Home Loan Tax Benefit: Section 24(b), 80C and Co-borrowers

By Paarth · Published 26 October 2026 · Updated 26 October 2026

A home loan can cut your tax in two ways: up to ₹2 lakh of interest under Section 24(b) and up to ₹1.5 lakh of principal under Section 80C, in the old tax regime. On a ₹50 lakh loan at 8.5% over 20 years, the first year alone can save about ₹93,448 for someone in the 30% slab.

Rules and rates here are as understood in October 2026. The Income-tax Act, 2025 has applied from 1 April 2026 and renumbers many sections, so the old section numbers used below (80C, 80D, 24(b), 194A and so on) may appear under new numbers on current forms. The amounts and ideas are what matter; confirm details on the Income Tax Department website.

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The two deductions

Interest, Section 24(b): up to ₹2,00,000 a year on a self-occupied house. If the house was bought or built with a loan taken for it, the interest paid before possession (pre-construction interest) can be claimed in five equal yearly parts after you get possession, still within the ₹2 lakh limit.
Principal, Section 80C: the principal part of your EMI counts toward the shared ₹1,50,000 limit, together with EPF, PPF and other 80C items. Stamp duty and registration charges also count in the year you pay them.

Example: ₹50 lakh at 8.5% for 20 years

The EMI is ₹43,391. How it splits changes every year, and so does the tax saved if you are in the 30% slab (cess included):

Year 1: interest ₹4,21,182 (claim ₹2,00,000), principal ₹99,511. Tax saved ₹93,448.
Year 5: interest ₹3,81,053 (claim ₹2,00,000), principal ₹1,39,641. Tax saved ₹1,05,968.
Year 10: interest ₹3,07,420 (claim ₹2,00,000), principal ₹2,13,274 (claim ₹1,50,000). Tax saved ₹1,09,200, the maximum.
Year 15: interest ₹1,94,961 falls below the cap for the first time. Tax saved ₹1,07,628.
Year 20: interest is only ₹23,202. Tax saved ₹54,039.

Added up, that is roughly ₹19.7 lakh over the loan, but only if you stay in the 30% slab, stay in the old regime and have no other 80C items using up the limit. In practice the real saving is usually lower, so treat this as a ceiling.

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Why a joint loan can save more

Each co-borrower who is also a co-owner has their own ₹2 lakh interest cap and their own ₹1.5 lakh 80C limit. On the same loan, if two people each pay half, year-1 interest is ₹2,10,591 each, so each claims the full ₹2 lakh, plus ₹49,756 of principal. With both at 30%, the combined saving is about ₹1,55,848 in year 1, compared with ₹93,448 for one borrower. This works only if both are genuine owners who actually pay.

Let-out and second properties

If the house is rented out, the interest is deducted against the rent you receive (after a 30% standard deduction on rent), with no cap on the interest itself. If that creates a loss, you can set off at most ₹2,00,000 against other income that year and carry the rest forward for 8 years. In the new regime this loss rule is stricter, so check it before assuming a benefit.

Do not let the tax tail wag the dog

You pay far more in interest than you save in tax. A loan of ₹50 lakh costs over ₹54 lakh in interest over 20 years, so reducing the loan with prepayments is often worth more than keeping it for the deduction. Our prepayment calculator shows how much interest you save, and rent vs buy looks at the bigger decision.

Frequently asked questions

How much home loan interest can I claim?

For a self-occupied house, up to ₹2,00,000 a year under Section 24(b) in the old regime. For a let-out house there is no cap on the interest deduction, but the loss from house property you can set off against other income is limited to ₹2,00,000 a year. Unused loss carries forward for 8 years.

Can both husband and wife claim the benefit?

Yes, if both are co-owners and co-borrowers and both pay the EMI. Each can claim up to ₹2 lakh of interest and ₹1.5 lakh of principal on their share. The deduction follows who actually pays and owns, so it should match the loan and ownership records.

Do I get these benefits in the new tax regime?

Not for a self-occupied house. The new regime does not allow the Section 24(b) deduction on it, or the 80C deduction for principal. Whether the old regime is worth choosing depends on your total deductions, so compare both before filing.

Disclaimer: This article is for general education only and is not financial, investment, tax or legal advice. Figures are illustrative, and rates and rules change. Check official sources and consult a SEBI-registered investment adviser or qualified tax professional before you decide.

Paarth builds the free calculators on PropertiesOnline.in and has been writing about money and everyday tools in India for over 15 years. These guides are practical and honest — not investment advice. Invest based on your own goals or a qualified adviser's guidance.