Home Loan Tax Benefits in FY 2026-27 - What Can You Actually Claim?

A home loan affects more than your monthly budget. It can also reduce your taxable income; but the benefit depends on your tax regime, the property’s status and your share of the repayments.

Before you include tax savings in your homebuying calculations, start with one question - are you using the old tax regime or the new one? The answer determines whether the main home loan deductions are available to you.

There is also an update to the section names. The Income-tax Act, 2025 took effect on 1 April 2026. For FY 2026-27, the familiar Section 80C deduction falls under Section 123, read with Schedule XV, while the interest deduction previously covered by Section 24(b) falls under Section 22. Older articles may still use the former references.

First, Check Your Tax Regime

For someone buying a home to live in, the main differences are:

These deductions do not automatically make the old regime the better option. Compare your total tax liability under both regimes, considering your income and other eligible deductions.

Also, a deduction is not a refund of the same amount. It reduces the income on which tax is calculated. Your actual saving depends on your tax position.

Principal Repayment - Understand the Shared ₹1.5 Lakh Limit

Under the old regime, eligible home loan principal repayments fall within the annual ₹1.5 lakh limit under Section 123.

This allowance is shared with other qualifying payments and investments, including provident fund contributions, eligible life insurance premiums and ELSS investments. A home loan does not create an additional ₹1.5 lakh allowance.

For example, suppose your other qualifying payments already total ₹1.2 lakh. Only ₹30,000 of the shared limit remains available for eligible home loan principal repayment.

If those payments already use the full ₹1.5 lakh allowance, your principal repayments will not generate an additional deduction under this provision.

Eligible stamp duty and registration charges can also fall within this same limit in the year they are paid, subject to the applicable conditions. They are not a separate annual allowance. Housing-payment deductions also carry conditions, including potential reversal of earlier deductions if the property is transferred before the prescribed five-year holding period ends.

Interest Repayment - When Does the ₹2 Lakh Limit Apply?

For a self-occupied home, the old regime allows an interest deduction of up to ₹2 lakh annually, subject to eligibility.

To qualify for this higher limit, the acquisition or construction must be completed within five years from the end of the tax year in which the capital was borrowed. The lender’s interest certificate is also required. Where the relevant conditions are not met, the limit can fall to ₹30,000.

The amount you claim depends on eligible interest for the year. Paying an EMI does not mean the entire EMI qualifies as interest - it contains both principal and interest, which are considered separately.

Buying an Under-Construction Home? Check When Claims Can Begin

Loan repayments may start well before your home is ready. That does not mean the usual home loan interest deduction starts immediately.

Eligible interest relating to the period before the acquisition or construction year is generally claimed in five equal annual instalments, beginning in the year the property is acquired or construction is completed.

For a self-occupied home, that annual instalment and the current year’s eligible interest must fit within the applicable overall interest-deduction limit. The pre-construction amount does not create an extra ₹2 lakh allowance.

When planning a purchase, discuss the expected completion timeline and the timing of deductions with your tax adviser. Keep your EMI budget workable without assuming an immediate tax saving.

Joint Home Loans - Two Borrowers Do Not Automatically Mean Double Benefits

Joint buyers may claim deductions separately when they meet the ownership, borrowing and repayment requirements. Claims must reflect their respective eligible shares, and each person’s tax regime matters.

The potential combined ceilings are ₹3 lakh for eligible principal payments and ₹4 lakh for self-occupied interest, but these are conditional maximums-not guaranteed deductions.

Consider this example:

Two spouses jointly own a completed, self-occupied home equally. Both are co-borrowers, contribute equally to repayments and use the old regime. Assume all other eligibility conditions are met.

Each person’s interest deduction would be ₹1.5 lakh, rather than automatically reaching ₹2 lakh.

Each person’s principal deduction would depend on their remaining shared allowance. If one spouse already has ₹1.2 lakh in other qualifying payments, only ₹30,000 remains available for their principal claim.

Before choosing a joint structure, look at ownership, repayment contributions and both borrowers’ tax positions together.

What if the Property Is Rented Out?

Rental properties have different rules.

Under the old regime, eligible interest is not subject to the self-occupied ₹2 lakh deduction ceiling. However, the house-property loss that can be adjusted against other income in a year is limited to ₹2 lakh. Eligible unadjusted loss may be carried forward for up to eight years and used against house-property income.

Under the new regime, eligible interest can be deducted when calculating income from a let-out property, but resulting house-property losses cannot be set off against other income or carried forward under the applicable restrictions.

For an investment purchase, calculate rental income, interest and the tax treatment together before estimating the benefit.

Can a New Borrower Claim the Additional 80eea Benefit?

A fresh loan sanctioned in FY 2026-27 does not qualify.

The additional deduction commonly associated with Section 80EEA applied to loans sanctioned between 1 April 2019 and 31 March 2022. Conditions included a property stamp duty value of no more than ₹45 lakh, no residential house ownership on the sanction date and ineligibility under Section 80EE.

The corresponding provision is now Section 131. Eligible borrowers with qualifying older loans may continue claiming subject to the rules, but the same interest cannot be deducted twice.

If you are arranging a new home loan today, leave this additional benefit out of your calculations.

Documents to Keep Ready

Before discussing your claim with a tax adviser, gather:

• Your lender’s annual certificate showing principal and interest separately.
• Loan sanction documents and repayment statements.
• Registered property documents showing ownership and shares.
• Relevant possession or completion documents.
• Stamp duty and registration payment receipts.
• Records of each co-borrower’s repayment contributions.
• Details of other payments using the shared principal-deduction allowance.

A provisional lender certificate can help with planning. For filing, reconcile the figures with the final annual certificate and repayment records. If you're preparing for a property purchase, you can also review our home-buying documents checklist to understand the paperwork commonly required during the purchase and home-loan process.

Plan Your Purchase Around the Full Cost

If you're still at the planning stage, our guide to the home buying process in Mumbai explains the key steps from setting a budget and shortlisting projects to arranging a home loan, verifying MahaRERA details and completing registration.

Home loan tax benefits can support your financial planning, but they should sit alongside the down payment, EMI, stamp duty, registration charges, maintenance and an emergency buffer. Before finalising your budget, use a home loan EMI calculator to understand the monthly repayment you can comfortably manage.

Start with an affordable purchase budget, then calculate the deductions you are eligible to claim.

If you are exploring a home with Chandak Group, speak with the team about project pricing, payment schedules and purchase documentation. Your lender can explain the loan repayment structure, while your tax adviser can confirm how the deductions apply to you.

Information updated for FY 2026-27 as of 28 September 2026. Individual eligibility and tax treatment depend on the applicable conditions.