Home Loan Tax Benefit in 2026: What the New Tax Act Changes
The Income-tax Act, 2025 took effect on 1 April 2026 and renumbered every home loan deduction. Here's what you can still claim, under which regime, with worked numbers.
If you've been searching for "Section 24(b)" this year, you're looking up a section that no longer exists in the law that governs your 2026-27 income. The Income-tax Act, 2025 replaced the 1961 Act from 1 April 2026. The home loan tax benefit survived the rewrite almost unchanged, but the section numbers, the vocabulary and a few pitfalls are new. Here's what you can claim now, and when it's worth claiming at all.
What changed on 1 April 2026
The new Act applies from tax year 2026-27, meaning income earned from April 2026 to March 2027, with the return filed in 2027. "Previous year" and "assessment year" are replaced by a single "tax year". Returns filed during 2026 for income of 2025-26 still follow the 1961 Act.
| Benefit | 1961 Act | Income-tax Act, 2025 |
|---|---|---|
| Interest on home loan (house property) | Section 24(b) | Section 22 |
| Principal repayment, stamp duty, registration | Section 80C | Section 123 |
| Choice of tax regime (new regime is the default) | Section 115BAC | Section 202 |
Budget 2026 didn't change the slabs, the rebate or the deduction limits. So the money numbers below are the same ones you used last year.
Interest deduction: the ₹2 lakh limit and its conditions
For a home you or your family live in (self-occupied), interest on a loan taken to buy or build it is deductible up to ₹2 lakh a year. For this higher limit, construction or purchase must be completed within five years from the end of the tax year in which you borrowed, and you need an interest certificate from the lender. Miss the five-year window and the cap drops to ₹30,000.
You can treat up to two homes as self-occupied, with nil annual value for both. The ₹2 lakh interest cap is shared across them, not doubled.
Interest paid while the flat was under construction isn't lost. It's added up and claimed in five equal parts starting from the year construction is completed. For a self-occupied home, though, those instalments sit inside the same ₹2 lakh annual cap, so a buyer already paying ₹2 lakh of regular interest gets no extra benefit from them.
Interest on a loan for repairs or renovation of a self-occupied home is capped at ₹30,000 within the same limit.
Principal, stamp duty and registration under Section 123
The old 80C basket is now Section 123, still with a ₹1.5 lakh ceiling. Principal repaid on a home loan counts, and so do stamp duty and registration charges in the year you pay them. The deduction is available in the old regime only; use the stamp duty calculator to see what the purchase-year claim could be. The catch is the size of the basket. EPF contributions, PPF, life insurance premiums and children's tuition fees already fill it for many salaried people, so the principal often adds nothing.
What people get wrong: selling the home within five years of the end of the tax year you bought it. The principal deductions claimed earlier are then reversed and added back to your income in the year of sale.
Section 80EEA: closed for new loans
The extra ₹1.5 lakh interest deduction for first-time buyers under 80EEA applied only to loans sanctioned between 1 April 2019 and 31 March 2022, on homes with a stamp duty value up to ₹45 lakh. No new loans qualify. If you took such a loan, you could keep claiming for the life of the loan under the 1961 Act, in the old regime only; check with your tax adviser how the new Act's transition rules treat your claim from tax year 2026-27.
Home loan tax benefit under the new regime vs the old
This is the choice that matters most, and it's where the maths often surprises people.
Under the new regime (the default), you get no deduction for interest on a self-occupied home and nothing under Section 123. What you do get are lower slabs: nil up to ₹4 lakh, then 5%, 10%, 15%, 20% and 25% in ₹4 lakh steps, and 30% above ₹24 lakh, plus a ₹75,000 standard deduction for salaried people and a rebate that makes income up to ₹12 lakh tax-free.
Under the old regime, you keep the ₹2 lakh interest and ₹1.5 lakh Section 123 deductions, along with HRA and the rest, but pay the older, steeper slabs with only a ₹50,000 standard deduction.
A salaried buyer earning ₹18 lakh, paying ₹2.4 lakh interest a year on a self-occupied flat and with a full ₹1.5 lakh of Section 123 investments:
| New regime | Old regime | |
|---|---|---|
| Salary | ₹18,00,000 | ₹18,00,000 |
| Standard deduction | ₹75,000 | ₹50,000 |
| Home loan interest | Not allowed | ₹2,00,000 (capped) |
| Section 123 | Not allowed | ₹1,50,000 |
| Taxable income | ₹17,25,000 | ₹14,00,000 |
| Tax before cess | ₹1,45,000 | ₹2,32,500 |
The new regime wins by more than ₹85,000 even with the loan deductions fully used. At ₹30 lakh of salary the gap is still over ₹1.3 lakh in the new regime's favour. The old regime tends to come out ahead only when you also have large HRA or other deductions, which a person living in their own flat usually doesn't. Run both before you file, but don't buy a home expecting a big tax refund.
Let-out property: benefits in both regimes, with a catch
Rent a flat out and the rules loosen. Interest is deductible against the rent with no ₹2 lakh ceiling, in either regime, alongside the 30% standard deduction on annual value and municipal taxes paid.
The difference is what happens to a loss. In the old regime, a loss from house property can be set off against salary or other income up to ₹2 lakh a year, and the rest carried forward for eight years. In the new regime, the loss can't be set off against other income or carried forward. For a flat bought on a large loan, where interest often exceeds the rent, that difference can decide which regime you pick.
Joint home loans: two sets of limits
When a couple buy together and both are co-owners and co-borrowers, each can claim up to ₹2 lakh of interest and ₹1.5 lakh under Section 123 on their share, in the old regime. On a ₹1 crore loan where annual interest runs well above ₹2 lakh, this is the only way to use more of it.
- Being a co-borrower isn't enough. You must be a co-owner on the sale deed.
- Each person claims in proportion to their ownership share and must actually be paying the EMI, ideally from a joint account or their own account.
- Each co-borrower chooses a regime independently. If one is in the new regime, only the other can use the self-occupied deductions.
Claiming it without trouble
- Get the lender's provisional interest certificate by January and give it to your employer, if you're in the old regime.
- Keep the possession letter or completion certificate. It fixes the year pre-construction interest starts.
- For a let-out flat, keep the rent agreement and the tenant's details. If the tenant claims HRA, their figures and yours should match.
Before you work out tax savings, work out what you can borrow: the home affordability calculator and home loan EMI calculator cover that. For Bengaluru buyers comparing budgets, the Bengaluru property rates page lists indicative asking prices by locality.
Frequently asked questions
Can I claim home loan interest in the new tax regime?
Not for a self-occupied home. Under the new regime, interest on a let-out property is still deductible against its rent, but a resulting loss cannot be set off against salary or carried forward.
What is the new section for 24(b) and 80C under the Income-tax Act 2025?
Home loan interest is now covered by Section 22 and the ₹1.5 lakh basket that included principal repayment is Section 123. The new numbering applies from tax year 2026-27, that is, income earned from 1 April 2026.
Can both husband and wife claim home loan tax benefits?
Yes, if both are co-owners and co-borrowers and both pay the EMI. Each can claim up to ₹2 lakh interest and ₹1.5 lakh principal in the old regime, in proportion to their ownership share.
Is Section 80EEA available in 2026?
Not for new loans. It applied only to loans sanctioned between 1 April 2019 and 31 March 2022 for homes with a stamp duty value up to ₹45 lakh, and only in the old regime.
Sources: Income Tax Department: Self-occupied house property, tax benefits · Income Tax Department: Section 80EEA · Indian Kanoon: Section 22, Income Tax Act, 2025 · Business Today: Tax slabs FY 2026-27, what Budget 2026 changed · Income-tax Act, 2025 (Wikipedia)
