The benefits in one table
| Benefit | Old regime | New regime |
|---|---|---|
| Interest on loan for self-occupied home (Section 24(b)) | Up to ₹2,00,000 a year | Not allowed |
| Principal repayment (80C) | Within ₹1,50,000 overall 80C limit | Not allowed |
| Stamp duty & registration (80C) | In the year paid, within ₹1.5 lakh | Not allowed |
| Interest on let-out property | Fully deductible from rent; net loss set off against salary up to ₹2 lakh, rest carried forward 8 years | Deductible from rent, but loss cannot be set off against salary or carried forward |
| Pre-construction interest | Claimed in 5 equal parts from the year of possession (within the ₹2 lakh cap) | Only for let-out property |
From 1 April 2026 the Income-tax Act 2025 replaced the 1961 Act and section numbers changed, but these limits were carried over; most people still refer to the interest deduction as “Section 24(b)”. The new regime is the default — you must opt for the old regime when filing your return (salaried taxpayers can switch each year).
Old vs new regime with a ₹50 lakh home loan
Say you have a ₹50 lakh loan at 8% for 20 years and live in the home. First-year interest is ₹3,96,181 (so the full ₹2 lakh is claimable) and principal is ₹1,05,683. We assume a typical salary structure (basic 50% of CTC, Karnataka professional tax), ₹1.5 lakh of 80C (EPF plus principal), ₹25,000 of 80D health insurance, and no HRA — you now live in your own home.
| CTC | Tax, new regime | Tax, old regime with loan | Better | Extra deductions for old regime to break even |
|---|---|---|---|---|
| 12 LPA | ₹0 | ₹48,704 | New (saves ₹48,704) | +₹1.7 lakh |
| 15 LPA | ₹77,835 | ₹1,05,860 | New (saves ₹28,025) | +₹1.3 lakh |
| 20 LPA | ₹1,57,440 | ₹2,43,180 | New (saves ₹85,740) | +₹2.7 lakh |
| 25 LPA | ₹2,63,875 | ₹3,86,070 | New (saves ₹1,22,195) | +₹3.9 lakh |
| 30 LPA | ₹3,97,140 | ₹5,28,960 | New (saves ₹1,31,820) | +₹4.2 lakh |
| 40 LPA | ₹6,82,920 | ₹8,14,740 | New (saves ₹1,31,820) | +₹4.2 lakh |
| 50 LPA | ₹9,68,700 | ₹11,00,520 | New (saves ₹1,31,820) | +₹4.2 lakh |
The result surprises many borrowers: with a typical salary and only the usual deductions (₹2 lakh interest, ₹1.5 lakh 80C, ₹25,000 80D — ₹3.75 lakh in all), the new regime is cheaper at every income in the table. Up to about 13–14 LPA the ₹12 lakh rebate brings new-regime tax to nil; above that, the new regime’s wider slabs (30% only above ₹24 lakh) outweigh the deductions. For the old regime to win you would need the extra deductions shown in the last column — for example HRA because you live in a rented home in another city, NPS under 80CCD(1B) (₹50,000), or interest on a let-out second property. The figures are for this example only — run your own numbers.
Joint home loans double the benefit
If two people are both co-borrowers and co-owners, each can claim up to ₹2 lakh of interest and up to ₹1.5 lakh of principal (within their own 80C) under the old regime — in the proportion of their share of the EMI. On a ₹50 lakh loan with ₹3,96,181 of first-year interest, a couple sharing 50:50 can claim ₹1,98,090 each. Being only a co-borrower without ownership does not qualify.
Conditions that trip people up
- Construction must finish within 5 years from the end of the financial year in which the loan was taken, otherwise the self-occupied interest cap falls to ₹30,000.
- The 80C principal deduction is reversed if you sell the house within 5 years of the end of the year you took possession.
- Interest on a loan from friends or family is allowed (with a certificate), but principal repaid to them does not qualify for 80C.
- The special first-time-buyer deductions (80EE, 80EEA) are closed for loans sanctioned after 31 March 2022.
- Keep the bank’s interest certificate each year; employers need it to reflect the deduction in TDS if you choose the old regime.
Two self-occupied homes
You can treat up to two houses as self-occupied, but the combined interest deduction for both remains ₹2 lakh. A third house is treated as let out (deemed rent is taxable).