When it comes to managing finances, securing a home loan is a significant commitment. Fortunately, under the old Indian tax regime, borrowers can leverage several tax benefits, making it a bit easier on the wallet. This blog aims to unpack the intricacies of tax deductions available for home loans under the old tax regime, providing you with a detailed guide to maximize your benefits.


Understanding the Old Tax Regime

Before we dive into the specifics, it’s crucial to clarify that the information provided here pertains to the old tax regime. This regime offers various deductions that can be availed on the principal and interest paid on home loans, which are not available under the new tax regime.



Tax Deduction on Home Loan Interest: Section 24(b)

What is Section 24(b)?

Under the old tax regime, Section 24(b) of the Income Tax Act allows homeowners to claim a deduction on the interest component of the home loan. This provision is a boon for borrowers as it can significantly reduce taxable income.

How Much Can You Claim?

You can claim a deduction of up to ₹2,00,000 on the interest paid on your home loan annually. This limit is applicable if the property is self-occupied. If you have rented out the property, there is no upper limit on the interest amount that can be deducted.

Deduction on Principal Repayment: Section 80C

Understanding Section 80C Benefits

Section 80C of the Income Tax Act includes various investments and expenses that are eligible for deductions, one of which is the principal repayment of a home loan.

Deduction Limit

The amount paid as principal repayment during the year can be claimed as a deduction under Section 80C, up to a maximum limit of ₹1,50,000. This limit is inclusive of other investments under Section 80C like EPF, PPF, Life Insurance Premiums, etc.


Additional Deduction Under Section 80EE

Eligibility for Section 80EE

First-time homebuyers can benefit from an additional deduction under Section 80EE. This deduction is over and above the limits under Sections 24(b) and 80C.

Claiming Additional Benefits

You can claim an additional deduction of up to ₹50,000 under Section 80EE on the interest paid, provided the loan amount is ₹35 lakhs or less and the property value does not exceed ₹50 lakhs.

Joint Home Loan: Doubling the Benefits

Benefits of a Joint Home Loan

If you have taken a joint home loan, each co-borrower can claim the deductions under Sections 24(b), 80C, and 80EE independently, provided they are also co-owners of the property and are contributing to the loan repayment.

Maximizing Tax Benefits

This arrangement effectively doubles the tax benefit, making it an attractive option for spouses or family members buying property together.


Points to Remember


Ensure to keep all documents such as loan approval papers, repayment statements, and construction-related receipts organized and handy for when you file your tax returns.

Timing of Deductions

Deductions under Section 24(b) are applicable on an accrual basis, meaning the interest deduction is claimed on the year it is due, irrespective of the payment. However, the principal repayment under Section 80C is eligible for deduction only on actual payment.

Impact of Pre-construction Period

Interest paid during the pre-construction period can be claimed as a deduction in five equal installments starting from the year in which the construction is completed.

Navigating through the tax deductions available for home loans under the old tax regime can provide substantial financial relief. By understanding and utilizing these benefits to their full extent, homeowners can significantly reduce their tax liability. Remember, the key to maximizing these benefits lies in meticulous planning and timely execution of your tax-related documents.

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In closing, while the new tax regime offers a simplified tax structure, the old regime’s deductions for home loans can be more beneficial if you have substantial deductions to claim. Make sure to consult with a tax advisor to make the best decision based on your financial situation.