Tax Benefits on Home Loans in India (2025)

Tax Benefits on Home Loans in India (2025) – A Detailed Guide

Buying a home is one of the biggest financial decisions in life, and a home loan helps in achieving this dream. Apart from making home ownership easier, home loans also offer significant tax benefits under various sections of the Income Tax Act, 1961. These benefits help borrowers save a considerable amount of money while repaying their loans.

Let’s explore the tax benefits on home loans in 2025, covering all key sections, eligibility criteria, and important considerations.

1. Tax Benefits on Home Loan Principal Repayment

Section 80C – Deduction on Principal Repayment

• Maximum Deduction: Up to ₹1.5 lakh per year
• Eligibility: Available to individuals and Hindu Undivided Families (HUFs)
• Conditions:
  • The property must not be sold within 5 years of purchase; otherwise, the claimed deduction will be reversed and added to your taxable income.
  • Only applicable for loans taken from recognized financial institutions or banks.

Stamp Duty & Registration Charges

• Additional Benefit: The amount paid for stamp duty and registration is also deductible under Section 80C in the year of purchase.

2. Tax Benefits on Home Loan Interest Payment

Section 24(b) – Deduction on Interest Paid

• Self-Occupied Property: Deduction up to ₹2 lakh per year
• Let-Out Property: No limit on interest deduction (entire interest paid can be claimed)
• Conditions:
  • The loan must be taken for purchase, construction, repair, renewal, or reconstruction of a house.
  • The construction of the house should be completed within 5 years from the end of the financial year in which the loan was taken.
  • If the construction is delayed beyond 5 years, the interest deduction is reduced to ₹30,000 per year (instead of ₹2 lakh).

3. Additional Deduction for First-Time Home Buyers

Section 80EE – Additional Deduction on Interest for First-Time Buyers

• Maximum Deduction: Up to ₹50,000 per year
• Eligibility:
  • The home loan must be sanctioned by a financial institution.
  • The loan amount must be ₹35 lakh or less.
  • The value of the property must not exceed ₹50 lakh.
  • The borrower should not own any other residential property at the time of loan sanction.

Section 80EEA – Extended Deduction for Affordable Housing

• Maximum Deduction: Up to ₹1.5 lakh per year
• Eligibility:
  • The loan must be sanctioned between 1st April 2019 and 31st March 2025 (extended under Budget 2024).
  • The stamp duty value of the house should be up to ₹45 lakh.
  • The borrower should not own any other house at the time of loan sanction.
  • This benefit is over and above Section 24(b), meaning borrowers can claim up to ₹3.5 lakh (₹2 lakh + ₹1.5 lakh) in interest deductions.

4. Joint Home Loans – Double Tax Benefits

If a home loan is taken jointly (e.g., husband and wife, siblings, or parents and children), each co-borrower can claim tax benefits separately.

• Section 80C: Each borrower can claim ₹1.5 lakh for principal repayment.
• Section 24(b): Each borrower can claim ₹2 lakh for interest paid.

Condition: Both co-borrowers must be co-owners of the property and co-applicants of the loan.

5. Tax Benefits on Under-Construction Properties

If the home is under construction, you cannot claim tax benefits under Section 80C for principal repayment.

However, interest paid during construction can be claimed in 5 equal installments after the completion of the property under Section 24(b) (subject to the ₹2 lakh limit).

6. Tax Benefits on Home Loan Balance Transfer & Top-Up Loans

• If you transfer your home loan to another bank or lender for a lower interest rate, your tax benefits remain unchanged.
• Top-up loans (extra loan amount on an existing home loan) are eligible for tax deductions if the amount is used for home construction, repair, or renovation.

7. Tax Benefits on Second Home Loan

• If you take a second home loan, tax benefits under Section 80C & 24(b) apply, but:
  • For self-occupied second homes, the interest deduction remains ₹2 lakh.
  • For rented or let-out properties, the full interest paid can be deducted.
  • However, from 2020 onwards, the loss from house property (excess interest paid over rental income) can be set off only up to ₹2 lakh per year, with the rest carried forward for up to 8 years.

Example Calculation of Tax Savings

This means if your income is taxed at 30%, you can save ₹1.5 lakh in taxes annually.

Conclusion

In 2025, home loan borrowers in India can avail multiple tax benefits, reducing their overall tax liability significantly. By strategically planning your home loan and taking advantage of deductions under Sections 80C, 24(b), 80EE, and 80EEA, you can maximize your savings.

If you’re planning to take a home loan, ensure you structure it properly (like opting for a joint loan or affordable housing schemes) to maximize tax benefits.

Contact Your Chartered Accountant for Best planning or Tax Consultant expert, For Getting home loan, Call us 88886249998.