With enhanced provisions in Budget 2025, home loan tax deductions can now save you up to ₹7 lakh annually, making property ownership more financially rewarding.
Buying a home in 2025 comes with stronger fiscal support that can reduce your yearly tax outgo. Policymakers have refined relief on principal and interest, while aligning incentives for first-time buyers and joint borrowers. Used correctly, home loan tax deductions can turn a long repayment horizon into manageable yearly savings and make ownership more resilient through market cycles.
Budget 2025 refines the framework across Sections 80C, 24(b), 80EE, and 80EEA, and encourages disciplined planning under the old and new regimes. With documentation in place, you can align repayment, possession timelines, and co-ownership to maximise home loan tax deductions under current rules, while maintaining compliance and preparing for scrutiny during assessment.
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Latest Tax Benefits on Housing Loans: FY 2025-26
One of the most significant financial advantages of purchasing a house is the opportunity to claim relief through home loan tax deductions. These cover both the repayment of principal and the interest paid, offering consistent savings for individuals across income levels.
The government’s introduction of tax benefits 2025 has strengthened these provisions further. With the interest deduction under Section 24(b) increased to ₹3 lakh for self-occupied homes, borrowers now enjoy a broader scope of annual relief.
Alongside this, deductions under Sections 80C, 80EE, and 80EEA continue to support principal repayment and affordable housing. When used effectively, these ensure your repayment plan remains financially sustainable while reducing long-term liability.
Also Read: What is a Home Loan & Types of Home Loan in India
Key Sections of the Income Tax Act for Home Loan Tax Deductions 2025
Understanding this framework begins with the key provisions of the Income Tax Act. Sections 80C, 24(b), 80EE, and 80EEA form the foundation of these benefits, guiding how much you can save in 2025.
Section 80C – Principal Repayment
This allows individuals to claim deductions on the principal portion of repayment made in a financial year. Beyond monthly instalments, this provision also covers registration and stamp duty expenses, though these charges qualify only in the year they are incurred.
The maximum exemption limit under this section is set at ₹1.5 lakh annually. Since Section 80C also includes instruments such as PPF, ELSS, tax-saving fixed deposits, and life insurance premiums, the same limit applies across all eligible investments. For those planning their finances, prioritising principal repayment can enhance overall housing loan savings within this shared cap.
Eligibility under Section 80C requires the property to be fully constructed and retained for at least five years from the date of possession. If sold earlier, the deductions claimed are reversed and added back to taxable income. By aligning repayments carefully, you can ensure long-term home loan tax deductions that reduce your yearly outflow while meeting compliance standards. This makes Section 80C an essential pillar of financial planning for property ownership in 2025.
Section 80EE, 80EEA – First-Time and Affordable Home Ownership
Housing Loan Tax Benefits under Section 80EE
This provides additional relief specifically for first-time buyers. Eligible taxpayers can claim deductions of up to ₹50,000 per year if certain conditions are met:
- The home loan should not exceed ₹35 lakh
- The property value should not be more than ₹50 lakh
- The loan should have been sanctioned during the window of 1 April 2016 to 31 March 2017
Section 80EEA: Extended Provisions
To widen eligibility, Section 80EEA was later introduced, offering deductions of up to ₹1.5 lakh annually. This applied to loans sanctioned between 1 April 2019 and 31 March 2022, where the property value did not exceed ₹45 lakh. A key condition was that the taxpayer could not own any other property on the date of loan sanction. These extensions became a vital part of home loan tax deductions for affordable housing.
Encouraging Affordable Housing Ownership
Together, these sections aim to support younger buyers entering the property market. When combined with Section 24(b) and Section 80C, they offer comprehensive relief for taxpayers. For first-time buyers, these measures serve as a pathway to ownership, while creating lasting financial stability through structured home loan tax deductions.
Joint Home Loans: More Benefits for Co-Borrowers
Individual Claims for Co-Borrowers
When two or more individuals take a joint home loan, each co-borrower becomes eligible to claim deductions separately, based on their ownership share and loan repayment contribution. This arrangement allows families to enhance their overall savings, as each member can use Section 24 to save up to ₹2 lakh on interest and Section 80C for ₹1.5 lakh on principal repayment. Together, these provisions strengthen the scope of home loan tax deductions in 2025.
Additional Relief through Section 80EEA
Beyond standard sections, co-borrowers can also utilise Section 80EEA, which provides an additional deduction of ₹1.5 lakh on interest for affordable housing loans. This is particularly beneficial when both borrowers meet the eligibility criteria, ensuring maximum relief within a single household. Joint loans therefore function as a strategic way to extend home loan tax deductions across family members, balancing repayment responsibilities and ownership.
Pre-construction Interest Benefits
For under-construction properties, interest paid before possession can also be claimed in equal instalments over 5 years starting from completion. For example, if ₹5 lakh is paid as pre-construction interest, ₹1 lakh can be claimed annually in addition to regular deductions. This approach ensures no payment is wasted, while maximising long-term financial efficiency for co-owners.
New Tax Regime vs. Old Tax Regime
The introduction of the new regime has shifted how taxpayers evaluate deductions and exemptions. Under the simplified structure, many traditional exemptions are excluded, which limits the scope of home loan tax deductions. However, those who opt for the old regime can still utilise provisions under Sections 80C, 24(b), 80EE, and 80EEA to reduce their taxable income.
While the new regime offers lower tax rates, the old system remains favourable for individuals with housing loans. Retaining eligibility for home loan tax deductions may result in greater overall savings, especially for buyers with high interest or principal outflows. Choosing between the two requires comparing potential liabilities under both regimes, before finalising the approach for FY 2025-26.
Key Changes in Budget 2025
| Section | Deduction Updated | Applicability |
| Section 24(b) | ₹3 lakh (was ₹2 lakh earlier) |
Interest, self-occupied
|
| Section 80C | ₹1.5 lakh | Principal, old regime |
| Section 80EEA | ₹1.5 lakh | Interest, affordable |
Combined Example: Maximum Deduction Potential
Assumptions (single buyer, old regime)
- Property value ₹45,00,000
- Home loan ₹35,00,000 sanctioned on 30 March 2022 (eligible for 80EEA)
- FY 2025-26 interest paid ₹450,000
- Principal repaid ₹160,000
- Stamp duty and registration paid ₹150,000 in the year of purchase.
Step-by-step deductions:
- Section 24(b): Claim ₹300,000 on interest for a self-occupied home (post-Budget 2025 cap)
- Section 80EEA: Claim the remaining ₹150,000 of interest (within the ₹150,000 ceiling) because the loan was sanctioned by 31 March 2022 and the property’s stamp-duty value does not exceed ₹45 lakh
- Section 80C: From principal ₹160,000 and charges ₹150,000, claim ₹150,000 (shared Section 80C cap) in the year charges were incurred
Total potential in FY 2025-26: ₹300,000 (24(b)) + ₹150,000 (80EEA) + ₹150,000 (80C) = ₹600,000 in home loan tax deductions. If pre-construction interest exists, one-fifth of that amount can also be claimed each year from completion, subject to the above caps, which helps you further optimise home loan tax deductions within the law.
Conclusion
Budget 2025 reforms have strengthened the framework for property-related savings, ensuring greater financial relief for individuals planning long-term ownership. By strategically using Section 24(b), 80C, 80EE, and 80EEA, along with the advantages of joint ownership, taxpayers can significantly lower yearly liabilities.
Proper planning not only enhances compliance, but also secures consistent relief. When aligned with repayment discipline, home loan tax deductions become a powerful tool for making home ownership more achievable and financially rewarding.
FAQs
1. What are the main sections of the Income Tax Act for home loan tax deductions in 2025?
The main sections of the Income Tax Act for home loan tax deductions in 2025 are Section 24(b) for interest payments, Section 80C for principal repayment, and Sections 80EE / 80EEA for first-time homebuyers.
2. How much tax deduction can be claimed on home loan interest payments under Section 24(b)?
The tax deduction on home loan interest payments under Section 24(b) is ₹3 lakh per annum for self-occupied properties in FY 2025-26, raised from ₹2 lakh earlier.
3. What is the maximum deduction allowed for principal repayment under Section 80C?
Maximum deduction allowed for principal repayment under Section 80C is ₹1.5 lakh per annum, available under the old tax regime.
4. What additional benefits are available for first-time homebuyers or affordable housing?
Additional benefits available for affordable housing, and first-time homebuyer tax benefits, include deductions of up to ₹1.5 lakh under Section 80EEA on interest paid, subject to property value and loan eligibility criteria.
5. How do joint home loans increase tax savings?
Joint home loans increase tax savings by allowing each co-owner and co-borrower to claim full deductions separately under Sections 24(b), 80C, and 80EEA, effectively doubling the benefit.
6. Can deductions be claimed under both the new and old tax regimes?
No, deductions cannot be claimed under both the new and old tax regimes, as Section 80C is available only under the old regime, while the new regime limits exemptions but allows certain interest deductions.
7. What are the key Budget 2025 updates affecting home loan tax benefits?
The key Budget 2025 updates affecting home loan tax benefits include an increase of Section 24(b) interest deduction to ₹3 lakh, retention of ₹1.5 lakh under Section 80C, and expanded incentives for affordable housing.
