Claiming tax relief on a home loan: 80C, 24(b) and the five-year rule
For most Indian families, a home loan brings the biggest tax saving they will ever get. Many still under-claim it. This guide explains which deductions exist, the rules attached to each, how to claim them on your return, and the mistakes that cost people money.
This is general information, not tax advice. Tax rules change and every situation is different, so check with a chartered accountant before you file.
The two deductions that matter most
| Section | What it covers | Limit per year |
|---|---|---|
| 80C | Principal repayment, plus stamp duty and registration in the year paid | ₹1.5 lakh, shared with all other 80C items |
| 24(b) | Interest paid on the loan, self occupied property | ₹2 lakh |
| 24(b) | Interest, let out property | No cap on the deduction. Loss set off against other income capped at ₹2 lakh a year |
A deduction most buyers forget
The stamp duty and registration fee you pay when buying can be claimed under Section 80C, but only for the financial year in which you actually pay them. For a ₹1 crore flat in Karnataka, that outlay is about ₹7.5 lakhs. The 80C limit is still ₹1.5 lakh, but in a purchase year many people have not used that limit elsewhere. You get one chance at this. If you do not claim it that year, it is lost.
Buying under construction: interest you cannot claim yet
This rule surprises nearly everyone who buys a flat that is still being built. While construction continues, the interest you pay is not deductible that year. It is recorded as pre-construction interest instead. You do not lose it. Once the building is finished and you take possession, you can spread that total over five equal yearly claims, added to the interest you are paying at the time.
There is a limit, though. For a home you live in, current interest plus one-fifth of the earlier interest must fit within ₹2 lakh a year. Borrowers with bigger loans often reach ₹2 lakh on current interest alone. For them, the deferred amount adds little or nothing.
The five-year completion deadline
To keep the full ₹2 lakh limit, construction must finish within five years of the end of the financial year in which you took the loan. Miss that, and the limit falls to just ₹30,000. That is ₹1.7 lakh less interest you can deduct each year, so check it against a real date instead of guessing.
Prestige Parklane's RERA filing gives a completion date of 31 December 2030. For a loan taken during 2026-27, the five-year window closes on 31 March 2032. On the filed date, the project meets that test with over a year to spare. If the completion date changes, run the check again.
Claiming home loan interest on your tax return
The process is simpler than it looks.
- Ask your lender for the yearly interest certificate. It separates what you paid into principal and interest.
- Enter the interest under "Income from House Property" as a Section 24(b) deduction.
- Enter the principal among your Chapter VI-A deductions, inside the 80C total.
- Once you have possession, add one-fifth of the pre-construction interest each year.
- Mark the property as self-occupied or rented, because the limits differ.
If you are salaried, you can give the certificate to your employer. Your monthly tax deduction then drops during the year, so you are not waiting for a refund.
Old tax regime or new one?
Everything above applies under the old regime only. The new regime does not allow 80C, and it does not allow the 24(b) interest deduction on a home you live in. Interest on a rented home can still reduce the rent you declare.
For a family with a big loan, that choice changes the numbers a great deal. Paying ₹2 lakh of interest and ₹1.5 lakh of principal gives ₹3.5 lakh of deductions under the old regime. The new regime offers no equivalent. Compare both each year before you decide. Most salaried people can switch annually.
Borrowing together raises the limits
When two people both own the home and both repay the loan, each can claim up to ₹2 lakh of interest and up to ₹1.5 lakh under 80C, in line with their share. A working couple can therefore deduct as much as ₹4 lakh of interest between them. Both conditions are required. Repaying without being an owner does not qualify, and being an owner without contributing to repayment does not qualify either.
What happened to Section 80EEA
Section 80EEA gave first-time buyers of affordable homes an extra interest deduction of up to ₹1.5 lakh. It applied only to loans approved within a set window, which has now closed. People already inside that window keep claiming it until they repay; new borrowers cannot use it. Ask your accountant whether it applies to you rather than assuming.
What the savings are worth
Someone in the 30 per cent bracket who claims the full ₹2 lakh of interest and ₹1.5 lakh under 80C saves about ₹1.09 lakh in tax each year, including cess. Across a twenty-year loan, that covers a meaningful part of the total interest. For higher earners, the real cost of the loan is noticeably below its stated rate.
Paperwork to keep
- Every year's interest certificate from your lender.
- Receipts for stamp duty and registration, for the 80C claim that year.
- The possession letter or occupancy certificate, which starts the interest claim.
- The sale agreement showing each owner's share, if you borrowed jointly.
- A yearly log of pre-construction interest, so the one-fifth claim is easy to work out.
Frequently asked questions
Up to ₹2 lakh a year under Section 24(b) for a home you live in. For a rented home there is no limit on the deduction itself, but only ₹2 lakh of loss can be set against other income each year.
Only if they also own the property and actually help repay the loan. A co-applicant who is not on the title cannot claim.
Interest goes under Income from House Property as a 24(b) deduction, and principal goes under 80C. Take both figures from your lender's interest certificate.
Not for interest. Interest during construction is saved up and claimed in five equal parts, starting in the year you take possession.
No. The deduction lowers what borrowing costs you, but you still pay interest. Buy because the home makes sense, and treat the tax saving as a bonus.
For a home you live in, yes: 80C and the 24(b) deduction both disappear. Compare the two regimes every year before choosing.
