A Bengaluru buyer who took a large home loan in 2026, expecting the familiar tax break on the interest, found the benefit had quietly vanished when the accountant filed under the default regime. It was not an error. Under the new tax regime, the interest a buyer pays on a loan for a self-occupied home is simply not deductible, and the principal repayment benefit is gone too. For a generation of buyers who treated the home loan tax shield as a given, this is a real shift, and it changes the maths of buying with a loan in ways that deserve a careful look before you sign.

The short answer. Under the new tax regime, which is now the default, the Section 24(b) interest deduction on a self-occupied house is not available, and the Section 80C deduction for home loan principal is not available either, because both fall in the categories the new regime removes. Interest on a let-out property is still deductible against its rental income, but a resulting house property loss cannot be set off against your salary or other income in the same year. The trade-off is a genuine choice: the new regime offers lower slab rates but strips these housing deductions, while the old regime keeps them, so a buyer with a big loan should compare both before deciding.

The anchor fact for a Bengaluru buyer in 2026 is that the new regime is the default, and you must actively opt for the old regime to claim the self-occupied interest and principal deductions. Home loan interest under the new tax regime in Bengaluru therefore needs a deliberate regime choice, not an assumption.

Can you claim home loan interest on a self-occupied home under the new regime?

No, under the new tax regime the interest on a loan for a self-occupied house is not allowed as a deduction. The Income Tax Department confirms that under the new regime, interest on borrowed capital for a self-occupied property is not allowed as a deduction from income from house property. So a Bengaluru buyer who files under the new regime cannot claim the Section 24(b) interest deduction on the home they live in, however large the interest they pay. This is the single biggest change for a home loan borrower, because the self-occupied interest deduction was for many years the largest tax benefit of buying with a loan. Our explainer on home loan tax benefits under Section 24(b) and 80C for Bengaluru buyers covers how these deductions worked in full.

Is the Section 80C principal deduction available under the new regime?

No, the Section 80C deduction for home loan principal repayment is not available under the new regime. The Income Tax Department states that under the new regime, Chapter VI-A deductions cannot be claimed, except for a few such as Section 80CCD(2), 80CCH and 80JJAA. Because the Section 80C home loan principal deduction is part of Chapter VI-A, it falls outside those exceptions and cannot be claimed by a buyer who opts for the new regime. So both halves of the classic home loan tax shield, the interest under Section 24(b) and the principal under Section 80C, are removed together under the new regime. A buyer weighing the regimes should therefore count both losses, not just the interest, when comparing the new regime's lower rates against the old regime's deductions.

This changes the way a first time buyer should think about affordability. For years, the standard advice was that a home loan pays for part of itself through tax savings, because the interest and principal both reduced taxable income. Under the new regime that cushion is gone, so the effective cost of the loan is closer to its actual interest rate, with no tax offset. It does not make buying a bad decision, but it does mean a buyer should model the loan on its real cost rather than on an assumed tax benefit that may no longer apply to them. The buyers most affected are those with large loans and otherwise modest deductions, for whom the housing deductions were the main reason to prefer the old regime.

What happens to a let-out property under the new regime?

Interest on a let-out property remains deductible against the rental income from that property, but the treatment of any resulting loss is restricted. Under the new regime, home loan interest on a let-out property can be set against the rent you earn from it, which is different from the self-occupied case where the interest is not deductible at all. The catch is that if the interest exceeds the rent and produces a house property loss, that loss cannot be set off against your salary or other income in the same year. So a buyer with a rented second property gets some relief on the interest, up to the rent, but cannot use a large interest bill to shelter unrelated income the way the old rules allowed. This distinction between a self-occupied and a let-out property is one of the more technical points a buyer with more than one home should understand before choosing a regime.

Read the table as the direction of the rules, and confirm the exact position for your year and situation on the official portal, since regime choices and thresholds are policy driven.

Does the old regime still allow the interest deduction?

Yes, the old tax regime still allows the self-occupied home loan interest deduction, up to 2,00,000 rupees a year. The Income Tax Department allows a deduction of up to 2,00,000 rupees for interest on a loan taken to buy or construct a self-occupied house, provided the loan was taken on or after 1 April 1999, the construction is completed within five years, and a lender certificate is furnished. So a buyer who wants to keep the interest deduction has to opt for the old regime and meet these conditions, rather than defaulting into the new one. This is exactly why the regime choice matters so much for anyone with a home loan: the old regime preserves the housing deductions, while the new regime trades them for lower slab rates. Our guide to home loan tax deductions under 80C and 24(b) for Bengaluru buyers sets out those conditions in more detail.

How does the new Income-tax Act, 2025 fit in?

The new regime and its treatment of home loan deductions continue under the new law, which replaced the earlier Act. The Income-tax Act, 2025 came into force on 1 April 2026, repealing the Income-tax Act, 1961, while the older Act continues to govern tax years that began before that date. The essential position for a home loan borrower, that the new regime is the default and does not allow the self-occupied interest or the principal deductions, carries through. Because the mapping of section numbers and the precise rules for a given year can be intricate, a buyer should not rely on old section labels alone but confirm which Act and which year applies to their filing on the official portal. The practical decision, old regime for the deductions or new regime for the lower rates, is the same one either way, so a buyer should focus on running that comparison rather than on tracking which section number applies in which year.

How should a Bengaluru buyer decide?

Treat the regime choice as a calculation to run, not a default to accept, with this checklist.

1. Estimate your annual home loan interest and principal, since these drive the value of the old regime deductions.
2. Check whether your home is self-occupied or let-out, because the interest treatment differs sharply.
3. Compute your tax under the new regime's lower rates without the housing deductions.
4. Compute your tax under the old regime with the Section 24(b) interest and Section 80C principal deductions.
5. Confirm you meet the old regime conditions, including the loan date and the five year construction limit.
6. Compare the two totals for your specific income and loan, rather than assuming one is always better.
7. Confirm the current rules for your filing year on the official portal, and take a chartered accountant's view.

Can I claim home loan interest on my self-occupied Bengaluru flat under the new tax regime?

No. The Income Tax Department confirms that under the new tax regime, interest on borrowed capital for a self-occupied property is not allowed as a deduction from income from house property. So if you opt for the new regime in Bengaluru, you cannot claim the Section 24(b) interest deduction on your self-occupied home.

How is home loan interest on a let-out property treated under the new regime?

Under the new tax regime, home loan interest on a let-out property can be deducted against the rental income from that property. However, if the interest exceeds the rent and creates a house property loss, that loss cannot be set off against your salary or other income in the same year under the new regime, so a large interest bill on a rented home cannot shelter your salary.

Is the 2 lakh self-occupied interest deduction still available anywhere?

Yes, but only if you choose the old tax regime. The Income Tax Department allows a deduction of up to 2,00,000 rupees for interest on a loan taken to buy or construct a self-occupied house, provided the loan is on or after 1 April 1999 and construction finishes within five years, with a lender certificate furnished.

Can I claim the Section 80C home loan principal repayment under the new regime?

No. The Income Tax Department states that under the new tax regime, Chapter VI-A deductions cannot be claimed, except for a few such as Section 80CCD(2), 80CCH and 80JJAA. Since the Section 80C home loan principal deduction is part of Chapter VI-A, it is not available if you opt for the new regime.

Last updated 2026-07-07. PropNewz Team.