Section 24(b) and 80C: The Home Loan Deductions Nobody Explains Clearly

Ask most home loan borrowers what interest rate they're paying, and they'll quote the number on their loan statement, say 8.5%. Ask what they end up paying after tax benefits, and most people don't know, because the honest answer starts with a question nobody asks first: which tax regime are you actually filed under? Under the old regime, home loan interest and principal still carry real deductions. Under the new regime, which has been the default for every taxpayer since assessment year (AY) 2024-25, a self-occupied home loan gets you nothing from Section 24(b) or Section 80C. Not "less." Zero. Everything below depends on getting that fork right first.

Which regime are you actually on?

Since AY 2024-25, the new tax regime under Section 115BAC applies automatically unless you actively opt out of it when filing. If you've never explicitly chosen the old regime on your return, you are very likely on the new one, and every deduction in this guide except one (let-out property interest, covered below) doesn't apply to you at all.

The rest of this guide covers what each regime actually gets you, with real figures from a ₹1,00,00,000 loan at 7.5% over 20 years, the same base case used across this site's guides.

Old regime: Section 24(b), the interest deduction

Section 24(b) of the Income Tax Act, 1961 lets you deduct home loan interest from your taxable income, for a self-occupied property, up to ₹2,00,000 per financial year, but only if you're filed under the old regime.

Take that ₹1,00,00,000 loan at 7.5% over 20 years. In year one, the amortisation schedule shows ₹7,42,393 paid in interest, well above the cap. You can only deduct ₹2,00,000 of it. At a 30% slab, that's ₹60,000 back in actual tax owed (plus 4% health and education cess on the tax amount, which the figures in this guide leave out for clarity).

Old regime: Section 80C, the principal deduction

Section 80C lets you deduct the principal portion of your EMI (not interest, that's 24(b)'s job) up to ₹1,50,000 per financial year, again only under the old regime. On the same loan, year-one principal is ₹2,24,319, already past the cap before the loan is even a year old.

Old regime, year by year: what the caps actually do

On this loan, both caps bind (you're paying more than ₹2,00,000 interest and ₹1,50,000 principal) for the first 17 years straight. The combined deduction stays flat at ₹3,50,000, and the tax saved at a 30% slab stays flat at ₹1,05,000 a year, regardless of how much more interest you were actually paying in year one than year fifteen.

The benefit only starts shrinking once interest drops under ₹2,00,000 (year 18 here), and even then it doesn't fall to zero, because 80C keeps capturing ₹1,50,000 of the now-large principal portion every year. Summed across all 20 years, old-regime deductions on this loan save ₹20,13,096 in total tax, against ₹93,34,237 in total interest paid over the loan's life.

New regime: self-occupied gets nothing, let-out is different

If you're on the new regime and the property is self-occupied, none of the above applies: not ₹2,00,000, not ₹1,50,000, not a partial version of either. Your tax bill is unaffected by the loan entirely.

There's one real exception. If the property is let out (rented, not self-occupied), the new regime still lets you deduct the full home loan interest against your rental income, with no ₹2,00,000 cap. On this same loan, that means the entire ₹7,42,393 in year-one interest is deductible against rent received, not just ₹2,00,000 of it. The restriction is on the other side: if the deduction creates a loss (interest paid exceeds rental income received, which it usually does in the early years of a large loan), that loss cannot be set off against your salary or other income heads under the new regime, unlike the old regime's more permissive set-off rules. Section 80C principal repayment still isn't available under the new regime either way, self-occupied or let-out.

How do you actually compute your effective interest rate?

"Effective interest rate" gets used loosely in home loan content without anyone running the number. Here it is, computed: take the total interest you'll pay over the loan's life, net out the total tax you'll actually save, and see what rate that net cost implies against the same sticker rate. The exact mechanism, including how the year-by-year deduction is computed and flushed against the amortisation schedule, is on the methodology page.

On this loan: ₹93,34,237 total interest, minus ₹20,13,096 in old-regime tax saved (30% slab, both caps applied every year), leaves a net cost of ₹73,21,141. Scaled against the 7.5% sticker rate, that works out to an effective interest rate of approximately 5.88% under the old regime.

Under the new regime, for the same self-occupied property, there's no tax saved to net out. The effective rate is the sticker rate: 7.5%, unchanged.

Which section numbers apply, and when?

Every number in this guide, ₹2,00,000, ₹1,50,000, the AY 2024-25 default regime switch, reflects the Income-tax Act, 1961 as it applies through FY 2025-26 (AY 2026-27). The Income-tax Act, 2025 came into force on 1 April 2026 and governs income from FY 2026-27 (AY 2027-28) onward, and it renumbers most sections of the Act. At the time of writing, several secondary sources describe the Section 80C-equivalent deduction moving to a new section number under the 2025 Act, but they don't agree on the exact number for the home loan interest deduction currently at Section 24(b), and none of the sources checked were the government's own official mapping. Rather than print a number we can't confirm, this guide keeps the familiar Section 24(b) and Section 80C citations, on the understanding that the underlying rule (the caps, the old-vs-new-regime split, the self-occupied vs. let-out distinction) has been reported as substantively unchanged even where the label has moved.

Tax law changes with every Budget. Verify current caps and section numbers against the Income Tax Department's own material at incometax.gov.in before filing, rather than relying on this guide or any other on the internet as the final word.