In the filing season of 2026 a Bengaluru buyer sat down to claim the home loan tax breaks he had counted on when he bought his flat, only to find they did not apply. He had opted for the new tax regime, under which the familiar deductions on a self occupied home loan simply are not available. The benefits were real, but they lived in the old regime, and his choice of regime had quietly switched them off. Home loan tax benefits can be worth a great deal, but only if you understand which regime allows them and which sections govern them before you file.

The short answer. A home loan on a self occupied property can earn you a deduction of up to 2 lakh rupees a year on the interest under Section 24, and up to 1.5 lakh rupees a year on the principal under Section 80C, but these apply under the old tax regime. The trade off worth knowing is that the new tax regime, which is now the default, does not allow these deductions for a self occupied home, so whether the benefits are worth anything to you depends first on the regime you choose.

What are the main home loan tax benefits?

The two main benefits are a deduction on the interest you pay and a deduction on the principal you repay. Under Section 24, the interest on a home loan for a self occupied property is deductible up to 2 lakh rupees in a year, which directly lowers your taxable income. Under Section 80C, the principal you repay is deductible up to 1.5 lakh rupees a year, though that limit is shared with other 80C items such as provident fund and life insurance. Together these can shelter a meaningful slice of income from tax while you repay a home loan. For a buyer, they soften the real cost of borrowing, since a portion of both the interest and the principal comes back as tax saved. The key is that both deductions sit in the old tax regime, so they reward the buyer who files under that regime.

Because the principal deduction shares the 80C ceiling with other investments, many buyers find their principal repayment alone fills much of that limit. The interest deduction under Section 24 is separate and dedicated to the home loan, which is why it is usually the larger and more valuable of the two. There is also a rule for the interest paid during construction, before the flat is ready, which can be claimed in five equal instalments once the home is complete, still within the overall interest limit. A buyer who bought under construction should keep a record of that pre construction interest, because it is easy to overlook and can add usefully to the deduction in the years after possession.

Why does your choice of tax regime matter so much?

Your regime matters because the new tax regime, now the default, does not allow the Section 24 interest or the Section 80C principal deduction for a self occupied home. The new regime offers lower slab rates but strips away most deductions, including these home loan benefits for a self occupied property. The old regime keeps the deductions but applies the older slab rates. This means the same home loan can save you tax under one regime and nothing under the other, so the choice is not a formality. As a rough guide, the old regime tends to work out better when your total deductions, including the home loan, are large enough to outweigh the new regime's lower rates. Because this depends on your full income and deductions, confirm the comparison for your own case with a tax adviser rather than assuming. Our guide to how the repo rate shapes a home loan EMI covers the interest side that these deductions partly offset.

How much can you actually claim?

The amounts you can claim are capped, and reading the caps together shows the shape of the benefit. The table below sets out the main deductions and where they apply, so you can see what a self occupied home loan can shelter under the old regime.

One detail worth noting is that the stamp duty and registration you pay can be claimed under the 80C limit in the year of purchase, which is useful given how large those charges are. Because it shares the same 1.5 lakh ceiling as the principal and other items, though, it may not add much on top if that limit is already full.

What about a jointly owned home?

A jointly owned and jointly borrowed home can multiply the benefit, because each co owner who is also a co borrower can claim the deductions on their share. When a couple buys together, each owning a share and each repaying part of the loan, both can claim the Section 24 interest and the Section 80C principal within their own limits. This effectively doubles the household deduction, provided both are owners and borrowers and both have taxable income to set the deductions against. It is one of the clearest reasons couples often choose to co own and co borrow. The caution is that the benefit follows genuine ownership and repayment, not a paper arrangement, so the shares and the loan should reflect the real position. Our guide to Karnataka stamp duty and registration charges covers the charges that can also be claimed under 80C.

How do these benefits fit your buying decision?

The tax benefits should inform your buying decision without driving it, because a home is first a place to live and only then a tax shelter. It is a mistake to buy a larger loan than you need simply to claim a bigger deduction, since the interest you pay always exceeds the tax you save on it. What the benefits do well is soften the real cost of a loan you were going to take anyway, and reward the discipline of repaying it. Reading them alongside your EMI and your regime choice gives you the true after tax cost of your home loan, which is the number that matters. A buyer who understands the deductions, picks the regime that suits their full finances, and does not overborrow for a tax break makes the soundest use of these benefits. They are a genuine help, not a reason to buy. It also helps to revisit the regime choice each year rather than setting it once and forgetting it, because your income, your deductions and the loan's shrinking interest component all change over time. The regime that suited you in the first year of a loan, when interest is highest, may not be the one that suits you later, so a quick annual comparison keeps you on the more favourable side.

How do you claim the benefits, step by step?

Treat the benefits as something to plan for before you file, and before you even choose your loan. These steps keep the deductions working for you.

1. Confirm the property is self occupied, since the limits differ for a let out home.
2. Compare the old and new tax regimes for your full income and deductions.
3. Choose the old regime if the deductions, including the home loan, favour it.
4. Claim the interest under Section 24, up to the 2 lakh limit for a self occupied home.
5. Claim the principal under Section 80C, within the shared 1.5 lakh limit.
6. Claim the stamp duty and registration under 80C in the year of purchase.
7. Confirm the current rules and your own position with a tax adviser before filing.

Run this on your own income before you commit. A buyer weighing a launch such as Prestige Lakeside Habitat in Whitefield should factor the after tax cost of the loan, under the regime that suits them, into the budget rather than counting on a deduction the new regime may not allow.

Frequently asked questions

What tax benefits does a home loan offer?

A home loan on a self occupied property offers a deduction of up to 2 lakh rupees a year on the interest under Section 24, and up to 1.5 lakh rupees a year on the principal under Section 80C. Both apply under the old tax regime and together shelter a portion of your income from tax while you repay the loan.

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

For a self occupied property, the new tax regime does not allow the Section 24 interest or the Section 80C principal deduction, so these benefits apply only under the old regime. Because the new regime is now the default, confirm which regime suits your full finances before you count on the deductions.

How much interest can I deduct on a home loan?

For a self occupied property under the old regime, you can deduct home loan interest up to 2 lakh rupees a year under Section 24. This is separate from the Section 80C principal deduction, and it is usually the larger of the two benefits since it is dedicated to the home loan rather than shared with other items.

Can a couple both claim home loan tax benefits?

Yes. When a couple co own and co borrow, each can claim the Section 24 interest and the Section 80C principal on their share within their own limits, effectively doubling the household deduction. The benefit follows genuine ownership and repayment, so the shares and the loan should reflect the real position, and both need taxable income to set it against.

The limits and regime rules in this guide reflect the home loan tax benefits for a self occupied property, summarised in this comparison of home loan tax benefits under the old and new regimes. Because tax rules and regime rates are revised over time, always confirm the current position and your own eligibility with a tax adviser before you file.

Last updated 2026-08-13. PropNewz Team.