interest for a self occupied home under Section 24(b), a combined 3.5 lakh. The actual tax saved depends on your slab rate. Remember the 80C limit is shared with other investments, so your real benefit may be lower.

Is the Section 80C home loan limit separate from other investments?

No. The 1.5 lakh Section 80C limit is a single shared ceiling that covers principal repayment along with investments such as the provident fund, equity linked savings schemes, and life insurance premiums. If those already use most of the limit, your home loan principal adds little extra deduction. Plan your 80C investments and principal repayment together.

Do the same rules apply to a let out property?

No, a let out property is treated differently from a self occupied one. The simple 2 lakh cap on self occupied interest does not apply in the same way to a rented property, and the overall treatment of rental income and interest differs. Because the rules are more involved, take specific advice for a let out property before you file.

Last updated 2026-08-15. PropNewz Team.