When Meena took a home loan for her flat in Gachibowli in early 2026, a colleague told her the loan would "pay for itself at tax time." She budgeted for a big refund, then filed her return under the new tax regime and found the refund was not there. Nothing had gone wrong with her paperwork. She had simply run into a change that catches many Hyderabad buyers by surprise. The two famous home loan deductions still exist, but whether you can use them now depends on a choice you make before you file, not on the loan itself.

The short answer. A home loan can still cut your tax, but only if you file under the old tax regime. Under the old regime you can claim up to 2 lakh rupees a year of loan interest on a self occupied home under Section 24(b), and up to 1.5 lakh rupees of principal repayment under Section 80C. The trade off is that the new regime, which is the default since the financial year 2023-24, gives you lower slab rates but does not allow these two deductions for a self occupied home. So the real decision is old regime with deductions versus new regime with simpler lower rates.

These deductions sit in the Income Tax Act, and banks such as ICICI Bank set out the same caps. Because regime rules can shift with each Union Budget, confirm the current position on the income tax portal or with a tax advisor before you rely on any figure below.

Which home loan deductions can a buyer actually claim?

The two core deductions are interest under Section 24(b) and principal under Section 80C. For a self occupied home, Section 24(b) lets you deduct the interest you pay on the loan, up to 2 lakh rupees in a financial year. Section 80C lets you deduct the principal you repay, up to 1.5 lakh rupees in a year, but that limit is shared with other 80C items such as life insurance premiums and provident fund. So if you already fill your 80C limit with other savings, the loan principal may add little on top.

There is a third, smaller benefit many buyers miss. The stamp duty and registration charges you pay in the year of purchase can also be claimed under Section 80C, within the same 1.5 lakh rupee limit, but only in that one year. For a Hyderabad buyer paying registration costs upfront, that is worth claiming in the year it happens rather than losing it.

Couples buying together can stretch these limits further. When two people are both co owners and co borrowers, each can claim the Section 24(b) interest and the Section 80C principal on their own share, within the same per person caps and only under the old regime. That can lift the household's total deduction well beyond what a single borrower could claim, provided both partners actually contribute to the repayment from their own income. If you are buying jointly, read our Adibatla buyer guide for how couples plan a purchase, and split the loan and ownership on paper deliberately rather than letting it fall out by default.

Why did Meena's refund disappear under the new regime?

Her refund disappeared because the new tax regime does not allow these home loan deductions for a self occupied home. The new regime offers lower slab rates in exchange for giving up most deductions and exemptions, including Section 24(b) interest on a self occupied property and the Section 80C basket. It has been the default option since the financial year 2023-24, which means you are placed in it unless you actively choose the old regime. Buyers who assume the deductions are automatic, as Meena did, are often filing in the very regime that switches them off.

This does not make the new regime a bad choice. For someone with a small loan or few other deductions, the lower rates can leave more in hand than the old regime with deductions would. The point is that it is a genuine either or decision, and a home loan alone does not settle it.

How does old regime versus new regime compare for a home loan?

The comparison comes down to whether your deductions are worth more than the rate cut. The table below lays out how the main home loan benefits stand under each regime, so you can see what you keep and what you give up.

What is different if you rent the property out?

A let out property is treated more generously on interest than a self occupied one. When you rent the home, you set the loan interest against the rent you receive, and there is no 2 lakh rupee ceiling on the interest itself the way there is for a self occupied home. If the interest is larger than the rent, the resulting loss from house property can be set against your other income up to a yearly limit, and any excess can generally be carried forward. This is one area where the rules are detailed, so a Hyderabad buyer planning to rent out a second home should confirm the current set off limits with a tax advisor before counting on them.

The wider lesson is that the tax treatment follows how the home is used, not only how it is financed. A self occupied home and a rented one carry different maths even with the identical loan.

Does selling the home early undo the tax benefit?

Selling within five years can reverse the Section 80C benefit you already claimed. The law expects you to hold a home bought with 80C benefits for at least five years from the end of the year of purchase. If you sell before that, the principal deductions you took are added back to your income in the year of sale, which can create an unexpected tax bill. The Section 24(b) interest deduction is treated differently, but the 80C reversal alone is enough reason to factor the five year mark into any early resale plan.

Buyers who fold this into their planning avoid a nasty surprise. If you might move within a few years, weigh the reversal against the gain before you decide, and read our guide on the TDS you must deduct when you buy so the tax side of both ends of the deal is covered.

What should a Hyderabad buyer do before filing?

Start by comparing your tax under both regimes for the year, using your actual loan interest and other deductions. Many buyers assume the old regime wins because of the home loan, but that is only true when the deductions you can genuinely use outweigh the new regime rate cut. Pull your interest certificate from the lender, add up your real 80C items, and run both numbers before you lock a regime. For a sense of the ticket sizes where a loan and these deductions matter most, a project such as Raghava Nova in Nanakramguda sits in the range where buyers usually carry a substantial loan.

Keep your loan statements, the lender interest certificate, and the registration receipts together in one file before you file. If you bought an under construction home, the interest you paid before possession is not lost, it is claimed in five equal yearly installments once you take possession, so note the possession date carefully. Small habits like these decide whether you claim the full benefit you are owed or quietly leave part of it on the table each year.

What is your step by step tax benefit checklist?

Run through these seven steps before you file, so you claim everything you are entitled to and nothing you are not.

1. Compare your tax under the old and new regimes for the year before choosing one.
2. Remember that the home loan deductions apply only if you pick the old regime.
3. Get the annual interest certificate from your lender showing interest and principal split.
4. Claim interest up to 2 lakh rupees under Section 24(b) for a self occupied home.
5. Claim principal up to 1.5 lakh rupees under Section 80C, shared with your other 80C items.
6. Add stamp duty and registration paid this year within the 80C limit, once only.
7. Keep the home at least five years so the 80C benefit is not reversed, and confirm current rules on the income tax portal.

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

Generally no for a self occupied home. The new regime, which is the default since the financial year 2023-24, does not allow the Section 24(b) interest deduction or the Section 80C principal deduction for a self occupied property. To claim these, you usually need to file under the old regime, so compare both before you choose.

How much home loan interest can I deduct?

For a self occupied home you can deduct up to 2 lakh rupees of loan interest a year under Section 24(b), if you file under the old regime. For a let out property, interest is set against rental income without that 2 lakh rupee ceiling, though wider loss set off limits then apply.

Is principal repayment also deductible?

Yes, under Section 80C in the old regime, up to 1.5 lakh rupees a year. That limit is shared with other 80C items such as provident fund and insurance, so the loan principal may not add much if your limit is already full. Stamp duty and registration can also be claimed here in the year of purchase.

What happens if I sell the home within five years?

If you sell within five years of the end of the purchase year, the Section 80C principal deductions you already claimed are added back to your income in the year of sale. That can create an unexpected tax bill, so factor the five year mark into any plan to resell a home bought with these benefits soon after buying.

Last updated 2026-07-20. PropNewz Team.