A buyer in Electronic City proudly told us in 2026 that he had chosen his home partly for the tax savings, expecting to knock 2 lakh off his taxable income every year for the interest. When his accountant filed his return, he discovered he had claimed nothing at all. He was on the new tax regime, where the home loan interest deduction on a self-occupied house simply does not exist. The flat was fine. The tax plan he had built around it was based on a rule that no longer applied to him.

Home loan tax benefits are real and can be worth lakhs over the years, but in 2026 they come with a large asterisk that trips up buyer after buyer. Here is exactly what you can claim, the regime trap that decides whether you can claim anything, and how a couple can double the benefit.

The short answer. Under the old tax regime, a home loan lets you deduct up to 2 lakh a year of interest on a self-occupied house under Section 24(b), and up to 1.5 lakh of principal under Section 80C, as guides on Section 24(b) confirm. The catch: under the new tax regime, which is now the default, neither deduction is available for a self-occupied home. So the single most important tax question for a buyer is which regime you are on. The trade-off: the old regime unlocks these deductions but has higher slab rates, so the right choice depends on your total deductions, not the home loan alone.

What tax benefits does a home loan give you?

Two main deductions, plus a few extras. The big one is Section 24(b), which lets you deduct the interest you pay on your home loan, up to 2 lakh a year, for a self-occupied house. The second is Section 80C, under which the principal you repay counts towards a deduction of up to 1.5 lakh a year, a limit you share with your provident fund, insurance and other 80C items.

There are useful extras. In the year you buy, the stamp duty and registration you pay also count within that same 1.5 lakh Section 80C limit. Interest you paid during construction, before you got possession, is not lost either; it is accumulated and claimed in five equal instalments starting from the year you take possession, within the applicable cap. And a let-out property is treated more generously on interest, which we cover below. All of these, however, sit behind the same gate: the tax regime you have chosen.

The catch: old regime versus new regime

This is the point most buyers miss. Under the new tax regime, which is now the default for most taxpayers, you cannot claim the Section 24(b) interest deduction or the Section 80C principal deduction on a self-occupied home. Those benefits live only in the old regime. If you have drifted onto the new regime, as many people have by default, your home loan gives you no deduction on a home you live in.

That does not automatically make the old regime better. The new regime offers lower slab rates in exchange for giving up most deductions. Whether the old regime, with your home loan deductions, beats the new regime with its lower rates depends on your total picture: your income, your 80C investments, your interest, and any other deductions. The honest approach is to compute your tax both ways for the year and pick the lower one, rather than assuming the home loan tips the balance by itself.

How do you even know which regime you are on? For most salaried taxpayers the new regime now applies by default unless you actively opt for the old one, either through your employer's declaration at the start of the year or in your return. This is exactly why so many buyers are caught out: they never chose the new regime, they simply did not opt out of it. If your home loan deductions matter to you, treat the regime choice as a deliberate annual decision, not something to leave on autopilot, and revisit it every year as your loan interest and income change.

How the deductions compare across regimes

The table below lays out the main home loan deductions, their limits, and whether each survives under the new regime. All figures are annual and assume the old regime unless the new regime column says otherwise.

Read the new regime column carefully. For a self-occupied home, almost everything reads No. That is the single fact that decides whether your home loan saves you tax at all, so establish it before you build any expectation around the savings.

How are let-out and first-time affordable homes treated?

A let-out property is treated more generously on interest. There is no 2 lakh cap on the interest you can set against the rent it earns, so the full interest is deductible against that rental income. However, if this creates a loss under house property, only 2 lakh of that loss can be set off against your other income in a year, with the balance carried forward for up to eight years to adjust against future house property income. Under the new regime, that set-off against other income is not available.

Section 80EEA once gave first-time buyers of affordable homes an extra interest deduction of up to 1.5 lakh, over and above Section 24(b). That window applied to loans sanctioned in earlier years and has since closed, so it is not available on a new loan taken today. If you took an eligible loan in that earlier period you may still be claiming it, but do not count on 80EEA for a fresh purchase. Confirm your specific eligibility on the Income Tax portal or with a tax professional.

How does a joint home loan double the benefit?

If two people co-own and co-borrow, each can claim the deductions separately, which effectively doubles them. A couple who are both co-owners and co-borrowers can, under the old regime, claim up to 2 lakh of interest and 1.5 lakh of principal each, taking the household deduction to as much as 7 lakh a year. This is one of the most underused levers in home loan tax planning. Follow this checklist to use the benefits properly:

1. Confirm which tax regime you are on, since the new regime removes these deductions for a self-occupied home.
2. If you are on the old regime, claim interest under Section 24(b) up to 2 lakh for a self-occupied house.
3. Claim principal repayment under Section 80C, remembering it shares the 1.5 lakh limit with other items.
4. In the year of purchase, include stamp duty and registration within that 80C limit.
5. For a joint loan, ensure both spouses are co-owners and co-borrowers so each can claim their share.
6. Claim pre-possession interest in five equal instalments from the year you take possession.
7. Compute your tax under both regimes each year and choose whichever leaves you paying less.

Because these benefits interact with your loan and your other costs, plan them together. Our home loan EMI guide shows the interest you will actually pay, and our guide to capital gains exemption under Section 54 covers the tax side when you eventually sell. If you are budgeting for a specific project such as Purva Meraki in HSR Layout, model the after-tax cost, not just the sticker price.

What mistakes do buyers make with home loan tax benefits?

The biggest mistake is assuming the deductions apply without checking the regime, then discovering at filing time that the new regime gave them nothing. The second is treating the tax saving as a reason to buy at all. A home loan deduction reduces the cost of a home you were going to buy anyway; it is never a good enough reason to buy a home you do not need or cannot comfortably afford.

The third mistake is a couple taking a single-borrower loan and losing the chance to double the benefit that joint ownership would have allowed. And the fourth is forgetting the pre-construction interest that accumulates before possession, which many buyers never claim in its five instalments. Check your regime first, structure a joint loan where it fits, claim what you are entitled to, and never let the tax tail wag the buying decision.

Frequently asked questions

How much tax benefit can I get on a home loan in 2026?

Under the old tax regime, you can deduct up to 2 lakh a year of interest on a self-occupied home under Section 24(b) and up to 1.5 lakh of principal under Section 80C. Under the new tax regime, neither deduction is available for a self-occupied home, so your regime choice decides whether you get any benefit at all.

Are home loan deductions available under the new tax regime?

Not for a self-occupied home. The new tax regime, now the default, does not allow the Section 24(b) interest or Section 80C principal deductions on a home you live in. A let-out property retains interest deductibility against its rent, but the loss set-off against other income is not available under the new regime. Compute both regimes before deciding.

Can my spouse and I both claim home loan tax benefits?

Yes, if you are both co-owners and co-borrowers of the property and loan. Under the old regime, each of you can claim up to 2 lakh of interest and 1.5 lakh of principal separately, taking the household deduction to as much as 7 lakh a year. Structure the loan jointly from the start to use this.

Can I claim interest paid during construction?

Yes. Interest paid before you take possession is not lost. It is accumulated and claimed in five equal annual instalments starting from the year you get possession, within the applicable Section 24(b) cap under the old regime. Keep your interest certificates from the construction period so you can claim these instalments correctly once you move in.

Last updated 2026-08-22. PropNewz Team.