A Bengaluru buyer told us he had banked on saving a fixed amount of tax every year from his home loan, only to find at filing time that he could claim almost none of it. He had opted for the new tax regime for its lower slab rates, not realising that the same choice switched off the home loan deductions he was counting on. This is the single biggest confusion buyers face today, because the tax benefit of a home loan now depends entirely on which regime you pick. Here is what Section 24(b) and Section 80C actually give, and when.

The short answer. A home loan can give you two main deductions, but only under the old tax regime. Section 24(b) allows up to 2 lakh a year on the interest you pay on a self occupied home, and Section 80C allows up to 1.5 lakh a year on the principal you repay, within the overall 80C limit. Under the new tax regime, which is now the default, these deductions for a self occupied property are generally not available. The trade off is real. The new regime offers lower slab rates but drops most home loan benefits, so whether the deductions are worth more than the rate saving depends on your numbers, and it is worth checking both before you file.

What tax benefits does a home loan give?

A home loan can reduce your taxable income through two separate deductions, one on interest and one on principal. The interest you pay qualifies under Section 24(b), and the principal you repay qualifies under Section 80C, and the two are claimed independently. Together they form the core home loan tax benefit that buyers have long relied on, as set out in this guide to home loan tax benefits. The crucial modern caveat is that both of these apply under the old tax regime. If you choose the new regime, the same loan generally gives you no self occupied deduction, so the value of these benefits is tied to a choice you make when you file.

What is the Section 24(b) interest deduction?

Section 24(b) lets you deduct the interest paid on a home loan for a self occupied property, up to 2 lakh in a financial year. This is the larger of the two benefits for most borrowers, because in the early years of a loan the interest portion of each EMI is high. The 2 lakh ceiling applies to a self occupied home under the old regime, and it is claimed against your taxable income for the year. Because the interest is front loaded in a long loan, many buyers hit the 2 lakh cap comfortably in the first several years. If your annual interest exceeds 2 lakh on a self occupied home, the excess simply cannot be claimed under this section.

To see the value, put it in rupees. If you fall in the 30 percent slab under the old regime and you claim the full 2 lakh interest deduction and 1.5 lakh principal deduction, the combined 3.5 lakh of deductions can reduce your tax by a little over one lakh in that year, before cess. A buyer in a lower slab saves proportionately less. This is exactly the figure you must weigh against the lower rates of the new regime, because if the new regime cuts your tax by more than the deductions would have, the deductions are worth giving up. There is no single right answer, only the answer your own numbers produce.

What is the Section 80C principal deduction?

Section 80C lets you deduct the principal you repay on a home loan, up to 1.5 lakh in a year, but that limit is shared with other 80C items. The same 1.5 lakh cap also covers investments and payments like provident fund, life insurance premiums and certain deposits, so your home loan principal competes with those for the same ceiling. Usefully, the stamp duty and registration charges you pay in the year of purchase can also be claimed within this 80C limit, though only in that year. As with Section 24(b), the 80C principal benefit applies under the old regime, so it too disappears if you choose the new regime for that year.

Joint ownership can widen these benefits, and it is a point worth planning before you buy. When two co owners are also co borrowers on the loan, each can separately claim the interest and principal deductions on their share, subject to the same per person caps and to being on the old regime. In principle that can let a couple claim more interest and principal between them than a single borrower could, provided both contribute to the EMIs and both hold a share in the property. The exact split follows ownership and repayment shares, and it is another situation where a short conversation with a tax advisor before registration helps you structure the purchase so the benefit is actually claimable rather than merely theoretical.

Old regime or new regime: which lets me claim?

Only the old regime lets you claim the self occupied home loan deductions, while the new regime, now the default, generally does not. This is the point that catches buyers out. The new regime offers lower slab rates but removes most deductions and exemptions, including Section 24(b) interest and Section 80C principal for a self occupied home. So the real question is not just whether a home loan saves tax, but whether the deductions under the old regime save you more than the lower rates of the new regime would. That depends on your income, your loan interest and your other 80C items, so it is worth computing your tax both ways, and confirming your case with a tax advisor or on the Income Tax Department portal before you file.

What about a let out or second property?

The treatment differs for a property you rent out rather than live in. For a let out property, the home loan interest can be set off against the rental income you declare, and this works differently from the 2 lakh cap that applies to a self occupied home. You can also treat up to two residential properties as self occupied for this purpose. The rules on how much loss from house property you can set off against other income, and how any excess is carried forward, are detailed and change between regimes, so a let out or second home is exactly the situation where a quick word with a tax advisor pays for itself. We cover a related closing step in our guide to filing TDS with Form 26QB.

What do I need to claim these deductions?

You mainly need your lender's annual interest certificate and your own records. The lender issues a certificate each year that splits your repayments into interest and principal, and those two figures feed Section 24(b) and Section 80C respectively. You also keep proof of the stamp duty and registration paid in the year of purchase if you want to claim those within 80C. Claims are made when you file your income tax return, and you must be on the old regime for that year to use them. Older additional deductions such as those under earlier sections applied only to loans sanctioned within past windows and are not available for new loans, so do not count on them without checking. When you compare a home like Purva Meraki in HSR Layout, model the after tax cost under both regimes.

What should a Bengaluru buyer check?

Work through these seven steps so you actually capture the tax benefit you plan for.

1. Decide whether the old or new regime suits you, since only the old one gives self occupied home loan deductions.
2. Estimate your annual loan interest and compare it to the 2 lakh Section 24(b) cap.
3. Check how much 80C room you have left after other items before counting principal repayment.
4. Claim stamp duty and registration within 80C in the year of purchase, if on the old regime.
5. Collect your lender's annual interest certificate for the split of interest and principal.
6. Compute your tax both ways to see whether the deductions beat the new regime's lower rates.
7. Confirm your specific case with a tax advisor or the Income Tax Department portal before filing.

Home loan tax benefits are real and can be substantial, but they are no longer automatic, because the regime you choose now decides whether you get them at all. Know that Section 24(b) and Section 80C live in the old regime, compare your tax both ways, keep your interest certificate handy, and confirm your situation with a professional. Do that and the tax saving becomes a planned outcome rather than a filing time surprise.

Frequently asked questions

How much tax can I save on a home loan? Under the old regime you can claim up to 2 lakh a year on interest under Section 24(b) for a self occupied home, and up to 1.5 lakh on principal under Section 80C, within the shared 80C cap. The exact saving depends on your slab. Under the new regime these self occupied deductions are generally not available.

Can I claim home loan deductions under the new tax regime? Generally not for a self occupied home. The new regime, now the default, offers lower slab rates but removes most deductions, including Section 24(b) interest and Section 80C principal for a self occupied property. Only the old regime lets you claim them, so compute your tax both ways and confirm your case before you file your return.

What is the Section 24(b) limit on home loan interest? Section 24(b) allows a deduction of up to 2 lakh a year on the interest paid on a self occupied home, under the old regime. Because interest is front loaded in a long loan, many borrowers reach this cap in the early years. Interest above 2 lakh on a self occupied home cannot be claimed under this section.

Does stamp duty qualify for a tax deduction? Yes, within limits. The stamp duty and registration charges paid in the year of purchase can be claimed within the 1.5 lakh Section 80C ceiling, but only in that year and only under the old regime. Since 80C is shared with items like provident fund and insurance, confirm how much room you have before counting on it.

Last updated 2026-08-26. PropNewz Team.