How to Save Tax on Your Home Loan in India

A home loan can reduce your tax bill, but the rules depend on the tax regime you choose, whether the home is self-occupied or let out, and the year in which you pay. This guide explains the main provisions in plain terms. Tax rules change with each Budget. The Income-tax Act, 2025 applies from 1 April 2026 and replaces the Income Tax Act, 1961. It mainly reorganises the existing law and renumbers the sections; for example, the house property interest deduction in Section 24 of the 1961 Act sits in Section 22 of the new Act. The section numbers below follow the 1961 Act. Check the current provisions with the Income Tax Department's website or a chartered accountant before you file.

Which tax regime applies to you?

Most home loan deductions are available only under the old tax regime. Under the new regime, deductions such as Section 80C and the interest deduction on a self-occupied home are not allowed. Compare your total tax under both regimes before you decide, because the regime you choose affects every deduction below.

What is Section 80C and how does it help homebuyers?

Under the old regime, Section 80C allows a deduction of up to ₹1.5 lakh a year. Repayment of the home loan principal counts towards it, as do stamp duty and registration charges in the year you pay them. The same limit is shared with other 80C items such as PPF, ELSS and life insurance premiums. If you sell the property within five years of possession, the deduction you claimed can be reversed.

How does Section 24(b) work on interest paid?

Section 24(b) allows a deduction on home loan interest. For a self-occupied home the limit is ₹2 lakh a year under the old regime. For a let-out home the full interest can be claimed, but the loss from house property that you can set off against other income is capped at ₹2 lakh a year, and the rest is carried forward. Interest paid during construction is claimed in five equal instalments, starting from the year construction is completed.

What about the first-time buyer deductions?

Sections 80EE and 80EEA gave extra interest deductions to first-time buyers, but only for loans sanctioned in specific periods and below set property and loan values. Those windows have closed, so they do not apply to a new loan. Ask your adviser whether any current provision applies to you.

How can a joint loan help?

If both co-borrowers are also co-owners and both pay the EMI, each can claim the deductions on their share of the principal and interest, subject to the individual limits. The claim must match the ownership and the share of repayment. Keep the loan certificate and the repayment record for each borrower.

Can you claim HRA and a home loan together?

Yes, in some cases. If you own a home in one city but live in rented accommodation in another city for work, you can claim HRA for the rent and the home loan deductions for the property you own. Each claim has its own conditions, so keep the rent receipts and loan documents ready.

Common mistakes to avoid

• Claiming principal repayment under 80C before you have taken possession.
• Claiming a deduction under the new regime that only the old regime allows.
• Not keeping the lender's interest and principal certificate.
• Claiming a joint loan deduction without being a co-owner.
• Selling the property within five years of possession without allowing for the reversal.

FAQs

1. How can I save tax on my home loan in India?
Under the old regime you can claim the principal repayment under Section 80C, up to ₹1.5 lakh together with your other 80C items, and the interest under Section 24(b), up to ₹2 lakh for a self-occupied home. Confirm the current limits before you file.

2. What is the Section 24(b) home loan benefit?
Section 24(b) allows a deduction on home loan interest. For a self-occupied home the limit is ₹2 lakh a year under the old regime. For a let-out home the loss from house property that can be set off against other income is capped at ₹2 lakh a year.

3. Does the principal repayment get a tax benefit?
Yes, under the old regime principal repayment qualifies under Section 80C, within the ₹1.5 lakh limit shared with your other 80C investments.

4. Are there tax benefits on an under-construction property?
Interest paid during construction can be claimed in five equal instalments starting from the year construction is completed. Principal repayment under Section 80C is claimed only after you have the home.

5. Can a joint home loan increase tax savings?
Each co-owner who also repays the loan can claim deductions on their own share, subject to the individual limits. The claim should match the ownership and the repayment.

6. Can I claim HRA and home loan benefits together?
In some cases, for example when you own a home in one city and live in a rented home in another for work. Each claim has its own conditions, so check with your adviser.

7. Do NRIs get home loan tax benefits in India?
NRIs can generally claim the same deductions on a loan from an Indian lender, subject to having income taxable in India. Check the provisions that apply to your residential status with a chartered accountant.

Next steps

This guide is general information, not tax advice. Before you decide on a home or a loan, ask your chartered accountant how the deductions apply to your income and regime. To look at homes, see residential projects in Pune and our first-time home buyer guide.

Also explore 24K Altura premium flats in Baner, Pune by Kolte-Patil.