In this guide
Home loan interest deduction for AY 2026-27
AY 2026-27 covers income earned from 1 April 2025 to 31 March 2026 under the Income-tax Act, 1961. Whether you can claim home loan interest depends mainly on whether the property is self-occupied or let out and which tax regime you use.
Section 24(b) allows eligible interest on borrowed capital to be deducted when calculating income from house property. It does not cover repayment of the loan principal.
The new tax regime is the default regime. Interest on a self-occupied property is not deductible under Section 24(b) in that regime. Under the old regime, a qualifying self-occupied property may qualify for a deduction of up to ₹2 lakh, subject to the conditions below.
| Property and regime | General treatment of home loan interest |
|---|---|
| Self-occupied, old regime | Up to ₹2 lakh for a qualifying purchase or construction loan; a lower limit may apply in other cases |
| Self-occupied, new regime | No Section 24(b) interest deduction |
| Let out, old regime | Actual eligible interest, with no Section 24(b) cap; limits apply to setting off a house property loss against other income |
| Let out, new regime | Actual eligible interest, with no Section 24(b) cap; a house property loss cannot be set off against other heads or carried forward |
The rules can differ for a property under construction, a loan used for repairs, a jointly owned home or a property that is let out. Check the facts and loan records before claiming a deduction.
When can you claim Section 24(b)?
The loan must have been used to buy, construct, repair, renew or reconstruct a house property. You may claim eligible interest on the borrowed amount, not the principal repaid.
A bank loan is not the only possible qualifying borrowing. If you borrowed from another lender, keep records showing the loan, its use for the property and the interest payable. The lender’s interest certificate or other supporting documents should clearly show the amount.
For a self-occupied property, the old-regime limit depends on the loan’s purpose and date, and sometimes on when the property was acquired or construction was completed.
| Self-occupied property loan | Maximum Section 24(b) deduction under the old regime |
|---|---|
| Purchase or construction loan borrowed on or after 1 April 1999, with the completion condition met | ₹2 lakh |
| Loan for repairs, renewal or reconstruction borrowed on or after 1 April 1999 | ₹30,000 |
| Purchase, construction or repairs loan borrowed before 1 April 1999 | ₹30,000 |
| Purchase or construction loan where the required completion condition is not met | Generally ₹30,000 |
To qualify for the ₹2 lakh limit on a purchase or construction loan, the property must generally be acquired or construction completed within five years from the end of the financial year in which the capital was borrowed. Keep evidence of the acquisition or completion date.
If you have more than one self-occupied property, the applicable interest limit is generally shared across those properties. It is not ₹2 lakh for each self-occupied home.
How the old and new regimes treat each property
Self-occupied property
Under the old regime, you can deduct eligible interest up to the applicable limit. The ₹2 lakh limit applies only when the loan and completion conditions are met. A lower limit may apply if those conditions are not met or the borrowing was for repairs.
Under the new regime, you cannot claim Section 24(b) interest for a self-occupied property. Paying the interest or reporting it to your employer for salary TDS does not make the deduction allowable under that regime.
Let-out property
For a let-out property, eligible interest is deductible from the property’s income under Section 24(b). The deduction is based on actual eligible interest, not a fixed rupee limit.
A large interest deduction may create a loss under the house property head. Under the old regime, house property loss can generally be set off against income under other heads up to ₹2 lakh in the year. An eligible balance may be carried forward for up to eight assessment years and set off against house property income, subject to the rules.
Under the new regime, a house property loss cannot be set off against income under other heads or carried forward. Interest may still be included when calculating income from a let-out property, but the loss restriction can affect which regime is more beneficial.
The calculation for a let-out property generally starts with its annual value. Deduct eligible municipal taxes paid to arrive at net annual value. The standard deduction under Section 24(a), generally 30% of net annual value, is then considered along with eligible interest under Section 24(b).
Example: let-out property
Assume a property earns annual rent of ₹6 lakh. After deducting ₹40,000 of eligible municipal taxes, its net annual value is ₹5.6 lakh. The 30% standard deduction is ₹1.68 lakh, and eligible home loan interest is ₹4.2 lakh. The resulting house property loss is ₹28,000.
Under the old regime, the ₹28,000 loss may generally be set off against eligible income from another head, subject to the rules. Under the new regime, it cannot reduce salary or other income and cannot be carried forward.
For more on rent, net annual value and the 30% deduction, see TaxClear’s rental income and house property guide.
Interest paid before construction is completed
Interest paid before construction is completed or the property is acquired is commonly called pre-construction interest. It is generally not claimed all at once in the year it is paid.
Eligible pre-construction interest is usually divided into five equal annual instalments, starting in the year the property is acquired or construction is completed. These instalments are claimed along with interest for that year, subject to the applicable Section 24(b) limit for a self-occupied property.
Keep the lender’s annual interest certificate and evidence of the completion or acquisition date. These records help establish the period and amount of interest claimed.
Other home loan tax benefits
Section 24(b) covers interest. Other home loan amounts may qualify under different provisions and have separate conditions.
Principal repayment under Section 80C
Under the old regime, eligible principal repayments may qualify under Section 80C. They share the combined ₹1.5 lakh limit with other eligible payments and investments, such as provident fund contributions and certain insurance premiums. Section 80C deductions are generally unavailable under the new regime.
If you transfer the property within five years from the end of the financial year in which you obtained possession, certain deductions claimed under Section 80C may be withdrawn and treated as income under the rules.
Additional interest under Sections 80EE and 80EEA
Sections 80EE and 80EEA apply only to taxpayers who meet specific conditions, including loan sanction dates. They are not general deductions for every home loan.
- Section 80EE: May allow an additional deduction of up to ₹50,000 for eligible interest on a loan sanctioned between 1 April 2016 and 31 March 2017. Conditions include a loan amount not exceeding ₹35 lakh, a property value not exceeding ₹50 lakh and not owning another residential house on the loan sanction date.
- Section 80EEA: May allow an additional deduction of up to ₹1.5 lakh for eligible interest on a loan sanctioned between 1 April 2019 and 31 March 2022. Conditions include a stamp duty value not exceeding ₹45 lakh, first-time home-buyer eligibility and not claiming Section 80EE.
These deductions are available only under the old regime and subject to their conditions. The loan-sanction windows have closed, but a taxpayer with a qualifying loan may still be able to claim a deduction while eligible. Review the current ITR instructions before claiming either section.
How to report home loan interest in your ITR
Enter eligible interest in the house property schedule and the relevant Section 24(b) fields for AY 2026-27. The return asks for loan details, so have the lender’s information ready.
The correct ITR form depends on your full income profile. ITR-1 may be available to eligible taxpayers with salary and other permitted income and up to two house properties. ITR-2 may apply if you have income such as capital gains but no business or professional income. ITR-3 may be required if you have business or professional income. Check the current eligibility conditions before choosing. TaxClear’s ITR form selection guide for AY 2026-27 explains the main differences.
You can give your employer estimated home loan details in Form 12BB so it can consider eligible claims when calculating salary TDS. These figures are estimates. Check the lender’s actual certificate and claim only the amount allowed under the regime selected in your return.
For filing steps and a document checklist, see TaxClear’s AY 2026-27 online ITR filing guide.
Documents to keep
Keep records that support the interest amount and how you reported the property:
- Annual home loan interest certificate showing principal and interest separately;
- Loan sanction letter and loan account details;
- Purchase or construction documents and proof of the acquisition or completion date;
- Ownership and co-ownership details;
- Rent and municipal tax records for a let-out property;
- Records of any pre-construction interest claimed in annual instalments; and
- Documents supporting any Section 80C, 80EE or 80EEA claim.
If the property is jointly owned, each co-owner should report their share of the property income. A co-owner claiming interest should be able to support their ownership, loan liability and eligible share of the interest with the relevant records. Do not claim the entire interest in one return simply because one co-owner paid the EMI unless the ownership, loan documents and applicable rules support that treatment.
Before filing, compare the house property schedule with the interest certificate and check that you selected the correct tax regime. When comparing regimes, consider all eligible deductions and the limits on house property losses, not just the home loan interest deduction.
Frequently asked questions
Can I claim ₹2 lakh of home loan interest under the new tax regime?
Not for a self-occupied property. Under the new regime, Section 24(b) does not allow a deduction for interest on a self-occupied property. For a let-out property, actual eligible interest can be included when calculating house property income, but loss restrictions apply.
Does the ₹2 lakh limit apply to each self-occupied home?
No. The limit depends on the loan’s purpose and date and whether the completion condition is met. The ₹2 lakh limit is generally shared across self-occupied properties. Repairs, older loans and loans that do not meet the completion condition may be subject to the ₹30,000 limit.
Can I claim both Section 24(b) and Section 80C?
You may be able to claim interest under Section 24(b) and eligible principal repayment under Section 80C if you meet their separate requirements and use the old regime. Section 80C deductions are generally unavailable under the new regime.
What if I paid interest before construction was completed?
Eligible pre-construction interest is generally claimed in five equal annual instalments, beginning in the year of acquisition or completion, subject to the applicable limit and other conditions.
Does submitting Form 12BB to my employer claim the deduction?
No. Form 12BB helps your employer estimate eligible claims for salary TDS. You must still report the property and eligible amounts correctly in your ITR under the tax regime you select.
