Tax Savings
10 min read
February 10, 2025
Home Loan Tax Benefits 2025: Save Up to ₹3.5 Lakh in Taxes
Complete guide to tax deductions on home loan principal and interest under Section 80C and 24(b)
Save Up to ₹3.5 Lakh Annually
Home loan offers dual tax benefits - deductions on both principal (₹1.5L) and interest (₹2L) payments. First-time buyers can save even more with Section 80EEA.
Two Major Tax Benefits on Home Loan
Understanding these two separate deductions can help you maximize your tax savings
Principal Repayment
Section 80C
₹1.5 Lakh
Maximum Annual Deduction
Only principal component of EMI
Shared with other 80C investments
Available under old tax regime only
Interest Payment
Section 24(b)
₹2 Lakh
Self-Occupied Property
Only interest component of EMI
Available in both tax regimes
No limit for let-out property
Combined Maximum Benefit: ₹3.5 Lakh per year!
(₹1.5L Principal + ₹2L Interest = Tax saving of up to ₹1.09 Lakh at 31% tax rate)
(₹1.5L Principal + ₹2L Interest = Tax saving of up to ₹1.09 Lakh at 31% tax rate)
Section 24(b): Interest Deduction Details
Interest benefit varies based on property type and occupancy status
| Property Type | Maximum Deduction | Key Points |
|---|---|---|
Self-Occupied | ₹2,00,000/year | Available in both old & new tax regime |
Let-Out (Rented) | No Limit | Full interest amount allowed as deduction |
Under Construction | ₹2L/year | Claimed in 5 equal installments after completion |
Vacant (Not rented) | ₹2,00,000/year | Treated as self-occupied for tax purposes |
Important: 5-Year Lock-in for 80C
If you sell the property within 5 years of possession, the entire principal deduction claimed under Section 80C will be reversed and added to your income in the year of sale.
Section 80EEA: Bonus for First-Time Buyers
Extra ₹1.5 Lakh for First-Time Buyers!
Additional interest deduction over and above Section 24(b)
Eligibility Criteria:
Loan Sanction Period
April 1, 2019 to March 31, 2022
Property Value
Not exceeding ₹45 lakh
Loan Amount
Not exceeding ₹35 lakh
First-Time Buyer
No other house owned on sanction date
Total Interest Benefit: ₹2L (24b) + ₹1.5L (80EEA) = ₹3.5 Lakh per year!
Real Example: Tax Savings Calculation
Annual Tax Calculation Example
See how much you can actually save
Income & EMI Details
Annual Income₹15,00,000
Monthly EMI₹50,000
Annual Principal₹1,50,000
Annual Interest₹4,50,000
Tax Deductions
80C (Principal)
₹1,50,000
24(b) (Interest)
₹2,00,000
Total Deduction₹3,50,000
Taxable Income: ₹15L - ₹3.5L = ₹11.5L
Tax Saved: ~₹1,08,500 at 31% tax rate
Joint Home Loan: Double the Benefits
Both Co-Borrowers Can Claim Separately
Maximize tax savings as a couple
Borrower 1
80C (Principal)₹1.5L
24(b) (Interest)₹2L
Total₹3.5L
Borrower 2
80C (Principal)₹1.5L
24(b) (Interest)₹2L
Total₹3.5L
Combined Deduction: ₹7 Lakh for the couple!
Both must be co-owners and co-borrowers of the property
Documents Required
| Document | Purpose | Required For |
|---|---|---|
Home Loan Sanction Letter | Proof of loan approval | Both 80C & 24(b) |
Interest Certificate | Annual interest paid proof | Section 24(b) |
Principal Statement | Annual principal paid proof | Section 80C |
Property Documents | Sale deed, registration | All claims |
Possession Certificate | For under-construction property | If applicable |
Calculate Your Home Loan & Tax Savings
Use our free calculators to plan your home loan
Key Points to Remember
- Principal deduction (80C) available only under old tax regime
- Interest deduction (24b) available in both old and new regime
- Don't sell property within 5 years or 80C benefit will be reversed
- Get interest certificate from bank before filing ITR
- Joint loan = double benefits, but both must be co-owners
- Under-construction interest is claimed over 5 years post-completion