Home Loan Tax Benefits (FY 2025-2026) Explained

A home loan enables you to buy your dream property or apartment while offering significant tax benefits under the Income Tax Act of 1961. Borrowers can claim tax deductions on EMI interest payments and principal repayment under Sections 24(b) and 80C. Keep reading to find out how to avail these home loan tax benefits in 2025! 

What Are the Tax Benefits on Home Loans? 

Borrowers of home loans get benefits from different tax provisions under the IT Act to reduce taxable income. For example, Section 24 allows deduction on the interest for home loans with specific provisions for let-out and self-occupied properties. They can also get deductions on interest during the pre-construction, with benefits accruing after the completion. 

The following table contains amounts of home loan tax benefits per section in the Income Tax Act of 1961:

Latest Updates from the Union Budget of 2025-2026

Here are a few updates on home loan taxes from the Union Budget:

• The eligibility period to claim an additional ₹1,50,000 deduction on interest to buy a house is 31 March, 2026.
• To boost rental housing for migrant workers, a special tax exemption has been granted to designated Affordable Rental Housing Projects.
• The tax holiday period for ‘affordable housing projects’ is extended, and the new deadline is 31st March 2026.

Home Loan Tax Benefit Under Different Sections

Following are the home loan tax benefits that you can avail under different sections:

1. Interest Deduction on Home Loan - Section 24

You can get a home loan with the purpose of building or purchasing a house. To avail the loan, you must complete the construction within 5 years. Further points include the following:

• Under section 24, you can claim deductions for your interest category of a maximum of ₹2 lakh.
• The maximum amount of interest deduction for self-occupied property is ₹2 lakh from 2019 onward. 
• For properties on rent, there is no limit for claimable interests. 

1. Tax Benefits on Home Loan Interest in Preparatory Phase - Section 24(b)

This section allows home loan borrowers to get home loan tax benefits by claiming a deduction on the interest. Borrowers can claim up to ₹2 lakhs per annum on the interest. The following conditions are applied to get the benefits such as:

• The home loan is to be taken for construction, purchase, renovation or repair of a residential property.
• Constructions need to be completed within 5 years from the end of the financial year of loan issuance.
• If construction takes more than 5 years, the benefits get reduced to only ₹30000.
• You can claim interest paid before possession or during pre-construction with 5 equal instalments.

1. Tax Benefits for Repayment of Home Loan - Section 80C

Section 80C provides one of the home loan tax benefits as a deduction of ₹1.5 lakh on principal repayment. This deduction is applicable for both occupied and rented properties. Keep in mind the important points to avail of the deduction:

• The loan borrower must not sell the property within 5 years of possession.
• If the borrower sells the property earlier, the tax benefits claimed under 80C will be added to taxable income. 
• Benefits of Section 80C include registration fees and stamp duty expenses provided they’re claimed in the same financial year. 

1. Tax Deduction via Joint Home Loan

You can take a joint home loan for more home loan tax benefits and savings. You will get the following income tax benefits from a joint home loan:

• If you take a home loan jointly, each borrower can claim an interest deduction of up to ₹2 lakhs under section 24(b). 
• Both borrowers can get ₹1.5 lakhs of deduction for principal repayment under section 80C. 
• For example, a joint home loan borrower can get a combined deduction of ₹7 lakhs (₹3 lakhs from principal + ₹3 lakhs from interest). 
• To claim such home loan tax benefits, each borrower must be a co-owner of the property.

Tax Benefits on Registration Fees and Stamp Duties

Aside from home loan repayments, you can get home loan tax benefits from stamp duties and registration fees. Following are some key points to remember:

• Registration fees and stamp duties are tax deductible under section 80C.
• You can get a deduction of a maximum ₹1.5 lakhs under this section for these duties.
• Home buyers must pay such charges separately from the home loan amount.
• If a residential property is bought jointly, both co-owner can claim their share separately.  

Steps to Claim Tax Benefits on Home Loan

Follow the below-mentioned steps to seamlessly claim the tax benefits of a home loan:

Step 1: Calculate your claimable tax deduction.

Step 2: Ensure that you are the owner of the property or a co-borrower of the home loan

Step 3: Submit your interest certificate on your home loan to your employer to adjust TDS.

Step 4: If you do not submit your interest certificate, file your tax returns by yourself.

Step 5: If you are self-employed, you do not need to submit documents anywhere. Keep the documents safe in case the IT department raises any concerns. 

Process to Calculate Home Loan Tax Benefits

You can easily calculate your tax benefits using an online home loan calculator. The details you need to calculate are as follows:

• Loan amount
• Interest rate
• Tenure
• Gross annual earnings
• Starting date of the loan
• Details on the existing deductions. 

Strategies to Maximise Your Home Loan Tax Benefits

Note the below tips so that you can maximise your home loan benefits:

• Time for Your Disbursement of Loan: If you are purchasing an under-construction property, ensure you obtain possession in 5 years to claim ₹2 lakh deduction. 
• Maintain Documentation: Keep payment receipts, loan interest documents and property documents for tax filing.
• Consult with a Tax Expert:  Home loan tax benefits are complex to understand, and a tax expert can help you to optimise your savings. 
• Go for a Joint Home Loan: If possible, apply for a home loan jointly with a spouse or a family member to double your tax benefits. 

Final Word

If you are planning to buy a house in 2025, it is important to take advantage of the various home loan tax benefits available. These benefits can help reduce your financial burden by lowering your taxable income. Additionally, you should explore the tax deductions offered under the Pradhan Mantri Awas Yojana (PMAY), which provides further financial assistance to eligible homebuyers. Understanding these benefits can help you make an informed decision and maximise your savings on your home purchase.