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Home Loans
Tax Benefits
November 2025

Home Loan Tax Benefits 2025: Save Up to ₹5 Lakhs Annually

CA Neha Gupta

Home loans offer substantial tax benefits under the Income Tax Act, making homeownership more affordable. For FY 2025-26, borrowers can claim deductions up to ₹5 lakhs annually on principal and interest payments. This comprehensive guide explains all available tax benefits and how to maximize your savings.

Maximum Tax Savings Summary
₹5,00,000
Maximum Annual Deduction
₹1.5L (80C) + ₹2L (24b) + ₹1.5L (80EEA)
₹1,56,000
Tax Saved (30% bracket)
Actual savings for highest tax bracket
Section 80C: Principal Repayment Deduction
Maximum Deduction₹1,50,000

Per financial year on principal repayment

Key Points:

  • Deduction available on principal amount repaid during the financial year
  • Includes stamp duty and registration charges paid during purchase
  • Property construction must be completed within 5 years
  • Combined limit of ₹1.5L with other 80C investments (PPF, ELSS, LIC, etc.)
  • If property sold within 5 years, deduction will be reversed and added to income
Section 24(b): Interest Payment Deduction
Self-Occupied Property₹2,00,000

Maximum deduction per year

Let-Out PropertyNo Limit

Entire interest amount deductible

Key Points:

  • Deduction on interest paid on home loan during the financial year
  • Available from the year construction is completed
  • Pre-construction interest (up to 5 years) can be claimed in 5 equal installments
  • For let-out property, entire interest is deductible under "Income from House Property"
  • If you have 2 self-occupied properties, both get ₹2L limit combined
Section 80EE: Additional Interest Deduction (First-Time Buyers)
Additional Deduction₹50,000

Over and above Section 24(b) limit

Eligibility Criteria:

  • First-time home buyer (no other residential property owned)
  • Loan sanctioned between April 1, 2016 and March 31, 2017
  • Loan amount should not exceed ₹35 lakhs
  • Property value should not exceed ₹50 lakhs
  • This section is now largely replaced by 80EEA for newer loans
Section 80EEA: Additional Interest Deduction (Affordable Housing)
Additional Deduction₹1,50,000

Over and above Section 24(b) limit

Eligibility Criteria:

  • First-time home buyer (no other residential property owned on loan sanction date)
  • Loan sanctioned between April 1, 2019 and March 31, 2025
  • Stamp duty value of property should not exceed ₹45 lakhs
  • Property should be in metro cities (carpet area ≤ 60 sq.m.) or non-metro (≤ 90 sq.m.)
  • Cannot be claimed along with Section 80EE
Tax Savings Example

Scenario: First-time buyer in 30% tax bracket

Principal repayment (80C):₹1,50,000
Interest payment (24b):₹2,00,000
Additional interest (80EEA):₹1,50,000
Total Deduction:₹5,00,000
Tax Saved (30%):₹1,56,000

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