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A home loan is often one of the largest financial commitments an individual undertakes. While it helps make property ownership possible, it can equally reduce the tax burden through deductions available under the Income-tax Act, 1961.
In 2026, taxpayers following the old tax regime can claim deductions on both the principal and interest components of a home loan. These benefits are primarily available under Section 80C and Section 24(b). Together, they can significantly increase the overall home loan tax deduction available to eligible borrowers.
This article explains how these provisions work, the deduction limits applicable in 2026, and how homeowners can maximise the income tax benefit on housing loan repayments.
Every home loan EMI includes a principal and an interest component. Principal repayment qualifies for deduction under Section 80C, while interest payments qualify under Section 24(b). Together, these provisions help increase the overall home loan tax deduction available to eligible taxpayers.
Section 80C allows individuals and Hindu Undivided Families (HUFs) to claim deductions of up to ₹1.5 lakh per financial year for specified investments and expenses. One of the eligible expenses under this section is the repayment of the principal amount of a housing loan.
Section 80C covers principal repayment along with eligible stamp duty and registration charges. The deduction is capped at ₹1.5 lakh per financial year, including other eligible investments such as EPF, PPF, ELSS, life insurance premiums, and NSC.
For many homeowners, principal repayment forms a significant portion of their annual home loan tax deduction claim.
To claim the deduction:
• The property must be a residential property.
• Possession of the property must have been obtained.
• The deduction can only be claimed by the owner of the property.
• The property should not be sold within five years from the end of the financial year in which possession was obtained.
If the property is transferred within the prescribed five-year period, the deductions claimed earlier may become taxable in the year of transfer.
While Section 80C covers principal repayment, Section 24(b) focuses on interest paid on borrowed capital used for purchasing or constructing a residential property.
The Section 24 deduction on home loan interest is often more valuable because interest payments tend to be higher during the initial years of a loan.
For a self-occupied residential property, taxpayers can claim up to ₹2 lakh annually as a Section 24 deduction on home loan interest.
To claim the full deduction:
• The loan must be taken for purchase or construction.
• Construction should be completed within the prescribed period under tax regulations.
The Section 24 deduction on home loans can significantly reduce taxable income, particularly for salaried individuals servicing large housing loans.
For a let-out property, the entire interest paid on the home loan can generally be considered while calculating income from house property. However, the adjustment of house property losses against income from other heads is subject to the limits prescribed under the Income-tax Act.
Property investors often rely on the income tax benefit on housing loan interest deductions to improve overall returns from real estate investments.
A taxpayer can potentially claim up to ₹1.5 lakh under Section 80C and up to ₹2 lakh under Section 24(b) for a self-occupied property, subject to eligibility conditions. This can significantly increase the available home loan tax deduction and reduce overall taxable income.
The actual tax savings depend on factors such as annual income, applicable tax slab, surcharge, and cess.
In a joint home loan, co-borrowers who are also co-owners and contribute towards repayment can claim deductions individually under Sections 80C and 24(b), increasing the overall income tax benefit on housing loan repayments.
The old regime allows:
• Section 80C deductions
• Interest deductions under Section 24(b)
As a result, taxpayers can continue to enjoy the full home loan tax deduction benefits available under the law.
The new tax regime offers lower tax rates but restricts several deductions and exemptions.
For self-occupied properties, many home loan-related benefits available under the old regime may not be claimable. Therefore, homeowners should compare both regimes before making a decision.
Many borrowers fail to claim the complete income tax benefit on housing loans because of avoidable errors.
Some common mistakes include:
• Claiming deductions before obtaining possession.
• Ignoring stamp duty and registration charges eligible under Section 80C.
• Failing to collect annual interest certificates from the lender.
• Claiming deductions without ownership rights.
• Choosing a tax regime without evaluating available deductions.
Proper tax planning can help homeowners maximise the Section 24 deduction on home loan interest as well as deductions available under Section 80C.
A home loan does more than finance the purchase of a property. It can become an effective tax-saving instrument when the available deductions are utilised correctly.
Section 80C allows deductions of up to ₹1.5 lakh on principal repayment and certain acquisition-related expenses. Section 24(b) permits interest deductions of up to ₹2 lakh for self-occupied properties, making the Section 24 deduction on home loan one of the most valuable tax benefits available to homeowners.
When combined, these provisions can significantly enhance the overall home loan tax deduction and increase the income tax benefit on housing loan repayments in 2026.
