Owning a home is a significant financial milestone, and a home loan can also offer valuable tax benefits. Under the Indian Income-tax provisions applicable for Tax Year 2026-27, eligible taxpayers may claim deductions on both the principal repayment and the interest paid on a home loan, subject to the applicable conditions and the tax regime chosen. However, the availability of these benefits differs between the Old Tax Regime and the New Tax Regime.
Understanding these provisions can help taxpayers make informed financial decisions while filing their Income Tax Returns.
Home Loan Tax Benefits Under the Old Tax Regime
The Old Tax Regime continues to provide several tax benefits for eligible home loan borrowers.
1. Deduction on Interest Paid – Section 24(b)
Taxpayers can claim a deduction for the interest paid on a home loan taken for the purchase or construction of a residential house property.
For a self-occupied property, the maximum deduction available is ₹2 lakh per financial year, provided the prescribed conditions are satisfied. If the loan is taken for repairs or reconstruction, or certain older loans, lower limits may apply.
For a let-out property, the actual interest paid is generally deductible while computing income from house property. However, the adjustment of house property losses against other income is subject to the applicable provisions of the Income-tax Act.
2. Deduction on Principal Repayment – Section 80C
The principal component of the home loan EMI is eligible for deduction under Section 80C, subject to the overall limit of ₹1.5 lakh along with other eligible investments and expenses covered under this section.
To claim this deduction, certain conditions relating to ownership and the holding period of the property should be fulfilled.
3. Stamp Duty and Registration Charges
Eligible taxpayers may also claim stamp duty and registration charges under Section 80C, subject to the overall deduction limit and the prescribed conditions.
Home Loan Benefits Under the New Tax Regime
Taxpayers opting for the New Tax Regime should note that the traditional home loan deductions available under Section 80C and, for self-occupied properties, Section 24(b) are generally not available.
However, where a property is let out, the interest deduction may still be considered while computing income from house property, subject to the provisions applicable under the new regime.
Therefore, before selecting a tax regime, taxpayers should compare their overall tax liability under both regimes instead of assuming that one is automatically more beneficial.
Home Loan Tax Benefits for Joint Home Loans
If a home loan is taken jointly, each co-owner who is also a co-borrower and contributes towards loan repayment may separately claim eligible tax deductions, provided all prescribed conditions are satisfied.
This can help families optimize their overall tax benefits where both individuals have taxable income.
Conditions for Claiming Home Loan Tax Benefits
To claim tax deductions on a home loan, taxpayers should ensure that:
- The loan is taken from a recognized financial institution or eligible lender.
- The taxpayer is the owner or co-owner of the property.
- The property satisfies the applicable conditions under the Income-tax Act.
- Interest and principal repayments are supported by the annual home loan certificate.
- All required information is correctly reported in the Income Tax Return.
Documents Required
Before filing your Income Tax Return, keep the following documents ready:
- Home loan interest certificate issued by the lender.
- Loan sanction letter.
- Loan repayment statement.
- Possession or completion certificate, wherever applicable.
- Sale deed or property ownership documents.
- Stamp duty and registration payment receipts, if claiming deduction.
Maintaining proper documentation helps support the deductions claimed and simplifies the return filing process.
Common Mistakes to Avoid
While claiming home loan tax benefits, taxpayers should avoid:
- Claiming deductions without verifying eligibility.
- Ignoring the impact of the chosen tax regime.
- Claiming incorrect interest or principal amounts.
- Forgetting to retain the lender’s interest certificate.
- Assuming all home loan benefits are available under the New Tax Regime.
- Failing to compare tax liability under both tax regimes before filing the return.
Conclusion
A home loan can provide significant tax advantages when claimed correctly. Understanding the deductions available under Section 24(b) and Section 80C, maintaining proper documentation, and selecting the appropriate tax regime can help maximize tax savings while ensuring compliance with the Income-tax provisions. Before filing your return, review your eligibility carefully and compute your tax liability under both tax regimes to make an informed decision.
If you have any further questions or need assistance, feel free to reach out to us at admin@ushmaassociates.com or info@nricaservices.com, or contact us via call/WhatsApp at +91 9910075924.
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Disclaimer: Aim of this article is to give basic knowledge about the topic to people who are not in touch with Indian tax norms. When anybody is dealing with these kinds of cases practically, he shall consider all relevant provisions of all applicable Laws like FEMA/Income Tax/RBI /Companies Act etc.