Section 24(b): The Home Loan Interest Deduction a Bengaluru Buyer Can Actually Claim

A first time buyer in Bellandur had budgeted around a tax refund. A colleague had told him the home loan would save him about 2 lakh rupees of interest against tax every year, so he factored that saving into the EMI he felt he could carry. When his accountant asked which tax regime he was on, the plan wobbled. He was on the new regime, the default, and under it the interest deduction he had counted on for his own home simply did not exist. The flat was fine. His tax assumption was not.

The short answer. Section 24(b) of the Income Tax Act lets you deduct home loan interest, up to 2 lakh rupees a year on a self-occupied home, but only if you are on the old tax regime. Under the new regime, now the default, that self-occupied interest deduction is not available, and neither is the Section 80C benefit on principal. The trade-off is real. The old regime can save tax on your home loan interest, but it takes away other simplifications of the new regime, so the right choice depends on your full tax picture, not on the home loan alone.

What does Section 24(b) let a buyer deduct?

Section 24(b) allows a deduction for the interest you pay on money borrowed to buy, build, repair, or reconstruct a house. For a self-occupied home the deduction is capped at 2 lakh rupees a year. This is the interest portion of your EMI, kept separate from the principal, which is dealt with under a different section. It is one of the two main tax benefits a home loan carries, and historically the larger one for most buyers.

For a property that is let out rather than lived in, the treatment differs. There is no cap on the interest deduction itself against the rental income, but the loss from house property that you can set off against your other income in a year is limited to 2 lakh rupees, with the balance carried forward. So the interest benefit exists in both cases, but the way it flows through your return is not the same for a home you live in and one you rent out.

The principal you repay is handled under Section 80C, up to 1.5 lakh rupees a year, alongside other 80C items. The two benefits are often spoken of together, but they sit in different sections and follow different rules, which is worth remembering when you plan around them. Our guide on Section 80C on stamp duty and registration covers that side in detail.

How does the old versus new regime change the benefit?

The single biggest factor is which tax regime you are on, because the new regime removes the self-occupied interest deduction entirely. Under the old regime you can claim up to 2 lakh rupees of interest on a self-occupied home and up to 1.5 lakh of principal under 80C. Under the new regime, which is now the default for individuals, neither of those benefits is available for a home you live in.

The table below sets the two regimes side by side for the common cases, so you can see exactly where the home loan saving survives and where it disappears.

This is why you cannot decide your home loan tax benefit in isolation. The new regime offers lower slab rates and a simpler return but strips out these housing deductions, while the old regime keeps the deductions but at higher slab rates. Which one leaves you better off depends on your total income and deductions, so treat the home loan saving as one input into that choice rather than the whole answer.

What about an under construction flat and pre-construction interest?

Interest you pay before you get possession is not lost, but it is treated specially under the old regime. This pre-construction interest, paid while the flat is still being built, is allowed in five equal yearly instalments starting from the year construction is completed, and it counts within the overall 2 lakh rupee cap for a self-occupied home. So the interest during construction is deferred rather than deducted year by year.

There is a timing condition that catches buyers of delayed projects. Under the old regime, the full 2 lakh limit for a self-occupied home applies only if construction is completed within five years from the end of the financial year in which the loan was taken. If the project runs past that window, the cap for that home can fall sharply, which turns a construction delay into a tax cost on top of the wait. This is one more reason to weigh delivery track record before you buy under construction.

For a flat you will occupy, the practical takeaway is to keep every interest certificate from your lender from the very first year, including the construction period. Those certificates are what let you claim the pre-construction interest correctly once you take possession, and reconstructing them years later is far harder than filing them as you go.

What conditions and limits should a buyer know?

The 2 lakh figure is a ceiling with conditions attached, not an automatic entitlement. The loan must be for the purchase or construction of the property, the construction must finish within the five year window described above, and the deduction is claimed under the old regime for a self-occupied home. Miss those conditions and the benefit can shrink to a much smaller figure for that property.

The deduction also applies to the interest actually paid or payable in the year, so it tracks your loan rather than a flat allowance. In the early years of a home loan, when the interest portion of the EMI is at its highest, buyers often hit the 2 lakh cap comfortably. As the loan ages and the interest portion falls, the interest may drop below the cap, which changes how much of the benefit you actually use. That interest profile is worth understanding alongside our guide on the home loan EMI at the current repo rate.

Because the rules interact with your regime choice and your wider income, confirm your specific position on the official income tax portal at incometax.gov.in or with a chartered accountant before you rely on a number. A benefit you assume but do not qualify for is worse than one you plan for accurately.

How should a Bengaluru buyer plan and claim it?

Work through these steps so the deduction is a planned outcome, not a hopeful guess. Each keeps your tax assumption honest before it feeds into the EMI you commit to.

1. Decide whether the old or the new tax regime is better for your overall income, not just the home loan.
2. Remember that the self-occupied interest and principal benefits exist only under the old regime.
3. Confirm the loan is for purchase or construction, since that is what Section 24(b) covers.
4. Check that construction will finish within five years to keep the full 2 lakh limit.
5. Collect your lender's interest certificate every year, including during construction.
6. Claim pre-construction interest in five instalments from the year you take possession.
7. Verify your position on incometax.gov.in or with a chartered accountant before you file.

Done this way, the tax benefit becomes a figure you can rely on rather than a rumour from a colleague. It also stops you from stretching your EMI on the strength of a deduction you may not be entitled to claim.

How does this fit your overall home buying maths?

The interest deduction is a genuine benefit, but it is a smaller and more conditional one than buyer folklore suggests. Even under the old regime, the 2 lakh cap and the falling interest portion of a maturing loan mean the saving is real but bounded, and under the new regime it may be zero for a self-occupied home. Building your budget on a full 2 lakh saving every year, regardless of regime, is exactly the mistake the Bellandur buyer nearly made.

The healthier approach is to treat the tax saving as a modest tailwind, not a load bearing pillar of your affordability. Choose the flat and the EMI you can carry without the deduction, then let whatever tax benefit you genuinely qualify for be a bonus. A project like Sobha Arena on Kanakapura Road should fit your numbers on its own merits, with the Section 24(b) benefit as the extra, not the reason.

What do Bengaluru buyers ask most about Section 24(b)?

How much home loan interest can I deduct under Section 24(b)?

Under the old tax regime you can deduct home loan interest on a self-occupied home up to 2 lakh rupees a year under Section 24(b). For a let-out property there is no cap on the interest deduction itself, though the loss you can set off against other income in a year is limited to 2 lakh rupees.

Is the Section 24(b) deduction available under the new tax regime?

No. Under the new tax regime, which is now the default, you cannot claim the Section 24(b) interest deduction on a self-occupied home, and the Section 80C principal deduction is also unavailable. The self-occupied interest benefit survives only if you choose the old regime, so the decision on regime directly affects your home loan tax saving.

What is pre-construction interest and can I claim it?

Pre-construction interest is the interest you pay while a flat is still being built, before you get possession. Under the old regime you can claim it in five equal yearly instalments starting from the year construction is completed, within the overall 2 lakh limit for a self-occupied home. Keep your interest certificates to support the claim.

Does the 2 lakh limit apply if construction is delayed?

Yes, and delay can cost you. Under the old regime the full 2 lakh limit for a self-occupied home applies only if construction is completed within five years of the end of the year the loan was taken. If it takes longer, the limit for that home can fall sharply, so a stalled project can quietly shrink your tax benefit.

Last updated 2026-09-13. PropNewz Team.