For years, the pitch to a Bengaluru homebuyer went like this. Take the loan, and the tax you save on the interest and principal will soften the EMI. Rohan had built his entire budget around that promise when he sat down to file his taxes in 2026, only to find the saving had vanished. He was on the new tax regime, now the default, and under it a self occupied home loan gives no deduction for either interest or principal. The loan was the same, the EMI was the same, but the tax cushion he had counted on was simply not there. Nothing had gone wrong. The rules had changed, and his budget had not kept up.

The short answer. Under the new tax regime, which is now the default, a self occupied home loan gives you no deduction for interest or for principal repayment. Those benefits, up to 2 lakh rupees on interest and up to 1.5 lakh rupees on principal, survive only if you specifically opt for the old regime. The trade off is real and personal. The new regime offers lower slab rates but strips the home loan deductions, while the old regime keeps the deductions but at higher rates, so the right choice depends on your whole tax picture, not on the loan alone.

What changed, and why did the benefit disappear?

The benefit did not disappear so much as move behind a choice you now have to make. India has two tax regimes running in parallel. The new regime offers lower tax rates but removes most deductions and exemptions, including the home loan benefits for a self occupied property. The old regime keeps those deductions but taxes income at higher rates. What caught Rohan out is that the new regime is now the default, so unless you actively choose the old regime, you are treated as being on the new one, where the self occupied home loan deductions do not apply. This is a shift from how things worked for years, when almost everyone claimed the home loan interest and principal as a matter of course. Today, claiming them is a decision, not an automatic entitlement, and it comes bundled with accepting the old regime higher rates.

You can read the current position on the official Income Tax Department site. The important mental shift for a buyer is to stop assuming the tax saving exists, and instead work out whether it exists for you. For many salaried buyers with few other deductions, the lower rates of the new regime can leave them better off overall even without the home loan benefit, while others with several deductions may still prefer the old regime. There is no single right answer, only your own numbers.

What can you claim on a self occupied home?

It depends entirely on which regime you are on. Under the old regime, a self occupied home loan still gives you the familiar deductions, up to 2 lakh rupees a year on the interest and up to 1.5 lakh rupees on the principal repayment within the overall limit for that section. Under the new regime, a self occupied home loan gives you neither. This is the single most important line in this guide. The same loan, on the same flat, produces a meaningful tax deduction under one regime and nothing at all under the other. So the question is never simply how much can I claim, it is how much can I claim given the regime that suits the rest of my finances. The table below lays the four combinations out side by side.

Read the first and third rows together. They describe the identical home loan, and the only variable is the regime. That is why choosing a regime and buying a home are decisions that should be made with one eye on each other.

Is a let out property treated differently?

Yes, a rented property gets a narrower but real benefit even under the new regime. If you let the property out, you can deduct the home loan interest against the rental income the property earns. That much survives. What is restricted under the new regime is your ability to set off a resulting loss, where the interest exceeds the rent, against your other income such as your salary. Under the old rules that set off was available within limits, and under the new regime it is curtailed. The practical effect is that a let out property still lets you reduce the tax on its own rental income through the interest, but it no longer generously shelters your salary the way it once could. Because this area is nuanced and depends on your rent, your interest and your other income, it is worth confirming your exact position with a tax professional rather than assuming.

Did the new Income Tax Act change the section numbers?

Yes, the references you grew up with have been renumbered, though the substance is broadly the same. From the 2026-27 tax year, the Income-tax Act, 2025 replaces the old 1961 Act, and in doing so it reorganises and renumbers the provisions. The familiar Section 24b for interest and Section 80C for principal now sit under new section numbers in the 2025 Act. For a buyer this is mostly a matter of vocabulary, because the renumbering by itself does not change the deduction limits or the basic treatment described here. But it does mean that older articles and calculators quoting the 1961 Act section numbers are now using outdated labels, even where the underlying figures still hold. Our explainers on the home loan interest deduction and the principal repayment deduction walk through how each one works in practice.

Should this change whether you buy at all?

No, and it is worth being clear about that, because a home and a tax deduction are two different things. People buy a home to live in it, for stability, for the freedom to make it their own, and to stop paying rent to someone else. None of those reasons depends on a tax break. What the new regime should change is not whether you buy, but how honestly you size the purchase. For years the home loan deduction was quietly used to justify a slightly bigger loan than the raw numbers supported, on the logic that the tax saving would bridge the gap. Under the new default regime, for a self occupied buyer, that bridge is gone. So the disciplined response is simply to plan the loan on its true cost, without leaning on a deduction you may not receive. If you do end up on the old regime and the deductions apply, treat that as a welcome reduction in your effective cost rather than the thing that made the home affordable. A purchase that only works because of a tax benefit was never really affordable. A purchase that works on the EMI alone, with any tax saving as a bonus, is one you can carry through whatever a future budget does to the regimes.

How should a Bengaluru buyer plan around this?

Plan the loan and the tax regime together, and never assume a deduction you have not confirmed applies to you. The mistake Rohan made was budgeting for a saving that his chosen regime did not offer. Avoid it by working through the checklist below in order.

1. Decide whether you are likely to be on the new default regime or to opt for the old one.
2. Confirm that a self occupied home loan gives no deduction under the new regime.
3. If you are on the old regime, note the interest and principal limits you can actually use.
4. Compare your total tax under each regime, with and without the home loan deductions.
5. Do not let a tax saving alone justify stretching to a larger loan than you can carry.
6. For a let out property, model the interest against rent and the limited loss set off.
7. Confirm the numbers for your exact case with a qualified tax professional before you file.

Following this order keeps the tax question in its proper place, as one input into affordability rather than the reason to buy. For a project such as Birla Ojasvi in Rajarajeshwari Nagar, the EMI you can comfortably carry should be judged on your actual cash flow first, and any tax benefit treated as a bonus only if your regime genuinely allows it. A home is a fine thing to own on its own merits. It just should not be bought on the strength of a tax saving that, under the new default regime, a self occupied buyer no longer receives.

Common questions from Bengaluru buyers

Can I claim home loan interest deduction under the new tax regime?

For a self occupied home, no. The deduction of up to 2 lakh rupees for home loan interest that was available under the old rules is not allowed under the new tax regime. Since the new regime is now the default, many buyers get no benefit on a self occupied home loan unless they opt for the old regime.

What about the principal repayment deduction under 80C?

That is also not available under the new tax regime. The deduction for home loan principal repayment, up to 1.5 lakh rupees, only applies if you choose the old regime. Under the new regime the principal repayment on a self occupied home loan gives you no separate income tax deduction, which surprises many first time buyers planning their taxes.

Do let out property home loans get any benefit under the new regime?

Yes, but in a limited way. For a let out property you can deduct the home loan interest against the rental income the property earns. However, your ability to set off a resulting loss against your other income is restricted under the new regime, so the benefit is narrower than under the old rules.

Did the section numbers change under the new Income Tax Act 2025?

Yes. From the 2026-27 tax year the Income-tax Act, 2025 replaces the old 1961 Act and renumbers the provisions, so the familiar Section 24b and Section 80C references move to new sections. The renumbering reorganises the law but does not by itself change the substantive deduction limits described here.

Last updated 2026-08-08. PropNewz Team.