East Bengaluru buyer answers
What home loan tax deductions remain under the Income-tax Act, 2025?
Direct answer: Under the Income-tax Act, 2025, the home loan tax benefit survives with new section numbers. In the old regime you can claim up to ₹2 lakh of interest on a self-occupied home (section 22) and up to ₹1.5 lakh of principal, stamp duty and registration (section 123, shared). In the default new regime, the self-occupied interest deduction isn't available.
Disclosure: acre&key’s advice is free to buyers.
Key takeaways
- New Act, same caps. The 2025 Act replaced the 1961 Act from 1 April 2026. Old 24(b) is now s.22; old 80C is now s.123 with Schedule XV.
- Self-occupied interest: up to ₹2,00,000 a year, old regime only.
- Principal, stamp duty and registration: inside the ₹1,50,000 s.123 limit, old regime only.
- Let-out flat: interest is deducted from rent, but only ₹2,00,000 of a loss can be set off against other income.
- Old 80EEA (now s.131): only for loans sanctioned 1 Apr 2019 to 31 Mar 2022.
Which sections replaced 24(b) and 80C?
The Income-tax Act, 2025 came into force on 1 April 2026 (PIB). We read the home loan provisions in the gazetted Act (Act 30 of 2025):
| What you claim | 1961 Act | 2025 Act | Limit | Old regime | New regime (s.202) |
|---|---|---|---|---|---|
| Interest, self-occupied home | 24(b) | 22(1)(b), cap in 22(2) | ₹2,00,000 (₹30,000 if conditions aren't met) | Yes | No |
| Interest, let-out home | 24(b) | 22(1)(b) | No cap on the deduction | Yes | Yes, against the rent |
| Pre-construction interest | 24(b) | 22(1)(c) | Five equal instalments, inside the cap if self-occupied | Yes | Self-occupied: no |
| Principal, stamp duty, registration | 80C | 123, Schedule XV para 1(r) and 3 | ₹1,50,000 shared with PF, insurance etc. | Yes | No |
| Extra interest for some first homes | 80EEA | 131 | ₹1,50,000 | Loans sanctioned 1 Apr 2019 to 31 Mar 2022 only | No |
| House-property loss against salary | 71(3A) | 109(1)(b) | ₹2,00,000; rest carried forward up to 8 years (s.110) | Yes | No set-off (s.202(2)(b)(ii)) |
The ₹2 lakh self-occupied cap needs two things under s.22(2)(a): the home is bought or built within five years from the end of the tax year you borrowed in, and the lender gives you an interest certificate. Otherwise the cap is ₹30,000. It's a combined cap across up to two self-occupied homes (s.21(7) and s.22(5)).
The Finance Act 2026 amended s.22(2) to say the ₹2 lakh cap includes pre-possession interest claimed in five instalments, matching the old 24(b) position (Finance Bill 2026; Economic Times, news). We read the gazetted Act as originally passed. For the amended text, see the Income Tax Department's Act as amended by the Finance Act 2026.
Does the new tax regime allow any home loan deduction?
Not for a home you live in. Section 202(2) computes new-regime income without the s.22(1)(b) interest deduction for self-occupied homes and without most Chapter VIII deductions, which includes s.123. For a let-out flat, interest still reduces the rental income, but a resulting loss can't be set off against your salary.
Worked example 1: the old-regime saving on a self-occupied flat
Illustrative: an ₹80 lakh loan at 8.5% over 20 years (the rate we use across our guides). From the loan schedule, year one interest is ₹6,73,892 and principal is ₹1,59,218. Assume no other s.123 investments and a 30% slab.
| Item | Working | Amount |
|---|---|---|
| Interest allowed (s.22) | Lower of ₹6,73,892 and ₹2,00,000 | ₹2,00,000 |
| Principal allowed (s.123) | Lower of ₹1,59,218 and ₹1,50,000 | ₹1,50,000 |
| Total deductions | ₹3,50,000 | |
| Tax saved at 30%, before cess | ₹3,50,000 × 30% | ₹1,05,000 |
That ₹1.05 lakh only matters if the old regime still beats the new one for your income. If your PF and insurance already fill the ₹1.5 lakh, the principal adds nothing.
Worked example 2: the same loan on a let-out flat
Illustrative: rent ₹35,000 a month, property tax ₹10,000 a year.
| Item | Working | Amount |
|---|---|---|
| Annual value | ₹4,20,000 rent − ₹10,000 property tax | ₹4,10,000 |
| Standard deduction, 30% (s.22(1)(a)) | ₹4,10,000 × 30% | ₹1,23,000 |
| Interest (s.22(1)(b), no cap) | ₹6,73,892 | |
| Loss from house property | ₹4,10,000 − ₹1,23,000 − ₹6,73,892 | −₹3,86,892 |
| Set off against salary, old regime (s.109) | Capped | ₹2,00,000 |
| Carried forward (s.110) | Against future house income only | ₹1,86,892 |
In the new regime, none of that loss reduces your salary income. Ask your CA whether it can be carried forward in your case.
The ROC check (our framework)
Before you size a loan "for the tax saving", run three questions in order:
- Regime. Old or new? In the new regime, a self-occupied loan saves no tax.
- Occupancy. Self-occupied (capped interest) or let-out (uncapped interest, capped loss)?
- Caps already used. Is your ₹1.5 lakh s.123 limit already full from PF and insurance? Is the 80EEA-type benefit closed to your loan date?
If the answers are new regime, self-occupied and s.123 already full, the tax benefit is zero. Plan the EMI on cash flow alone with our EMI calculator.
Checklist for claiming
- Lender's interest certificate for the year (needed for the ₹2 lakh cap)
- Principal repaid, from the loan statement
- Stamp duty and registration receipts, in the year you paid them
- Possession or completion date, for the five-year build test and pre-construction interest
- Co-owner shares, if the loan is joint (see our answer on joint home loans)
- Sale plans: selling within five years of the end of the tax year you got possession reverses the s.123 deduction (Schedule XV para 4)
Related: pre-construction interest, down payment and LTV rules, balance transfers, the first-time buyer guide and the full cost of a Bengaluru flat.
CA note: This is general information, not tax advice. Tax depends on your income, regime and loan details, so confirm your claim with a chartered accountant.
Frequently asked questions
Is section 24(b) still available after April 2026?
The deduction is, under a new number. From 1 April 2026, interest on a home loan is deducted under section 22 of the Income-tax Act, 2025. For a self-occupied home the cap is still ₹2 lakh a year, in the old regime only. A let-out home has no cap on the interest deduction.
Can I claim home loan principal under the new Act?
Yes, in the old regime. Principal repayment, plus stamp duty and registration in the year paid, counts under section 123 and Schedule XV. It shares the ₹1.5 lakh limit with PF, life insurance and similar items. The new regime doesn't allow it.
Does the new tax regime give any home loan benefit?
Not for a home you live in. For a let-out home, interest still reduces the rental income, but any resulting loss can't be set off against salary or other income in the new regime. Compare both regimes with your CA before choosing.
Can I still claim 80EEA?
Only if your loan was sanctioned between 1 April 2019 and 31 March 2022 and you meet its other conditions. It's now section 131 of the 2025 Act, with a ₹1.5 lakh limit. New loans don't qualify, so don't count on it when planning a purchase.
What happens if I sell the flat within five years?
The principal, stamp duty and registration deductions under section 123 are reversed. Under Schedule XV para 4, if you transfer the home before five years from the end of the tax year you got possession, the deductions already allowed are taxed as income that year.
How much can a let-out flat's loss reduce my salary income?
Up to ₹2 lakh a year in the old regime, under section 109. The rest is carried forward for up to eight tax years and can only be set off against future house-property income (section 110). In the new regime, the loss can't be set off against salary.
Talk it through with acre&key
If you're working out how a loan fits your purchase, book a consultation with acre&key.
References
Checked 19 Oct 2026.
- Income-tax Act, 2025 (Act 30 of 2025), Gazette of India, ss.21, 22, 109, 110, 123, 131, 202 and Schedule XV: https://egazette.gov.in/WriteReadData/2025/265620.pdf
- PIB, Income-tax Act, 2025 in force from 1 April 2026: https://www.pib.gov.in/PressReleasePage.aspx?PRID=2248005&lang=1®=3
- Finance Bill, 2026 (amendment to s.22(2)): https://www.indiabudget.gov.in/doc/Finance_Bill.pdf
- Income Tax Department, Income-tax Act, 2025 as amended by the Finance Act 2026: https://www.incometaxindia.gov.in/documents/d/guest/income_tax_act_2025_as_amended_by_fa_act_2026-pdf
- Economic Times, Budget 2026 clarifies the ₹2 lakh cap includes pre-EMI interest, 6 Feb 2026 (news): https://economictimes.indiatimes.com/wealth/tax/confused-about-income-tax-deduction-on-pre-emi-interest-budget-2026-brings-clarity-on-rs-2-lakh-home-loan-deduction/articleshow/127983542.cms