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For AY 2026–27, calculate your home-loan tax benefit in two separate parts: interest on borrowed capital and principal repayment. Under the old regime, qualifying interest on a self-occupied purchase or construction loan can be deducted up to ₹2,00,000 under section 24(b), while eligible principal repayment falls within the shared ₹1,50,000 section 80C limit. The new regime generally does not list section 24(b) for a self-occupied home or section 80C for principal, but it does list actual interest for a let-out purchase or construction property; any resulting house-property loss cannot be set off against other income or carried forward.
The correct result depends on your assessment year, filing category, property use, loan purpose, sanction date, annual interest, principal paid and other section 80C claims. Work through the calculations below for both regimes, then compare the resulting taxable income and tax using the same income and facts.
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Which tax year and regime are you calculating?
This guide uses the Income Tax Department’s AY 2026–27 guidance, with the relevant regime page last reviewed on 4 June 2026. The new tax regime is the default for an individual, Hindu Undivided Family (HUF), Association of Persons other than a co-operative society, Body of Individuals and Artificial Juridical Person. An eligible taxpayer may opt out and choose the old regime, but the procedure depends on the filing category. See the Department’s AY 2026–27 regime and deduction guidance.
Taxpayers without business or professional income
If you do not have business or professional income, the regime choice can generally be exercised each year in the income-tax return, provided the return is filed by the applicable due date. This makes an annual comparison practical: calculate the tax under both regimes from the same income figures and choose the eligible option that produces the lower lawful tax.
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Taxpayers with business or professional income
If you have income from a business or profession, opting out of the default regime requires Form 10-IEA. Re-entering the default regime is subject to more restricted rules than the annual choice available to a taxpayer without business or professional income. Confirm the procedure for your taxpayer category and the assessment year before filing; do not assume that the workflow for salaried income applies to you.
Collect the figures before doing any calculation
A deduction calculation is only as reliable as the loan and property records behind it. Gather the following for the relevant financial year:
- Assessment year and your filing category, including whether you have business or professional income.
- Whether each property is self-occupied or let out during the year.
- Whether the borrowing financed purchase or construction, or was used for repairs.
- The loan sanction date, lender or financial institution and loan account number.
- Total loan sanctioned, year-end outstanding balance, annual interest charged and principal repaid.
- Other payments that may already use the section 80C ceiling, such as eligible investments or insurance premiums.
- Bank statements or passbooks, the lender’s annual interest certificate, receipts for deductions or exemptions, Form 16, Form 26AS and investment proofs.
The Department’s ITR-1 instructions specifically identify the lender or source, bank or institution name, loan account number, sanction date, total loan amount, outstanding amount and interest amount as home-loan reporting details. Keep the certificate and repayment schedule even where the return does not require every document to be uploaded.
Home-loan deductions at a glance
| Home-loan item | Old regime | New regime for AY 2026–27 |
|---|---|---|
| Self-occupied purchase or construction interest | Up to ₹2,00,000 under section 24(b) for a qualifying loan taken on or after 1 April 1999 | Not listed as an available section 24(b) deduction in the Department’s new-regime table |
| Other specified self-occupied cases | ₹30,000 for the listed pre-1 April 1999 purchase or construction loans and repair loans | Not listed in the new-regime table |
| Let-out purchase or construction interest | Actual interest; the official table states no monetary cap | Actual interest; the official table states no monetary cap, but a resulting house-property loss cannot be set off against other heads or carried forward |
| Eligible principal repayment | Section 80C, within the combined ₹1,50,000 ceiling shared with other eligible section 80C payments | Section 80C housing-loan principal is not listed as available |
These are deduction rules, not a promise that one regime is always better. The default regime’s lower rates or other provisions may outweigh deductions for one taxpayer, while the old regime may produce lower tax for another.
Step 1: Classify the property and the borrowing
Start with the facts that determine which row of the official tables applies. Record the use of the property for the year, the purpose of the loan and its sanction date. Do not combine interest from different properties or loans before classifying them.
Self-occupied property
A self-occupied property is considered under the self-occupied rows of the deduction table. Under the old regime, the ₹2,00,000 ceiling applies to qualifying purchase or construction loans taken on or after 1 April 1999. The Department separately lists a ₹30,000 limit for the specified older purchase or construction category and for repair loans. The date and purpose therefore matter even when the property is your own residence.
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Let-out property
For a let-out property, the official table lists actual interest for a purchase or construction loan without a stated monetary cap. Under the new regime, that interest is listed as well, but the loss restriction is critical: a house-property loss created by the deduction cannot be set off against salary, business or other heads and cannot be carried forward.
Purchase, construction and repairs are not interchangeable
Use the lender’s sanction documents and interest certificate to identify the purpose. A repair loan does not automatically receive the same limit as a post-1 April 1999 purchase or construction loan. If a loan was refinanced, consolidated or partly used for another purpose, separate the qualifying and non-qualifying portions using the applicable documents and professional advice.
Step 2: Calculate interest under the old regime
For each property, take the actual interest charged during the financial year from the lender’s annual certificate. Then apply the appropriate limit:
- For a qualifying self-occupied purchase or construction loan sanctioned on or after 1 April 1999, enter the lower of actual annual interest or ₹2,00,000.
- For the specified self-occupied pre-1 April 1999 purchase or construction category or a repair loan, enter the lower of actual interest or ₹30,000, as shown in the Department’s table.
- For a let-out purchase or construction property, use the actual interest shown for the year; the table states no monetary cap for this category.
Do not treat the limit as a cash payment from the government. If your qualifying self-occupied interest is ₹2,40,000, the deduction used in the old-regime calculation is ₹2,00,000, not ₹2,40,000 and not a ₹2,00,000 refund. The deduction reduces the income on which tax is calculated.
Interest paid during construction
The material covered here does not establish the detailed treatment of pre-construction interest. If construction-period interest, completion dates or a delayed possession is involved, check the applicable statute and return instructions rather than automatically adding the entire historical amount to the current year’s interest.
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Step 3: Calculate principal repayment under the old regime
Principal repayment is separate from interest. Eligible home-loan principal is included in section 80C, but section 80C has one combined ceiling of ₹1,50,000 for all qualifying payments. The ceiling is not reserved exclusively for your housing loan.
- Take the principal repaid during the year from the lender’s statement, excluding interest, late fees and other charges.
- List your other eligible section 80C payments for the same year.
- Add them together and cap the total section 80C deduction at ₹1,50,000.
- Allocate the available ceiling consistently in your working papers; the return deduction cannot exceed the combined limit.
For example, if principal repayment is ₹1,20,000 but other eligible section 80C payments total ₹60,000, the combined amount is ₹1,80,000 and the usable section 80C deduction is ₹1,50,000. You cannot claim ₹1,20,000 for principal plus a separate ₹1,50,000 for the other payments.
Step 4: Apply the new-regime property rules
Under the AY 2026–27 new-regime table, section 24(b) interest is listed for a let-out property where the borrowing financed purchase or construction. The table states actual interest with no monetary cap, but it also states that a resulting house-property loss cannot be set off against other heads or carried forward.
Self-occupied home in the new regime
The Department’s new-regime table does not list section 24(b) interest for a self-occupied property. It also does not list section 80C housing-loan principal. Therefore, do not import the old-regime ₹2,00,000 interest ceiling or the ₹1,50,000 principal ceiling into a new-regime calculation.
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Enter the actual qualifying interest for the let-out purchase or construction property, then apply the loss restriction. If the property’s income becomes negative after allowable deductions, that negative amount cannot reduce salary or another income head and cannot be carried forward under the stated new-regime rule.
Worked calculations
The examples below show the mechanics only. They do not calculate final tax because tax rates, surcharge, cess, salary, other income and other deductions are taxpayer-specific.
Example 1: Self-occupied purchase loan under the old regime
Assume annual interest is ₹2,40,000 and principal repaid is ₹1,10,000. The loan financed purchase, was sanctioned after 1 April 1999 and the property is self-occupied. The section 24(b) interest amount used is ₹2,00,000, the lower of actual interest and the stated ceiling. The ₹1,10,000 principal is then combined with all other eligible section 80C payments and remains subject to the shared ₹1,50,000 limit.
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Example 2: Self-occupied repair loan under the old regime
Assume annual interest on a repair loan is ₹45,000. Because the official table lists ₹30,000 for the specified self-occupied repair category, the amount used for that row is ₹30,000. Principal repayment does not become a section 24(b) interest deduction; any eligible principal must be considered separately under section 80C and its combined ceiling.
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Example 3: Let-out purchase loan under both regimes
Assume a let-out property has ₹3,60,000 of qualifying purchase-loan interest for the year. The official table does not state a monetary cap for this let-out category under either regime. Under the old regime, use the actual interest subject to the applicable house-property computation. Under the new regime, the actual interest is listed, but any resulting house-property loss cannot be set off against other heads or carried forward.
Step 5: Compare the complete tax calculation
Do not compare only the home-loan deduction. Prepare two parallel calculations:
- Start with the same gross income, exemptions and income classification in both columns.
- In the old-regime column, include only deductions allowed under that regime, including the applicable section 24(b) interest and the section 80C amount left after other section 80C claims.
- In the new-regime column, include only deductions permitted there. For a self-occupied property, do not insert the old-regime section 24(b) or section 80C housing-loan amounts. For a let-out property, apply the stated loss restriction.
- Apply the tax rates and other rules for AY 2026–27 to each resulting taxable-income figure.
- Compare the final tax payable, including any applicable surcharge, cess, rebates or tax credits that apply to your complete circumstances.
A deduction reduces taxable income; its value is the deduction multiplied by the applicable marginal tax rate, subject to the overall return calculation. Someone with little taxable income may receive less practical benefit from the same ₹2,00,000 deduction than someone in a higher bracket. Conversely, a taxpayer with substantial other section 80C payments may have little or no section 80C space left for principal.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.How to report the loan in the return
The Income Tax Department’s ITR-1 filing FAQ says the section 24(b) schedule was added from AY 2025–26. For the year you are filing, check the current return form and instructions rather than relying on an older saved draft. The FAQ is available at Income Tax Department ITR-1 filing FAQs.
Keep these details ready for the home-loan fields:
- Name or source of the lender.
- Bank or financial institution name.
- Loan account number.
- Sanction date.
- Total loan amount.
- Outstanding amount at year end.
- Interest amount for the relevant year.
Match the interest figure in the return to the annual certificate, not to an approximate monthly instalment calculation. An EMI contains both principal and interest, and the split changes over time. Retain the certificate, statements and supporting proofs in case the return is questioned.
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Cases that need additional checking
The general comparison above does not settle every specialised housing case. Obtain the applicable statute, current return instructions or qualified tax advice before filing if any of these apply:
- Co-ownership, where interest and principal may need to be allocated between owners.
- Pre-construction interest or a property completed partway through the year.
- More than one house property or a change from self-occupied to let out.
- Multiple loans, refinancing, balance transfers or a loan used partly for non-housing purposes.
- Special first-home-loan provisions such as sections 80EE or 80EEA.
- Business or professional income requiring Form 10-IEA and a restricted regime re-entry path.
Do not claim a special provision simply because its section number appears in an old calculator or prior-year return. Eligibility can depend on sanction date, loan amount, property value, completion date and assessment-year wording.
Common mistakes and how to correct them
Counting the full EMI as interest
Use the annual interest certificate. The principal component is a separate figure and cannot be added to section 24(b) interest.
Claiming ₹1,50,000 for principal on top of other section 80C claims
Add every eligible section 80C payment first. The housing-loan principal shares the single ₹1,50,000 ceiling.
Using the old-regime deduction after selecting the new regime
Rebuild the calculation with the new-regime table. The self-occupied section 24(b) and section 80C housing-loan entries are not listed there.
Ignoring the let-out loss restriction
Under the new regime, do not use a negative house-property result to reduce salary or another head, and do not carry that loss forward where the stated rule prohibits it.
Using the wrong sanction date or loan purpose
Check the sanction letter and lender records. The ₹2,00,000 and ₹30,000 self-occupied rows are tied to specific categories, including the 1 April 1999 date and repair-loan distinction.
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Prepare both columns with identical income inputs. A home-loan deduction alone cannot show which regime produces the lower final tax.
A practical worksheet
| Input | Your figure | Where it is used |
|---|---|---|
| Assessment year | AY 2026–27 | Determines the applicable return and regime guidance |
| Property use | Self-occupied or let out | Selects the property row |
| Loan purpose | Purchase, construction or repairs | Determines the permitted category |
| Sanction date | As stated by lender | Relevant to the self-occupied old-regime limits |
| Annual interest | From interest certificate | Section 24(b) calculation |
| Annual principal | From repayment statement | Section 80C calculation under old regime |
| Other section 80C payments | From receipts and records | Consumes the shared ₹1,50,000 ceiling |
| Regime procedure | Non-business choice or Form 10-IEA | Determines how the regime is selected |
Once the worksheet is complete, calculate taxable income under each regime and apply the year’s rates and other rules. The official guidance establishes the home-loan deduction mechanics, but it does not determine an individual’s complete tax without the rest of that person’s income and claims.
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