TL; DR
- A home loan gives you two separate tax benefits: principal repayment under Section 80C (₹1.5 lakh cap) and interest paid under Section 24(b) (₹2 lakh cap for a self-occupied property, no cap for a let-out one).
- Both benefits are available only under the old tax regime. If you choose the new tax regime, you lose the 80C benefit entirely and the 24(b) benefit for a self-occupied home entirely, only let-out property interest remains deductible under the new regime.
- The section numbers are changing too. From Tax Year 2026-27 (income earned on or after April 1, 2026), Section 24(b) becomes Section 22 and Section 80C becomes Section 123 under the Income Tax Act, 2025. The limits and rules are unchanged, only the numbering.
- On a typical Bangalore loan, actual interest paid in the early years usually exceeds the ₹2 lakh cap by a wide margin, so the deduction does not scale with your loan size the way many buyers assume.
- Section 80EE and 80EEA (extra deductions for first-time affordable housing buyers) are closed to any loan sanctioned after March 31, 2022, and irrelevant to most Bangalore purchases anyway since the ₹45-50 lakh property value ceiling is well below typical Bangalore prices.
- If house property loss exceeds ₹2 lakh in a year, the excess can only be carried forward against future house property income for 8 years under the old regime, and cannot offset salary or other income at all under the new regime.
The Two Benefits: Principal vs. Interest
A home loan EMI has two components, and the tax code treats them completely differently.
Section 80C covers the principal portion of your EMI, the part that actually reduces your outstanding loan balance. You can claim up to ₹1.5 lakh a year here, but this is not exclusive to home loans, it is a combined limit shared with PPF, ELSS, life insurance premiums, tuition fees, and other common 80C investments. If you are already using most of that ₹1.5 lakh elsewhere, your loan principal may not add much extra benefit.
Section 24(b) covers the interest portion of your EMI, computed under the head "Income from House Property." For a self-occupied property, this is capped at ₹2 lakh a year. For a property you rent out, there is no cap at all, you can deduct the entire interest paid, though a separate rule limits how much of any resulting loss can offset other income.
Stamp duty and registration charges also qualify under Section 80C, but only in the financial year you actually pay them, not spread across the loan tenure. If you registered your Bangalore flat this year and paid stamp duty and registration as covered in our guide on Karnataka's stamp duty structure, that amount can be claimed under the same ₹1.5 lakh ceiling in that specific year.
The Sections Are Being Renumbered in 2026
If your CA starts referring to "Section 22" instead of "Section 24(b)," this is why. The Income Tax Act, 2025 replaces the Income Tax Act, 1961 with effect from April 1, 2026, for Tax Year 2026-27 onward. As part of a broader restructuring, familiar section numbers have moved:
This is a change in labeling, not in substance. The ₹2 lakh interest cap, the ₹1.5 lakh 80C cap, and the old-regime-only restriction all carry over unchanged. Returns for FY 2025-26 (filed in 2026) still use the old section numbers, so most homebuyers reading this in 2026 will still see "24(b)" and "80C" on their current year's paperwork, with the new numbers applying from the following tax year.
Old Regime vs. New Regime: This Decides Whether You Get Either Benefit
This is the single most important thing to get right before you assume you are entitled to these deductions.
The new tax regime, which is now the default option unless you actively opt for the old one, does not allow the Section 80C deduction at all, and does not allow the Section 24(b) interest deduction for a self-occupied property. If your home loan is on a self-occupied flat and you file under the new regime, both benefits described in this article simply do not apply to you.
The one exception: if your property is let out (rented to a tenant), you can still deduct the full home loan interest under the new regime too. What you lose under the new regime is the favorable loss set-off rule, covered below, not the deduction itself for a let-out property.
Because of this, anyone with a meaningful home loan on a self-occupied property needs to actually run the numbers under both regimes before filing, rather than defaulting to whichever one their employer's payroll system assumes.
A Bangalore Example: Where the ₹2 Lakh Cap Actually Bites
Here is where the theory runs into Bangalore's actual price points. Take a fairly typical Bangalore purchase: an ₹80 lakh flat, with a ₹60 lakh home loan (75% loan-to-value) at 8.5% interest over a 20-year tenure.
In the first year of this loan, the EMI works out to roughly ₹52,000 a month, or about ₹6.25 lakh for the year. Of that, interest and principal split out approximately as follows:
Notice what happened here: the actual interest paid in year one, ₹5.05 lakh, is more than double the ₹2 lakh cap. You do not get to claim the extra ₹3.05 lakh against your salary or other income under the old regime, it simply goes unclaimed for this property in this year, unless the property is let out. This is the part many first-time buyers miss when they assume a bigger loan automatically means a bigger tax break, the interest deduction on a self-occupied property does not scale past ₹2 lakh no matter how large the loan is.
At a 30% tax slab (plus 4% health and education cess, an effective 31.2%), claiming the full ₹3.19 lakh under the old regime saves approximately ₹99,500 in tax for that year, roughly ₹1 lakh. As the loan amortizes over subsequent years, the interest component of each EMI shrinks and the principal component grows, so the ₹2 lakh interest cap becomes less binding over time, while the ₹1.5 lakh 80C cap (assuming you have no competing 80C investments) tends to accommodate more of the principal as the years go on.
What Happens If Your Interest Loss Exceeds ₹2 Lakh
If your interest paid creates a loss under "Income from House Property" larger than ₹2 lakh (more common on a let-out property, or a large loan even on a self-occupied one before the cap applies), the treatment differs sharply by regime:
- Old regime: Up to ₹2 lakh of that loss can be set off against your other income (salary, business income, and so on) in the same year. Anything beyond ₹2 lakh is carried forward for up to 8 assessment years, but during those 8 years it can only be set off against future house property income, not against salary or any other head.
- New regime: No inter-head set-off is permitted at all. The loss can only be carried forward for 8 years and adjusted against future house property income, meaning it does you no good against your current salary income in the year it arises.
Section 80EE and 80EEA: Mostly Irrelevant for Bangalore Buyers Today
These two provisions offered first-time buyers extra interest deductions beyond the ₹2 lakh cap, ₹50,000 extra under Section 80EE and ₹1.5 lakh extra under Section 80EEA. Both are now closed to new loans:
- Section 80EE: loan sanctioned between April 1, 2016 and March 31, 2017 only.
- Section 80EEA: loan sanctioned between April 1, 2019 and March 31, 2022 only, and only if the property's stamp duty value did not exceed ₹45 lakh.
If your loan falls inside one of these windows and you are still repaying it, you can continue claiming the relevant deduction for the rest of your tenure. But for anyone taking a fresh loan in Bangalore today, both sections are irrelevant, not only because the sanction windows have closed, but because most Bangalore residential properties, even relatively modest ones, sit well above the ₹45 lakh ceiling that Section 80EEA required in the first place.
Practical Notes Worth Knowing
- Two self-occupied properties allowed. Since a 2019 amendment, you can treat up to two properties as self-occupied (not rented, not deemed to be rented) for tax purposes, each still subject to its own ₹2 lakh interest cap if you have separate loans on both.
- Pre-construction interest. If you paid interest before taking possession, that accumulated interest is not lost, it is claimed in five equal annual instalments starting from the year construction is completed or you take possession, still within the same ₹2 lakh annual cap for a self-occupied property.