Tax Benefits on Home Loans in India for FY 2025-26: Save More on Your Dream Home

Buying a house is as big a dream as it can be scary. The burden of a home loan is huge, but don’t worry, the Government of India has made this dream of yours easier by providing several tax benefits on home loans in India, which you can take advantage of to reduce your tax. For FY 2025-26 (AY 2026-27), you can save thousands of rupees by availing the exemption under Section 24(b) on interest and Section 80C on principal repayment under the Income Tax Act.

Especially if you are in the old tax regime. Whether you are a first-time home buyer, a self-occupied property owner or an NRI, you can save your money smartly by understanding these rules. So let’s know how you can take full advantage of these tax benefits.

Why Tax Benefits on Home Loans in India Are a Game-Changer

After taking a home loan, you have to pay huge interest and principal installments for years. But the exemptions available under tax sections 24(b), 80C, 80EE, and 80EEA give you some relief by reducing your taxable income. These benefits are especially helpful for salaried professionals, self-employed people, and NRIs investing in property in India.

But here’s one thing you need to keep in mind: these tax benefits are quite different in the old tax system and the new tax system. So, let’s understand how home loan tax benefits can work for you for FY 2025-26.

Tax Benefits Under the Old Tax Regime

If you have taken a home loan, then you can get a lot of benefits in the old tax regime. Here is a simple breakdown of each section, read it carefully so that you do not make any mistake:

Section 24(b): Deduction on home loan interest

• Self-Occupied House: Interest deduction of up to ₹2 lakh per annum is available. In the initial years when most of the EMI goes into interest, this is very useful for homebuyers.
• Let-Out: There is no limit here, the entire interest can be deducted from the rent income. If the interest is high, then you can claim the remaining loss for the next 8 years.
• Pre-construction interest: If interest is paid before the construction of the property, then it can be claimed equally in 5 years after the property is ready (up to ₹2 lakh annually). If the construction is not completed in 5 years, you will get only ₹30,000.

Note: If there is more than one self-occupied property, then the limit of ₹2 lakh will apply to all of them.

Section 80C: Deduction on principal repayment

Up to ₹1.5 lakh per annum is available as deduction on the principal of home loan (other investments like PPF, ELSS, insurance premium also come under this section).

Stamp duty and registration: The stamp duty and registration charges levied at the time of purchase of property can also be claimed in this section (but only in the year in which the payment is made).

Condition: If the property is sold within 5 years, then this deduction will be added back to the taxable income.

Section 80EE: Extra benefit for first-time homebuyers

First-time home loan borrowers can avail an additional interest deduction of ₹50,000 (over and above the ₹2 lakh limit under Section 24(b)).

Who can claim it?

• The loan should have been sanctioned between April 1, 2016 and March 31, 2017.
• The loan amount should be up to ₹35 lakh.
• The value of the property should be less than ₹50 lakh.
• No other property should be owned at the time of taking the loan.

Note: This scheme is no longer available for new loans, but if your loan was sanctioned during this period, avail the benefit.

Section 80EEA: Deduction for affordable homes

An additional interest deduction of ₹1.5 lakh on affordable housing loans (over and above the ₹2 lakh limit under Section 24(b)).

Who can claim it?

• The stamp duty value of the property should be less than ₹45 lakh.
• The loan should be sanctioned between 1 April 2019 and 31 March 2022.
• There should not be any other property at the time of taking the loan.

No longer available: This benefit is not available for loans sanctioned after 31 March 2022.

Joint home loan: Double deduction!

If you have taken a joint loan (and both are co-owners and co-borrowers), then each person can take these deductions:

• ₹2 lakh (on interest) under section 24(b).
• ₹1.5 lakh (on principal) under section 80C.

Advantage: If the income of both partners is taxable, then the deduction is also double!

So if you are thinking of taking a home loan or have already taken it, then take full advantage of these deductions in the old tax regime.

Tax Benefits Under the New Tax Regime

In the new tax system, rates are low and things are simple, but the deduction options have also reduced. In particular, home loan borrowers will not get as many benefits as before:

Under section 24(b):

• If the house is for self-occupation: Now no deduction will be available on interest, this is a big deduction.
• If the house is let-out: Full deduction of interest is available, which can be adjusted against rental income.
• Section 80C, 80EE, 80EEA: Deductions available in these (such as principal repayment or extra interest) will no longer be available in the new regime.

For whom is it good?

For those who have income but do not have many deductions (such as no home loan, less savings), the new regime can be beneficial for them because the tax slabs are lower and the standard deduction is higher.

But if you have taken a loan to purchase a house (especially for self-residence), then the old regime may be better as it offers more tax saving options.

Key Tips to Maximize Home Loan Tax Benefits

To make the most of these tax deductions, follow these practical strategies:

Take advantage of house property losses

If you have rented out a property and the loan interest is more than the rental income, you can set off up to Rs. 2 lakh of the loss against your salary or other income. If the loss is more than this, you can set off the remaining amount against future house property income for up to 8 years.

NRIs can also benefit

NRIs also get the same tax benefits as residents, the only condition is that the loan is taken from an RBI-approved lender. This makes Indian real estate a good investment option for NRIs as well.

Keep documents ready

To avoid any hassle in tax filing, keep these documents saved:

• Loan sanction letter
• Interest certificate (in which principal and interest are given separately)
• Property papers (if you are claiming under section 80EE/80EEA)
• If the income tax department asks for verification, these documents will come in handy.

Make the right choice between old vs new tax regime

If your home loan deduction is more than Rs. 2-3 lakh, then in most cases the old tax regime is more beneficial. It would be better to compare both the regimes yourself first using an income tax calculator.

Consult a tax expert

Tax laws keep changing, and everyone’s financial situation is different. A Chartered Accountant (CA) can suggest the right strategy based on your income and investments, so that you can take full advantage of the home loan tax benefits 2025.

Overall, with a little planning and the right documentation, you can maximize the tax benefits on your home loan.

Also Read: Benefits of Buying Under-Construction Property

Quick Reference: Maximum Deductions at a Glance

Section	Component	Maximum Deduction	Applicability
24(b)	Interest (Self-occupied)	Rs. 2 lakh	Old regime only
24(b)	Interest (Let-out)	No limit	Both regimes (offset against rent)
80C	Principal Repayment	Rs. 1.5 lakh	Old regime only
80EE	Interest (First-time buyers)	Rs. 50,000	Old regime only (loans 2016-17)
80EEA	Interest (Affordable housing)	Rs. 1.5 lakh	Old regime only (loans 2019-22)

Conclusion: Turn Your Home Loan into a Tax-Saving Tool

Home loan tax benefits for FY 2025-26: There are huge opportunities to save tax on home loans in the old tax system. You can easily get a deduction of up to Rs 2 lakh on loan interest and up to Rs 1.5 lakh on the principal. If you are buying a house for the first time, then you get more benefits.

But in the new tax system, there are not many benefits, especially for self-occupied properties. Therefore, it is very important to choose the right option according to your financial plan.

Tips to maximize tax savings:

• Compare both tax systems: Find out which one is giving you more benefits.
• Maintain all documents: Maintain documents like loan statement, interest certificate, etc.
• Take expert advice: Talk to a tax professional and make the right plan.

By taking advantage of these tax benefits, you can not only buy your dream home, but it can also prove to be a smart investment for you.

Frequently Asked Questions