Saving up money and buying a house in India is a financially draining task which requires years of pre-planning to save money.
Home loan tax benefit options available in India lets you easily save some money on tax through the Income Tax Act.
Read further to find out how!
What is a home loan tax benefit?
Buying a home in India is a lifelong achievement which a majority of Indians dream to achieve.
To make home-buying more accessible, affordable, and easy, the government of India provides a certain amount of tax exemption when you take a home loan from a bank, or finance company. This loan may be for a residential property, or to build a house on a land.
This is known as home loan tax benefit in India.
How does a home loan tax benefit work?
Whenever you pay your Equated Monthly Installments (EMIs), it is divided into two parts.
One part is the principal amount, which is the original amount borrowed. And the other part is the interest amount charged by the bank on a monthly basis.
In India, the income tax department allows you to deduct this whole EMI amount from your annual income before calculating your final tax liability in a fiscal year.
Due to this tax exemption, you benefit by being able to pay significantly lower tax to the government at the end of the year when you are on a home loan.
If you learn the strategies on how to save tax with home loan payments, it will help you immensely to manage your household budget easily. And you can buy your dream home through affordable and financially rewarding means!
How can you save with a home loan tax benefit in 2026?
In 2026, you can enjoy tax savings under the Old Tax Regime. Let us understand how you save money through the Income Tax Act:
Firstly, under Section 80C, you can easily claim a home loan principal tax exemption of up to 1.5 lakh INR every financial year. This include the stamp duty and registration charges paid during the year of purchase.
Secondly, under the Section 24b of income tax act, you can easily claim a tax deduction on home loan interest payments up to ₹2 lakh per year for a home in which you presently reside in.
This home loan tax benefit helps you to save a significant portion of your money.
Can you claim a home loan tax benefit under the new tax regime in India?
The rules between the old and the new tax regime differ a lot in 2026. The new tax regime offers lower tax rates and simpler filing, but it removes the tax exemptions.
Under the new tax regime, the tax exemptions and deductions for the repayment of your principal are not available under section 80C.
Additionally, interest deductions under Section 24(b) are also not available for a home in which you are presently living.
But there is an exception that if your property is on rent, you can claim an interest deduction on the rental income which you receive.
Therefore, selecting the Old Tax Regime is more rewarding financially than the new one. You can get a big difference in the amount of money saved under home loan tax benefit in India, if you pick the right income tax regime.
What is the eligibility to claim a home loan tax benefit in India?
The eligibility criteria set by the Income Tax Department, government of India to claim the home loan tax benefit is as follows:
- Property Ownership
You must be the legal owner or co-owner of the house. You cannot claim the home loan tax benefit even if you are the one paying the loan, but the house is not in your name. - Loan Ownership
Your name should be there on the official application of the home-loan, or as a co-borrower. - Construction Status
The tax benefit is only applicable only if the house or property is fully completed and you are in its possession. You could claim pre-construction interest in 5 equal yearly installments starting from the year construction ends. - Holding Period
If you are using the principal repayment benefits under Section 80C, you cannot sell the property within 5 years of buying it. If you don’t comply with this, past deductions will be added back to your taxable income.
How do you claim your home loan tax benefit step-by-step?
You can follow the below mentioned simple steps to claim your home loan tax benefit during the current financial year in 2026:
- Step 1: Get the Interest Certificate
You should first request for a provisional home loan interest certificate from your bank or housing finance institution. This document will have the exact principal and interest figures paid during the year. - Step 2: Submit Proof to Your Employer
If you are an employee on a salary, you must submit this certificate combined with your investment declaration form (Form 12BB) to your HR or payroll team. This will help by reducing your monthly Tax Deducted at Source (TDS). - Step 3: Select the Old Tax Regime
You should choose the old tax regime when submitting your investment declarations. This is because in the new tax regime, home loan tax benefit is not available in the new regime for a property in which you currently reside. - Step 4: File Your Income Tax Return
When you are filing your ITR, enter the principal repayment under Section 80C and the interest paid under Section 24 (b) in the given sections.
You can easily claim your home loan tax benefit in 2026 by following the above simple steps, which will result in a good amount of savings.
| Steps | What You Need to Do |
|---|---|
| Step 1: Get the Interest Certificate | Request a provisional home loan interest certificate from your bank. It shows the exact principal and interest amounts paid during the year. |
| Step 2: Submit Proof to Your Employer | If you are salaried, submit this certificate along with Form 12BB to your HR team so they reduce your monthly salary TDS. |
| Step 3: Select the Old Tax Regime | Choose the Old Tax Regime during tax declaration, as self-occupied home loan tax deductions are not available under the New Tax Regime. |
| Step 4: File Your Income Tax Return (ITR) | Enter your principal repayment under Section 80C and interest paid under Section 24(b) when filing your final ITR. |
Conclusion
Managing the EMI of your home loan along with other financial commitments is a difficult task. It requires great financial discipline, and a good understanding of the tax system of our country to reduce your financial burden.
Thus, by using tax concessions made by the government, and selecting between the old and new tax regimes, you can arrive at the best possible money-saving option for your future.
For a majority of Indian homeowners, paying active interest on a house they live in, which selecting the Old Tax Regime is the best strategy to save on income tax in India.
It is recommended for you to always keep your bank interest certificates safe, complete your tax declarations on time, and verify your property ownership details to prevent any unnecessary issues in the future.
If you liked this simple guide, consider reading other such guides on our blog.
Frequently Asked Questions (FAQs)
1. What is the maximum home loan tax benefit you can claim under the Old Tax Regime?
You can claim up to ₹5 lakh per year on home loan tax benefit under the Old Tax Regime. You can save up to ₹2 lakh for interest paid under Section 24b, ₹1.5 lakh for principal repayment under Section 80C, and an additional ₹1.5 lakh annually which is applicable for first-time home buyers in India.
2. How does the section 24b income tax act help home buyers in India?
The section 24b of income tax act says that, self-occupied property owners can claim a tax deduction on home loan interest payments up to ₹2 lakh every financial year.
3. Is home loan principal tax exemption available under the New Tax Regime?
No, the home loan principal tax exemption under Section 80C of the Old Tax Regime is not available under the New Tax Regime. You must opt for the Old Tax Regime during filing to claim this benefit.
4. How can joint home loan owners maximize their tax deduction on home loan interest?
In India, each joint home owner who is also a co-borrower can individually claim a tax deduction on home loan interest up to ₹2 lakh under Section 24b.
5. What is a home loan rebate and can first-time home buyers claim extra benefits?
Yes, first-time home buyers can get an additional home loan deduction under special sections like 80EEA. This is provided they meet specific property and loan eligibility conditions.
6. How to save tax with home loan payments if your house is still under construction?
Interest on under-construction homes can be claimed in 5 equal annual installments. It starts from the year the construction finishes.
7. Can you claim a home loan tax benefit for a rented or let-out property?
Yes. Under both the tax regimes, you can claim the interest paid on a rented property against rental income. Though, certain rules apply on it.
8. What documents are required to claim a home loan tax benefit with your employer?
The important documents to claim a home loan tax benefit are: You need a home loan interest certificate from your bank showing principal and interest paid, property ownership proof, and Form 12BB submitted to your employer’s HR department.
9. What happens to Section 80C benefits if you sell the property within 5 years?
If you sell the house within 5 years of possession: all the past home loan principal tax exemption deductions claimed under Section 80C will be reversed and taxed as income in India in 2026.
10. Can co-borrowers claim a home loan tax benefit if one person is not a co-owner?
No, you cannot do that. To claim any home loan tax benefit in India, an individual must be both a co-borrower on the loan and a registered co-owner of the property.
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