Home loan tax benefits under the Income-tax Act 2025

Which law applies

The Income Tax Department’s portal states that for events on or after 1 April 2026 the Income-tax Act, 2025 applies; for events up to 31 March 2026 the Income-tax Act, 1961 applied. The section numbers below are those of the 2025 Act, with the old number in brackets only to help you read older material. This guide states the Act as published in the Gazette. The Finance Bill 2026 proposed changes (for example on the interest cap, see below); they are proposals until you have checked the Finance Act as passed.

Interest on the loan (section 22)

Section 22(1)(b) allows, in computing income from house property, “the amount of any interest payable” on capital borrowed to acquire, construct, repair, renew or reconstruct the property.

For a house that you occupy yourself (section 21(6), where the annual value is taken as nil), section 22(2) caps the deduction:

• ₹2,00,000 if the property was acquired or constructed with borrowed capital, the acquisition or construction is completed within five years from the end of the tax year in which the capital was borrowed, and you hold a certificate from the lender showing the interest;
• ₹30,000 in any other case.

Section 22(5) says the total for all self-occupied properties cannot exceed ₹2,00,000. Under section 21(7), this treatment applies to two such houses that you specify.

Interest paid before the year of acquisition or completion (pre-construction interest, section 22(1)(c)) is deducted in five equal instalments from the year of acquisition. The Finance Bill 2026 proposed that this earlier interest be brought within the ₹2 lakh cap; this is a proposal, not the rule stated in the Act text.

If the house is let, the interest is part of the computation of income from house property after the 30% deduction of section 22(1)(a). See the next section for the limit on setting a loss against other income.

Principal, stamp duty and registration (section 123)

Section 123 allows individuals and Hindu undivided families a deduction of the sums listed in Schedule XV, up to ₹1,50,000 a year. For a house, Schedule XV includes:

• repayment of money borrowed from the Government, a bank (including a co-operative bank), the Life Insurance Corporation, the National Housing Bank, specified housing finance companies and certain employers;
• instalments to a development authority, housing board, company or co-operative society for a house;
• stamp duty, registration fee and other expenses for the transfer of the house to you.

It excludes the admission fee and initial deposit for becoming a society member, and the cost of additions or repairs after the completion certificate or occupation. The ₹1,50,000 limit is shared with the other items of Schedule XV (insurance premia, provident fund and so on), not an extra limit on housing. If you take the deduction, there is also a rule that deductions already allowed are added back to income in the year you break the conditions of the Schedule.

Old regime or default regime

Section 202(1) sets the default rates for individuals and HUFs: nil up to ₹4,00,000, 5% from ₹4,00,001 to ₹8,00,000, 10% to ₹12,00,000, 15% to ₹16,00,000, 20% to ₹20,00,000, 25% to ₹24,00,000 and 30% above ₹24,00,000. Section 202(2) computes the total income under this regime without several deductions, including:

• the interest deduction of section 22(1)(b) for properties referred to in section 21(6) (self-occupied);
• Chapter VIII deductions, other than those listed in sections 124(1), 124(2), 125(2) and 146, which means section 123 is not available;
• any set-off of a loss under the head “Income from house property” against other heads of income.

A let-out house is not in the list for the interest deduction: the interest on it stays deductible against rental income, but the loss cannot be set off against your salary or other heads under the default regime.

To use the deductions, you opt out of the default regime under section 202(4): if you have no business or profession income, you do it along with the return of income under section 263(1). Compare the tax in both regimes with your own figures, or ask a chartered accountant, before you choose.

Co-borrowers

Each co-owner’s income from the property is computed on their definite and ascertainable share, and the ₹2,00,000 relief applies to each co-owner individually (section 24). See joint home loan and co-ownership.

Which professional to consult

A chartered accountant can compute the tax in both regimes. For the loan itself, a home loan lender.