Claim home loan deductions in your ITR for AY 2026-27 in India ā Section 24(b), 80C, 80EE, 80EEA, and how the new tax regime changes the math.
Home Loan Interest Deduction in ITR
For AY 2026-27 (FY 2025-26), a home loan borrower on the old tax regime can claim: up to ā¹2 lakh interest deduction under Section 24(b) for a self-occupied property, up to ā¹1.5 lakh principal repayment under Section 80C, and an additional ā¹1.5 lakh under Section 80EEA for eligible affordable-housing loans. Under the default new tax regime, none of these three apply to a self-occupied property ā making the regime comparison the single most consequential tax decision on your ITR for AY 2026-27, with a due date of 31 July 2026.
Section 24(b): How the Interest Deduction Actually Works
Section 24(b) of the Income-tax Act, 1961 allows a deduction for interest paid on a loan taken for the purchase, construction, repair, renewal, or reconstruction of a house property ā residential or commercial. The deduction is computed under the head Income from House Property, and the limit depends entirely on how you use the property.
Self-Occupied Property
The maximum deduction is ā¹2,00,000 per year, subject to one critical condition: construction or acquisition must be completed within 5 years from the end of the financial year in which the loan was first taken.
If your builder hands over possession more than 5 years after the loan was drawn ā a real-world outcome in many delayed RERA projects ā the cap collapses to ā¹30,000 per year. That is a ā¹1,70,000 reduction in annual deduction, purely because of a construction delay you may not have controlled.
Let-Out Property
There is no ceiling on the interest you can deduct from rental income for a let-out property. You deduct interest, municipal taxes, and a 30% standard deduction from the gross annual value to arrive at net house property income ā or a loss.
If the result is a house property loss, you can set off up to ā¹2 lakh against other income heads (salary, business, capital gains) in the same year under Section 71. The remaining loss is not wasted ā it carries forward for up to 8 assessment years and can be set off against future house property income. However, you must file your ITR before the due date (31 July 2026 for AY 2026-27) to preserve this carry-forward right. A belated return permanently forfeits it.
Deemed Let-Out Property
Under the old regime, you can designate up to two properties as self-occupied. Any additional property is treated as deemed let-out at market rent ā whether or not it is actually rented. Full interest is deductible against the deemed rental income, subject to the same ā¹2 lakh annual set-off cap.
Section 80C: Principal Repayment and Stamp Duty
Section 80C is an aggregated basket. Principal repayment on your home loan qualifies alongside EPF, ELSS, PPF, life insurance premiums, NSC, and tuition fees. The ceiling is ā¹1,50,000 per year across all 80C investments combined ā not per instrument.
Two practical points most borrowers miss:
- Stamp duty and registration charges paid at purchase are eligible under 80C in the year of payment. If you paid ā¹3.2 lakh in stamp duty in FY 2025-26, you can include that (up to the ā¹1.5 lakh ceiling) in your 80C claim.
- If you sell the property within 5 years of possession, all 80C deductions claimed on principal repayment are reversed. They are treated as income in the year of sale. This reversal catches many sellers by surprise when they compute capital gains tax on a short-term flip.
Sections 80EE and 80EEA: The Additional Interest Deductions
Both sections are additional ā they sit on top of Section 24(b) for first-time buyers who already used the ā¹2 lakh ceiling.
Section 80EE (Legacy Benefit)
- Additional deduction: up to ā¹50,000 per year
- Loan sanction window: 1 April 2016 to 31 March 2017 only
- Property value at sanction: ā¤ ā¹50 lakh
- Loan amount: ā¤ ā¹35 lakh
- The borrower must not have owned any residential property on the sanction date
If you took a loan in FY 2016-17 and are still repaying, you can continue to claim 80EE ā but only under the old regime, and not in the same year as 80EEA.
Section 80EEA (Affordable Housing Push)
- Additional deduction: up to ā¹1,50,000 per year
- Loan sanction window: 1 April 2019 to 31 March 2022 (this window is permanently closed for new loans)
- Stamp duty value of the property: ā¤ ā¹45 lakh at the time of sanction
- The borrower must not have owned any other residential property on the sanction date
- Cannot be claimed in the same year as Section 80EE
The stamp duty value condition is the most frequently misunderstood element. It is not the agreement value or the circle rate ā it is the value the state government assigns for stamp duty computation. In many Tier-1 cities, properties with agreement values slightly below ā¹45 lakh had stamp duty values that crossed the limit, invalidating the 80EEA claim.
How the New Tax Regime Eliminates These Benefits
Under Section 115BAC ā the new tax regime, which is now the default for all individuals ā the following deductions are not available:
- Section 24(b) interest on a self-occupied property
- Section 80C principal repayment and stamp duty
- Sections 80EE and 80EEA additional interest
Interest on a let-out property is still deductible under the new regime ā you compute house property income normally and set off up to ā¹2 lakh against other income. But the beneficial deductions that make the old regime attractive for owner-occupiers are gone.
The new regime's lower slab rates can partially compensate, but for borrowers with ā¹4ā5 lakh in combined home-loan deductions (24(b) + 80EEA + 80C), the old regime almost always produces a lower tax bill. The break-even point depends on your gross income, HRA situation, and 80C utilisation ā which is why running both computations on the portal before filing is non-negotiable.
Worked Example: Old Regime vs New Regime for AY 2026-27
Profile ā Ananya, 36, salaried, Pune
- Gross salary: ā¹20,00,000
- Home loan sanctioned August 2020, self-occupied; stamp duty value at sanction: ā¹41 lakh (first property)
- Interest paid FY 2025-26: ā¹2,30,000
- Principal repaid FY 2025-26: ā¹72,000
- Other 80C: EPF ā¹78,000 (so total 80C head-room: ā¹1,50,000 ā ā¹78,000 = ā¹72,000 absorbed by principal)
- Standard deduction (both regimes): ā¹75,000
Old Regime:
| Deduction | Amount |
|---|---|
| Standard deduction | ā¹75,000 |
| Section 24(b) interest (capped) | ā¹2,00,000 |
| Section 80EEA additional interest | ā¹1,50,000 |
| Section 80C (EPF + principal, capped) | ā¹1,50,000 |
| Total deductions | ā¹5,75,000 |
| Taxable income | ā¹14,25,000 |
| Approximate tax (old slabs + 4% cess) | ~ā¹2,55,840 |
New Regime:
| Deduction | Amount |
|---|---|
| Standard deduction | ā¹75,000 |
| Total deductions | ā¹75,000 |
| Taxable income | ā¹19,25,000 |
| Approximate tax (new slabs + 4% cess) | ~ā¹3,22,400 |
Old regime saves Ananya approximately ā¹66,560 per year.
At ā¹20 lakh gross salary with an active affordable-housing loan, the old regime is the rational choice by a wide margin. As gross income rises above ā¹50 lakh and surcharge kicks in, the gap narrows ā but even at ā¹50 lakh, the deduction value typically prevails. Verify using the e-filing portal's tax calculator at incometax.gov.in with your actual numbers before filing.
> Tax rates used here are as applicable for FY 2025-26 / AY 2026-27. Marginal relief and Section 87A rebate can alter the final liability at boundary incomes ā always use the portal tool for a definitive answer.
Pre-Construction Interest: The Deduction Most Buyers Forget
If you booked an under-construction flat and paid interest during the construction phase, that interest is deferred ā not lost.
The mechanics:
- Total all interest paid from the date of the first loan disbursement to 31 March of the financial year immediately before the year of possession.
- This sum is your pre-construction interest.
- Claim it in 5 equal annual instalments starting from the year of possession.
- The instalment is added to the current year's interest ā and both together are subject to the ā¹2 lakh ceiling for a self-occupied property.
Worked example:
- Loan disbursed: November 2021
- Possession: September 2024 (FY 2024-25)
- Pre-construction period: November 2021 to March 2024
- Total pre-construction interest: ā¹4,80,000
- Annual instalment: ā¹4,80,000 Ć· 5 = ā¹96,000
In FY 2025-26 (AY 2026-27), this borrower can claim ā¹96,000 as pre-construction instalment plus current-year interest, all subject to the ā¹2 lakh combined cap.
The practical action: download your bank loan statements for every year from disbursement through possession and store them with your ITR records. Many borrowers tally pre-construction interest only at possession and find half the statements are no longer downloadable from the bank's portal.
Joint Home Loan: Legally Doubling the Tax Shield
A joint home loan where two co-borrowers are also co-owners allows each person to independently claim deductions in their individual ITRs.
What each co-owner can claim:
- Section 24(b): up to ā¹2 lakh per person (family total: up to ā¹4 lakh)
- Section 80C: up to ā¹1.5 lakh per person
- Section 80EEA: up to ā¹1.5 lakh per person (if individually eligible)
Conditions that must hold:
- Both must be co-borrowers in the loan sanction letter
- Both must be co-owners in the registered sale deed
- Each must pay their share of EMI from their own individual bank account ā a single shared account means only one person can demonstrate actual payment
- The split (typically 50:50 or 60:40) must be agreed and consistent
Worked family example: Vikram and Deepa, dual-income couple, self-occupied property, total interest paid FY 2025-26: ā¹4,60,000.
- Vikram claims ā¹2,00,000 under 24(b); Deepa claims ā¹2,00,000 under 24(b)
- Both claim ā¹1,50,000 each under 80C
- Both claim ā¹1,50,000 each under 80EEA (loan sanctioned December 2020, stamp duty value ā¹43 lakh, first property for both)
- Combined family deduction: ā¹10,00,000
At a 30% slab for each, this translates to approximately ā¹3,00,000 in combined annual tax saving ā on top of the standard deduction. Joint home loans are one of the most structurally efficient tax-planning tools available to a salaried Indian couple.
Step-by-Step: Claiming Home Loan Deductions in Your ITR for AY 2026-27
Step 1 ā Get your interest certificate Request the annual interest certificate from your lender (bank, NBFC, or housing finance company) for FY 2025-26. It must separately state: total interest paid, total principal repaid, loan account number, and sanction date.
Step 2 ā Reconcile with AIS/TIS Log in to the e-filing portal and check your Annual Information Statement (AIS) and Taxpayer Information Summary (TIS). Lenders report the interest you paid to the Income Tax Department. If the AIS figure differs from your certificate, submit a feedback correction on the AIS portal before filing ā a mismatch is one of the most common triggers for a Section 143(1)(a) adjustment notice.
Step 3 ā Select the right ITR form
- ITR-1 (Sahaj): One self-occupied or let-out property; no carried-forward losses; income below ā¹50 lakh. Not available if you have losses to carry forward from prior years.
- ITR-2: Multiple properties, capital gains, carried-forward house property losses, or income above ā¹50 lakh.
Step 4 ā Fill Schedule HP (House Property) Enter annual rent received (or annual letting value for deemed let-out), municipal taxes paid, and interest under Section 24(b). The portal computes the 30% standard deduction automatically on net annual value. For self-occupied property, the portal will alert you if your interest claim exceeds ā¹2 lakh.
Step 5 ā Fill Schedule VIA Under Schedule VIA: enter principal repayment under 80C, stamp duty under 80C (if paid during FY 2025-26), and eligible interest under 80EEA or 80EE. The portal enforces the ā¹1.5 lakh 80C ceiling and prevents a simultaneous 80EE + 80EEA claim.
Step 6 ā Run the regime comparison The e-filing portal has a built-in regime selector. Input your income and all deductions ā it shows tax liability under both regimes. Do not skip this even if the answer feels obvious; Section 87A rebate (ā¹60,000 under the new regime for taxable income up to ā¹12 lakh) and marginal relief at the ā¹12ā13 lakh boundary can flip the outcome for some borrowers.
Step 7 ā File before 31 July 2026 The due date for individuals without audit obligation for AY 2026-27 is 31 July 2026. Missing this date means: a belated return (with interest under Section 234A), loss of the right to carry forward house property losses, and a late fee of up to ā¹5,000 under Section 234F (ā¹1,000 if total income does not exceed ā¹5 lakh).
Common Mistakes That Cost Borrowers Thousands
Mistake 1: Assuming the new regime is always cheaper post-budget The new regime is default ā not always optimal. For borrowers with active home loans, HRA, and 80C utilisation, the old regime typically saves more. Default ā best.
Mistake 2: Ignoring the 5-year completion window Delayed possession in RERA-registered projects is common. If your loan was taken in April 2019 and possession was delivered in June 2025 ā over 6 years later ā your Section 24(b) cap is ā¹30,000, not ā¹2 lakh. Check this before filing.
Mistake 3: Using agreement value instead of stamp duty value for 80EEA 80EEA eligibility is based on the stamp duty value of the property as assessed by the state government ā not the agreement value or the market rate. Get this number from your registration documents.
Mistake 4: Co-owners paying EMI from a joint account If both co-owners' contributions come from a single joint account, neither has clean individual documentary proof. Keep separate accounts and pay your respective EMI shares from each.
Mistake 5: Not tracking pre-construction interest by year If you aggregate all pre-EMI payments only at the time of possession, missing bank statements become a problem. Preserve monthly loan account statements from the first disbursement onwards.
Mistake 6: Forgetting to report rental income in the new regime Switching to the new regime does not exempt rental income. If you have a let-out property, rental income is taxable under both regimes. AIS now captures rental income from TDS-deducting tenants (10% TDS applies if annual rent exceeds ā¹2,40,000 under Section 194-IB).
Mistake 7: Reversibility of 80C on a premature property sale Selling within 5 years of possession claws back all principal-repayment deductions claimed under 80C ā treated as income in the sale year. Factor this into your capital gains planning before you transact.
Carried-Forward House Property Losses: What Happens Next
If your interest cost on a let-out property exceeds the rent and standard deduction, you generate a house property loss. Here is the carry-forward treatment:
- Set off up to ā¹2 lakh against any income head in the current year (salary, business income, capital gains)
- The balance carries forward for up to 8 assessment years
- In future years, carried-forward house property loss can only be set off against house property income ā not salary or business in those years
- You must file on time to preserve the carry-forward. A belated return forfeits the entire unabsorbed balance permanently
Example: House property loss FY 2025-26: ā¹5,80,000
- ā¹2,00,000 set off against salary in AY 2026-27
- ā¹3,80,000 carried forward ā usable against rental income in AY 2027-28 through AY 2034-35
This carry-forward is meaningful if you plan to let out the property in future years or acquire another let-out asset.
Key Takeaways
- Section 24(b) allows up to ā¹2 lakh interest deduction for a self-occupied property under the old regime; for let-out properties there is no interest cap, but the net house property loss set-off against other income is capped at ā¹2 lakh per year under Section 71.
- The new tax regime eliminates 24(b) for self-occupied property and removes 80C, 80EE, and 80EEA entirely ā making the regime comparison the most financially significant step in your AY 2026-27 ITR filing.
- Section 80EEA (up to ā¹1.5 lakh additional interest) is still claimable for loans sanctioned between 1 April 2019 and 31 March 2022 ā old regime only, stamp duty value ā¤ ā¹45 lakh, and not in the same year as 80EE.
- Joint home loans where each co-owner pays from their own bank account can legally double the 24(b) deduction to ā¹4 lakh per family and triple or quadruple total deductions for dual-income couples.
- Pre-construction interest is deductible in five equal instalments from the year of possession ā track it year-by-year from disbursement, not just at the end, to avoid documentation gaps.
- Reconcile your interest certificate with AIS/TIS before filing; a mismatch between lender-reported data and your claim is one of the most common triggers for a 143(1)(a) notice.
- File before 31 July 2026 for AY 2026-27 ā a belated return permanently forfeits the right to carry forward house property losses and attracts a late fee under Section 234F.
