Home Loan Tax Benefits: Old vs New Regime for Buyers

A Bengaluru buyer budgeted her flat on the comforting idea that the taxman would hand back a chunk of her home loan interest every year. She had read about the 2 lakh rupee deduction and the 1.5 lakh rupee one and built them into her sums. Then her accountant pointed out that she had opted for the new tax regime, under which a self-occupied home loan gives neither. The deductions are real, but they live in the old regime, and which regime you are in decides whether you get them at all. For a buyer stretching to afford a flat, that is not a technicality; it can be lakhs of rupees a year in expected relief that simply does not arrive.

The short answer. Under the old tax regime, a self-occupied home loan can give up to 2 lakh rupees a year of interest deduction under Section 24(b) and up to 1.5 lakh rupees of principal under Section 80C, with a further 1.5 lakh under Section 80EEA for a narrow set of older loans. Under the new regime, which is now the default, these deductions are largely unavailable for a self-occupied home. The trade-off: the old regime rewards a home loan with deductions but has higher slab rates, while the new regime has lower rates but drops most of these benefits, so the right choice depends on your full numbers.

What can I deduct under the old regime?

Under the old regime a self-occupied home loan carries two main deductions, plus a narrow third. As Piramal Realty's guide to home loan tax benefits sets out, Section 24(b) allows up to 2 lakh rupees a year on the interest for a self-occupied property, and Section 80C allows up to 1.5 lakh rupees a year on the principal, though that 1.5 lakh is a shared limit across other 80C products such as provident fund and life insurance. Stamp duty and registration paid in the purchase year also fall within that same 80C limit rather than a separate one. Section 80EEA can add a further 1.5 lakh rupees over the 24(b) cap, but only for first-time buyers whose loans were sanctioned between April 2019 and March 2022 with a stamp duty value up to 45 lakh rupees, so loans taken now do not qualify.

Taken together, the old regime's self-occupied benefit tops out around 3.5 lakh rupees a year, or up to 5 lakh for the few who still qualify under 80EEA. Two conditions are worth noting on the 24(b) interest cap. The 2 lakh limit applies to a self-occupied property whose construction is completed within five years of the end of the financial year in which the loan was taken; if it drags on longer, the allowable interest drops sharply. And the 1.5 lakh under 80C is a principal deduction only, so the much larger interest component of your early EMIs does not count there, which is why 24(b) and 80C are separate heads rather than one pool.

Why does the new regime change the picture?

Because the new regime, now the default, does not allow these deductions for a self-occupied home. Piramal's guide states that under the new tax regime home loan deductions are largely unavailable, and that Section 24(b), 80C and 80EEA cannot be claimed for a self-occupied flat. The new regime offers lower slab rates instead, so it is not simply worse; it is a different trade. A buyer who assumes the home loan deductions apply, without checking which regime they are in, can over-estimate their tax saving and therefore their affordability. The practical point is that the deductions are not automatic with a home loan; they are automatic only with the old regime, and you choose your regime each year. Because the new regime is the default, a salaried buyer who never actively opts for the old regime is on the new one, and may not realise the home loan deductions have quietly fallen away. The honest way to decide is to compute your tax both ways, with all your deductions on one side and the lower slab rates on the other, and pick the lower figure. For a borrower with a large interest outgo and other old-regime deductions, the old regime can still win; for someone with few deductions beyond the home loan, the new regime's lower rates sometimes come out ahead even without the home loan benefits.

What about a let-out property?

A let-out flat is treated differently, and here the interest deduction survives in both regimes. The full interest you pay on a let-out property is deductible against the rent, in the old and the new regime alike. The difference is in how a loss is treated: if your interest exceeds the rent, the resulting loss cannot be set off against your salary or other income under the new regime, and cannot be carried forward in the way the old regime allows. So a landlord with a large loan feels the new regime's limits through the loss rules rather than the deduction itself. For a buyer deciding between living in the flat and letting it out, this difference is worth modelling, because the tax treatment genuinely differs. The practical upshot is that a self-occupied home and a let-out home are not the same proposition for tax, and the gap widens under the new regime. A self-occupied flat on the new regime carries no interest deduction at all, while a let-out flat still offsets interest against rent, subject to the loss restriction. None of this should drive the decision of where to live, but it should be in the arithmetic rather than discovered after the fact, especially for a buyer weighing whether a second flat would be self-occupied or let out.

How do the regimes compare for a home loan borrower?

The table below sets the main deductions against each regime so you can see where each benefit survives.

How should a buyer use this when planning?

You compare the two regimes on your actual numbers before you count any tax saving into your budget. The checklist below helps you avoid over-estimating the benefit.

1. Confirm whether you are filing under the old or the new tax regime for the relevant year.
2. If you are on the new regime and the flat is self-occupied, plan on no home loan deduction.
3. If you are on the old regime, estimate the 24(b) interest deduction up to 2 lakh rupees.
4. Add the 80C principal within the shared 1.5 lakh limit, remembering your other 80C items.
5. Include stamp duty and registration under 80C only in the year you paid them.
6. Check whether your loan's sanction date and value let you claim 80EEA, which very few new loans will.
7. Compare your total tax under both regimes, since the lower slab rates may outweigh the deductions.

What do buyers most often get wrong?

The biggest error is assuming the deductions come with the loan rather than with the regime, and budgeting a tax saving that the new regime does not give. The next is double counting the 1.5 lakh under 80C, forgetting it is shared with provident fund, insurance and the rest, so the principal rarely gets the full limit to itself. A third is expecting 80EEA on a recent loan, when it closed to loans sanctioned after March 2022. These benefits also interact with the rest of your purchase maths, so it helps to see the whole picture: our guide to the home loan EMI and the repo rate covers the interest you are paying, and our guide to stamp duty and registration charges in Bangalore covers the duty that can sit within your 80C limit. When you plan the finances for a specific flat, say at Prestige Rosewood in Varthur, model the tax under both regimes rather than assuming the deductions apply, and confirm the current limits with a chartered accountant.

Frequently asked questions

How much home loan tax benefit can I claim?

Under the old regime for a self-occupied flat, up to 2 lakh rupees a year on interest under Section 24(b) and up to 1.5 lakh rupees on principal under Section 80C, which is a shared limit. A further 1.5 lakh under Section 80EEA applies only to older qualifying loans. Under the new regime these are largely unavailable.

Are home loan deductions available in the new tax regime?

Largely no, for a self-occupied home. The new regime, now the default, does not allow the Section 24(b) interest deduction or the Section 80C principal deduction for a flat you live in. It offers lower slab rates instead, so compare your total tax under both regimes before assuming a home loan will cut your tax bill.

Can I claim stamp duty and registration as a tax deduction?

Under the old regime, stamp duty and registration charges can be claimed under Section 80C in the year you pay them, but within the same 1.5 lakh rupee limit that covers the loan principal and other 80C items, not as a separate amount. Under the new regime this deduction is not available.

Is the interest deduction different for a rented-out flat?

Yes. For a let-out flat the full interest is deductible against the rent in both the old and new regimes. The difference is the loss: if interest exceeds rent, the new regime does not let you set that loss off against salary or carry it forward, so a landlord with a large loan feels the limit through the loss rules.

The short version: the deductions belong to the old regime, not to the loan. Check your regime first, then plan the 24(b) and 80C benefits, and compare both regimes on your real numbers before you fold any expected tax saving into what you can genuinely afford to pay each month.

Last updated 2026-10-08. PropNewz Team.