Home Loan Tax Benefits: Section 24(b), 80C and the Regime Trap in Bengaluru

An HR manager in Bengaluru assumed her home loan would automatically cut her tax bill, the way a colleague had described years earlier. When she filed her return, her chartered accountant asked one question that changed the arithmetic: had she opted for the old tax regime or the new one? She was on the new regime by default, and under it the familiar home loan deductions for a self-occupied flat simply do not apply. The benefit she had counted on was real, but only for someone who had chosen the right regime.

The short answer. A home loan can reduce your tax through three main provisions: Section 24(b) for interest, up to 2 lakh rupees a year on a self-occupied home; Section 80C for principal, up to 1.5 lakh rupees a year within its shared limit; and, historically, Section 80EEA for extra interest on affordable housing. The trade-off to know: for a self-occupied home these deductions are available only under the old tax regime, and the new regime, which is now the default, does not allow them, so whether you benefit at all depends on the regime you choose when you file.

What home loan tax benefits can a Bengaluru buyer claim?

A home loan buyer can claim deductions on both the interest and the principal, plus certain purchase costs, under the old tax regime. The interest you pay each year is deductible under Section 24(b), the principal you repay is deductible under Section 80C, and the stamp duty and registration you pay in the year of purchase also count within the Section 80C limit. Together these can lower your taxable income meaningfully in the early, interest heavy years of the loan.

The important condition is the tax regime, and it now shapes everything. Because the new regime is the default and does not permit these deductions for a self-occupied home, simply having a home loan is no longer enough to save tax. You have to actively compare the two regimes and choose the one that leaves you better off, which for a borrower with a large interest bill is often, though not always, the old regime.

How much interest can you deduct under Section 24(b)?

Under Section 24(b) you can deduct up to 2 lakh rupees of home loan interest a year on a self-occupied property. This is an annual deduction, claimed for each financial year in which you pay interest, and it is one of the larger reliefs available to an ordinary salaried buyer under the old regime. Since interest dominates your EMI in the first years of a loan, this cap is often fully used early on.

The position differs for a let-out property, where the interest you pay is deductible without the 2 lakh ceiling, although the overall loss from house property that you can set off against other income in a year is itself limited, with the remainder carried forward. For most first time buyers living in the home, the practical rule to remember is the 2 lakh annual cap on interest, claimed under the old regime. It is also worth noting that interest paid during the construction period, before you get possession, is not lost; it can be claimed in five equal instalments over the five years after the year in which construction is completed, subject to the same overall cap.

What does Section 80C cover on a home loan?

Section 80C lets you deduct the principal portion of your home loan repayment, up to 1.5 lakh rupees a year, but that limit is shared. The same 1.5 lakh ceiling also covers other common investments such as provident fund, life insurance premiums, and certain deposits, so your home loan principal competes with them for the same space. If those other items already fill the limit, the principal repayment may add little further benefit.

There is a useful extra within Section 80C for buyers: the stamp duty and registration charges you pay in the year of purchase can be claimed under the same section, again within the 1.5 lakh cap. Because registration costs are large and one time, claiming them in the year you buy can be worthwhile. As with the other deductions, all of this applies only if you are on the old tax regime.

What was Section 80EEA and can you still claim it?

Section 80EEA offered an additional interest deduction of up to 1.5 lakh rupees a year for affordable housing, over and above the Section 24(b) limit. It was aimed at first time buyers of lower value homes and, for those who qualified, it materially increased the interest that could be deducted. For eligible borrowers it was one of the most generous home loan reliefs available.

The catch is timing. Section 80EEA applied to home loans sanctioned within a specified window that has since closed, so it is generally not available for new loans taken today. If your loan was sanctioned during the eligible period you may still be claiming it through the life of that loan, but a buyer borrowing now should not assume it applies. Confirm your eligibility for any additional interest deduction with a tax adviser rather than counting on it in your budget.

Old regime or new regime: which lets you claim these?

For a self-occupied home, the old tax regime is the one that lets you claim these home loan deductions, and the new regime does not. The new regime, now the default, offers lower headline slab rates but removes most deductions, including Section 24(b), Section 80C, and Section 80EEA for a self-occupied property. So the choice of regime is not a formality; it directly decides whether your home loan saves you tax at all.

The right choice depends on your numbers. If your deductions, led by a large home loan interest bill, add up to more than the benefit of the new regime lower rates, the old regime usually wins. If you have few deductions, the new regime may leave you better off despite the loan. Run both calculations each year, because your interest, principal, and other deductions change over the life of the loan, and so can the better answer. A salaried employee can usually switch between the regimes from year to year at the time of filing, so a decision that suited you last year is worth revisiting rather than repeating out of habit.

How do joint borrowers multiply the benefit?

Joint borrowers who are also co-owners can each claim the deductions on their share, which can multiply the household benefit. If two co-owners are both co-borrowers, each can separately claim interest under Section 24(b) and principal under Section 80C within their own limits, on their respective shares of the loan, provided they meet the conditions. For a couple, this can roughly double the deductions the family claims, again only under the old regime.

The key is that a person must be both a co-owner of the property and a co-borrower on the loan, and must actually contribute to the repayment. Getting the ownership share and the loan structure right at the start is what makes the benefit real later. Our guide to joint home loans and co-applicant tax benefits explains how to set this up correctly before you sign.

How do you claim home loan tax benefits correctly?

Plan the tax side before you file, not at the last minute. The checklist below helps a Bengaluru buyer capture every benefit they are entitled to.

1. Decide each year whether the old or new regime leaves you better off.
2. Collect the lender interest certificate showing interest and principal split.
3. Claim interest under Section 24(b), up to 2 lakh for a self-occupied home.
4. Claim principal under Section 80C, within the shared 1.5 lakh limit.
5. In the purchase year, include stamp duty and registration within Section 80C.
6. If co-owned and co-borrowed, have each owner claim their share.
7. Check with a tax adviser whether any additional interest deduction applies to you.

Approached this way, the home loan does double duty, funding your flat and, under the right regime, trimming your tax. Before you finalise your loan amount, run the EMI and interest numbers too, using our guide to home loan EMI calculation at the current repo rate, so the tax benefit sits on top of a loan you have already sized sensibly, whether for a compact home or a larger flat in a project such as Sobha Dream Acres.

Frequently asked questions

Can I claim home loan tax benefits under the new tax regime? For a self-occupied home, no. The new tax regime, which is now the default, does not allow Section 24(b), Section 80C, or Section 80EEA deductions for a self-occupied property. These home loan benefits are available only under the old regime, so you must compare both regimes and choose the old one to claim them.

How much home loan interest is tax deductible? Under Section 24(b), up to 2 lakh rupees of interest a year is deductible on a self-occupied home, under the old tax regime. For a let-out property the interest is deductible without that ceiling, though the annual house property loss you can set off is itself limited. Most resident buyers rely on the 2 lakh cap.

Does Section 80C cover stamp duty and registration? Yes. The stamp duty and registration charges paid in the year of purchase can be claimed under Section 80C, within its overall limit of 1.5 lakh rupees a year. Since that limit is shared with principal repayment and other investments, plan which items to claim so you use the space to best effect.

Is Section 80EEA still available for new home loans? Generally no. Section 80EEA applied to loans sanctioned within a window that has since closed, so a new borrower usually cannot claim it. If your loan was sanctioned during the eligible period, you may still claim it over that loan's life. Confirm your position with a tax adviser rather than assuming it applies.

Last updated 2026-09-06. PropNewz Team.