Deductions and exemptions · Tax Year 2025-26
Section 24(b): home loan interest deduction
Interest on a home loan is deductible under section 24(b), but the rules differ for a self-occupied house and a let-out house, and for the old and new regimes. Learn the ₹2,00,000 cap, loss set-off and where the other home loan deductions fit.
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Section 24(b) lets you deduct the interest on a home loan from your house property income. For a self-occupied house the deduction is capped at ₹2,00,000 a year in the old regime, and is not available in the new regime. For a let-out house the interest is deductible without a cap against the rent, but the loss you can set off against your salary and other income is limited to ₹2,00,000 a year, and only in the old regime.
These are the rules TaxCare applies for the tax year 2025-26, which are signed off. For the tax year 2026-27 they are carried forward provisionally and not yet signed off against the Income-tax Act, 2025.
The section numbers in this guide are those of the Income-tax Act, 1961, under which the return for the tax year 2025-26 is filed. The Income-tax Act, 2025 renumbers these provisions; the new numbers will be added here once TaxCare's 2026-27 rules are signed off.
Self-occupied house
A self-occupied house has nil annual value, so there is no rent to deduct the interest from. The interest therefore becomes a loss under house property, which is set off against your other income.
- Old regime: the loss from interest on a self-occupied house is limited to ₹2,00,000.
- New regime: it is not allowed.
Example (old regime): you pay ₹2,50,000 of interest on a loan for the house you live in. You can claim only ₹2,00,000. If your salary income before this is ₹12,00,000 and you take the ₹50,000 standard deduction, your taxable income becomes ₹12,00,000 − ₹50,000 − ₹2,00,000 = ₹9,50,000. On TaxCare's engine, tax in the old regime is ₹1,06,600 with the interest claim, against ₹1,63,800 without it, a saving of ₹57,200. In the new regime the tax for the same salary is nil because of the rebate, and the interest does not matter.
Let-out house
For a house you rent out, the calculation is:
- Take the rent for the year (the annual value), less municipal taxes you paid.
- Deduct 30% of that as the standard deduction.
- Deduct the interest on the loan, without a cap.
- The result is income from house property, or a loss.
If the result is a loss:
- Old regime: you can set off up to ₹2,00,000 of the loss against other income such as salary, in the same year. The rest is carried forward.
- New regime: the loss cannot be set off against other income, and the department's guidance says it cannot be carried forward either.
In the old regime, a house-property loss carried forward can be set off only against house property income, for up to eight following tax years. Unlike most other losses, it is carried forward even if the return is filed late.
Where the other home loan deductions fit
Other deductions related to a home loan exist, with their own caps:
Deduction | Cap in TaxCare's rules | Regime |
|---|---|---|
Section 80C, principal repayment (inside the ₹1,50,000 total) | ₹1,50,000 with other 80C items | Old |
Section 80EE, interest for a first home | ₹50,000 | Old |
Section 80EEA, interest for affordable housing | ₹1,50,000 | Old |
Both depend on when the loan was sanctioned. Section 80EE applies only to a loan sanctioned between 1 April 2016 and 31 March 2017 (loan up to ₹35 lakh, house value up to ₹50 lakh, no other house owned on the sanction date). Section 80EEA applies only to a loan sanctioned between 1 April 2019 and 31 March 2022 (stamp duty value up to ₹45 lakh, no other house owned on the sanction date) for someone who does not qualify under 80EE. You can claim one of them, not both, and only in the old regime.
Other points
- Pre-construction interest. Interest for the period before the house was bought or built is claimed in five equal yearly instalments, starting with the year in which the purchase or construction is completed.
- Joint ownership. Where a house is co-owned, each owner is taxed on their own share of the house and claims the interest in proportion to that share.
- More than one house. Interest can be claimed for up to two self-occupied houses, but the combined cap for both is still ₹2,00,000. The ₹2,00,000 cap also needs the loan to have been taken on or after 1 April 1999 to buy or build the house, with the work finished within five years; otherwise the cap is ₹30,000.
- ITR form. More than one house property takes you out of ITR-1 into ITR-2. See which ITR form should I file.
Does it change the regime choice?
For a self-occupied house, the interest deduction is one of the big items that can push the old regime ahead. But the cap of ₹2,00,000 limits it. Together with 80C (₹1,50,000), NPS (₹50,000) and 80D (₹25,000), a full package is ₹4,25,000, which is still below the break-even at most salaries. See is the new tax regime better for you.
How TaxCare helps
TaxCare asks whether each property is self-occupied or let out, brings in what the portal has, applies the 30% and the ₹2,00,000 caps for you, and shows the effect in both regimes. It tells you when a second property moves you to ITR-2. You can ask a Tax Expert about unusual cases such as joint loans or a loan taken to repay another. See pricing.
This guide gives general information and is not professional tax advice.
Questions on this topic
How much home loan interest can I claim?
For a self-occupied house the cap is ₹2,00,000 a year in the old regime and nil in the new regime. For a let-out house the interest is not capped, but the loss you can set off against other income is limited to ₹2,00,000.
Can I claim home loan interest in the new regime?
Not for a self-occupied house. For a let-out house, interest is deductible against the rent, but a resulting loss cannot be set off against other income in the new regime.
Is the principal repayment covered by section 24(b)?
No. Section 24(b) covers interest only. Principal repayment may qualify under section 80C in the old regime.
Do I need a certificate from the bank?
Yes. Keep the interest certificate from your lender. It shows the interest and principal for the year.
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