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Home loan application and tax benefits (interest and principal)

  • A home loan can cut your tax through interest and principal deductions, but only if ownership, co-borrowers, completion dates and the tax regime are set up right.
  • Deadline: Before applying for the loan (to plan ownership and co-borrowers) and each year before filing the return
  • Done in 3 working days after loan and property details
  • Prepared by your Savvy, checked by a CA
  1. Loan sanction letter
  2. Who will own the house and who will be on the loan?
  3. Loan readiness check
  4. Borrowing and ownership plan with tax saving estimate
The law and the stepsPay and start · ₹1,999One time, with a yearly claim in the return, + 18% GST

Answer in brief

A home loan can cut your tax through interest and principal deductions, but only if ownership, co-borrowers, completion dates and the tax regime are set up right. We check your loan readiness, plan who should borrow and own, and compute the deduction each year so it matches the lender's certificate.

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From the official sources

What the law says, and what trips people up

From the official portal's manuals and FAQs, with the source for each point.

The law

  • Income-tax Act 1961, Sec 24(b) (now Sec 22(1)(b); applies up to tax year 2025-26)

    Interest on capital borrowed to buy, build, repair or renew a house is deductible; for self-occupied property capped at ₹2,00,000 if borrowed on or after 1 April 1999 and construction or purchase completed within five years from the end of the year of borrowing, otherwise ₹30,000; lender's certificate neededSource

  • Income-tax Act 1961, Sec 24(b) (now Sec 22(1)(b)), pre-construction interest

    Interest for the period before purchase or construction is allowed in five equal instalments from the year of completion, within the same ₹2,00,000 overall cap for self-occupied propertySource

  • Income-tax Act 2025, Sec 22(1)(b), 22(1)(c), 22(2) and 22(5) (from 1 April 2026)

    Same rules carried over: interest deduction, five equal instalments for pre-construction interest, ₹2,00,000 cap for self-occupied property (Sec 21(6) property) with lender's certificate, ₹30,000 otherwiseSource

  • Income-tax Act 1961, Sec 80C; Income-tax Act 2025, Sec 123

    Principal repayment counts within the ₹1,50,000 limit shared with other eligible itemsSource

  • Income-tax Act 1961, Sec 80EE and 80EEA; Income-tax Act 2025, Sec 130 and 131

    Extra interest deductions of ₹50,000 and ₹1,50,000 for specified first-home loans; both cannot be claimed togetherSource

  • New tax regime (default)

    No principal deduction and no interest deduction for self-occupied property; interest on let-out property is still deductibleSource

  • Government fee

    No government fee for the tax claim. Loan processing fee is set by the lender; stamp duty and registration on the property and mortgage are state charges (see PRP segment).

On the portal

  1. Download the interest certificate from the lender's portal
  2. Salaried: declare the home loan in the employer's investment declaration so TDS is lower
  3. Log in to incometax.gov.in and file the return under the old regime if claiming
  4. Enter the property details and interest in the house property schedule
  5. Enter the principal repaid in the deduction schedule (80C for FY 2025-26; Sec 123 from tax year 2026-27)
  6. Verify the return and keep the certificate and statement for records

What trips people up

  • Claiming home loan benefits while in the new regime

    Opt for the old regime if the claim is worth more; otherwise only let-out interest is allowedSource

  • Pre-construction interest claimed during construction

    Claim only from the completion year in five equal partsSource

  • Interest certificate missing or figures do not match the claim

    Use the lender's final certificate and match loan, interest and property detailsSource

  • Co-borrower who is not a co-owner claims the deduction

    Only owners can claim; plan ownership before the loanSource

  • Brokerage or agent commission added to interest

    Not deductible; remove from the claimSource

  • Construction not completed within 5 years, so cap falls to ₹30,000

    Track possession date and plan claims accordinglySource

People ask

How much interest can I claim on my own home?

Up to ₹2,00,000 a year in the old regime if the loan meets the conditions; otherwise ₹30,000.Source

Can my wife and I both claim?

Yes, if both are co-owners and co-borrowers and both use the old regime; each claims their own share within the limits.Source

I pay EMIs but possession is next year. Is the interest lost?

No. Interest before completion is claimed in five equal instalments from the completion year.Source

Does the new Income-tax Act 2025 change the limits?

No. The ₹2,00,000 cap and five-instalment rule move to Sec 22 of the 2025 Act from 1 April 2026.Source

Can I claim both 80EE and 80EEA?

No, only one of them.Source

Is interest on a rented house limited to ₹2 lakh?

The interest itself is not capped for a let-out house, but the loss that can be set off against other income is limited.Source

IDFD

How we solve it: 4 steps

Every line tracked live.

Step 1 of 4 · What we need from you

Tap each one you already have

Ready0 / 8
  • Loan sanction letter
  • Lender's interest certificate for the year
  • Repayment statement or receipts
  • Sale deed or allotment letter
  • Possession or completion date
  • Co-owner and co-borrower sharesOptional
  • Rent agreement, if let outOptional
  • Chosen tax regime

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₹1,999

₹1,999 + ₹359.82 GST = ₹2,358.82

One time, with a yearly claim in the return. Delivered in 3 working days after loan and property details. Due: Before applying for the loan (to plan ownership and co-borrowers) and each year before filing the return

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