Tax Benefit on Home Loan Interest & Principle F.Y. 2025-26

To understand the key tax benefits on a home loan, we are bifurcating the repayment techniques into four major elements tax benefits on principal repaid, tax benefits on interest paid, deduction on pre-construction interest, and section 80EE (New section 130) income tax benefits. The next section will let you know the concept in detail.

Tax Benefits on Principal Repaid

Under section 80C of the Income Tax Act, the maximum deduction allowed for the repayment of the principal amount of a home loan is Rs. 1.5 lakh. Deduction under section 80C also includes investments done in the PPF Account,  Equity Oriented Mutual funds, Tax Saving Fixed Deposits, National Savings Certificate, etc. subject to a maximum of Rs. 1.5 lakhs.

Besides this, there are stamp duty and registration charges that one can claim under the aforementioned section. However, the claim can only take place in the year in which the payment was made.

Nevertheless, there’s a condition under which this repayment of the principal amount of the housing loan is allowed. The deduction is only possible after the house gets entirely completed and there is a completion certificate for the same. The principal amount paid on any under-construction structure/property is not going to be a part of this section.

Tax Benefits on Interest Paid

Under section 24 (New Section 22) of the Income Tax Act, one can avail of the deduction on a Home Loan for payment of Interest tax benefits. The self-occupied property allows the deduction with a maximum limit of Rs. 2 lakh if it takes completed within 5 years from the end of the Financial Year, otherwise, the maximum limit is Rs. 30,000.

Interest on housing loans paid for the let-out property is fully allowed in the relevant assessment year in which it is claimed.

From Assessment year 2018-19, the loss from house property head that will be allowed to be set off from other heads of income will be restricted to Rs 2,00,000 in a particular assessment year, and the rest amount shall be carried forward for set-off in subsequent years.

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Tax Deduction on Pre-construction Interest

You can also claim interest on a housing loan paid before the completion of the construction of the property. It is termed pre-construction interest. It is allowed in 5 equal instalments beginning from the financial year in which the construction is completed. The limit of 2 lacs will also apply for pre-construction interest in the case of self-occupied property. However, it is fully allowed in case we let our property.

Section 80EE (New Section 130) Income Tax Benefit

Section 80EE proposes an additional deduction of Rs 50000 in respect of interest on housing loans to first-time house owners who own a house of Rs 50 lakh or less and have taken a home loan amount of less than or equal to Rs 35 lakh. The loan should be sanctioned between April 1, 2016, and March 31, 2017, to claim a deduction under this section. This deduction shall be in addition to the interest allowed under section 24(b) of the Income Tax Act, 1961.

Deductions Claimed by Individuals Under Section 80EEA (New Section 131)

As mentioned under the newly inserted section 80EEA of the Income Tax Act, the government has extended the limit of deduction up to Rs. 1,50,000 applicable to the interest paid by any individual on the loan against residential property.

As per the policies, the deduction is available for individual residents only and for the property having a stamp value of less than Rs. 45 Lakhs.

Also, the loan needs to be sanctioned between 1 April 2019 to 31 March 2022, and the individual should not own any other residential property on the date of sanctioning the loan. Lastly, the person should not be eligible for claiming any deduction U/S 80EE.

Joint Home Loan Deduction

In case a home loan is taken jointly, each co-borrower can claim a deduction of up to Rs. 2 lakh for interest on the home loan under Section 24(b) and up to Rs. 1.50 lakh for principal repayment under Section 80C in their respective income tax returns. However, the borrowers must also be co-owners of the property. Joint home loans can therefore help families avail higher overall tax benefits.

Deductions	Section	Maximum Deduction (INR)	Conditions
Principal	80c	1.5 Lakh	No sale of property within 5 years
Interest	24b	2 Lakh	The loan has to be taken for construction and has to be completed within 5 years
Interest	80EE	50,000 Thousand	The loan amount must be under 35 lakhs, and the property value under 50 lakhs
Stamp Duty	80C	1.5 Lakh	Availed only in the year of expense
Interest	80EEA	1.5 Lakh	The stamp value of the property is under INR 45 lakh. Taxpayers are not eligible to claim a deduction under section 80EE

However, in the new tax regime, deduction is not allowed under sections 24(b), 80C, 80EE and 80EEA corresponding to sections 22(2), 123, 130, 131 under the new Income Tax Act, 2025.