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PILLAR GUIDE VERIFIED

House Property & Home Loan Tax Guide.

Whether you live in your own home, rent it out, or hold multiple properties — the tax treatment differs dramatically. Here's the complete rulebook for FY 2026-27 under the Income Tax Act, 2025.

01

Self-Occupied Property

A self-occupied property is one where you or your family reside. The tax treatment is straightforward — and generous under the Old Regime.

GROSS ANNUAL VALUE
NIL

No rental income is computed. GAV is zero for self-occupied property.

24(b) INTEREST CAP
₹2,00,000

Maximum deduction on home loan interest per year. Old Regime only.

Loss set-off: If your 24(b) interest deduction exceeds other income under House Property, the loss can be set off against other heads of income — but capped at ₹2,00,000 per year. Any remaining loss is carried forward for up to 8 assessment years.

KEY RULE

Self-occupied property means: (1) you live in it, (2) your spouse/children/parents live in it, or (3) it is vacant — but you own no more than 2 residential properties. If you own more than 2, the additional ones are deemed let-out.

02

Let-Out Property

If you rent out your property, the Gross Annual Value (GAV) is the higher of:

  • Municipal Value
  • Fair Rental Value
  • Actual Rent Received (capped at Standard Rent, if applicable)
SECTION 24(a)
30%

Standard deduction from GAV — no proof needed

SECTION 24(b)
No Cap

Full interest deductible — no ₹2L limit

NEW REGIME
Allowed

But loss ring-fenced within HP only

LOSS RING-FENCING (NEW REGIME)

Under the New Regime, 24(b) interest on let-out property is allowed — but any resulting loss under House Property can only be set off against income from other house properties. It cannot offset salary, business income, or capital gains.

03

Deemed Let-Out (>2 Properties)

If you own more than 2 residential properties, all properties beyond 2 are deemed to be let-out — even if they are actually vacant or self-occupied.

Deemed let-out properties are taxed on expected rent, which is the higher of municipal value or fair rental value. Actual rent received is irrelevant for deemed let-out properties.

Property Status 24(a) 30% 24(b) Interest
1st property Self-occupied or let-out check ₹2L cap (SOP) or no cap (LOP)
2nd property Self-occupied or let-out check ₹2L cap (SOP) or no cap (LOP)
3rd+ property Deemed Let-Out check No cap — both regimes
04

Pre-Construction Interest

Interest paid on a home loan before the construction is completed (or the property is acquired) is aggregated and deducted in 5 equal annual installments starting from the FY in which construction is completed.

This pre-construction interest is subject to the same caps as regular 24(b) interest:

Property Type Pre-Construction Deduction Regime
Self-Occupied Within ₹2L cap (combined with regular 24(b)) OLD ONLY
Let-Out No cap (combined with regular 24(b)) BOTH

EXAMPLE

If you took a loan in FY 2023-24 and construction completed in FY 2026-27, the interest paid from FY 2023-24 to FY 2025-26 is pre-construction interest. You can claim 1/5th of it each year from FY 2026-27 to FY 2030-31 — in addition to your regular 24(b) deduction.

05

Joint Home Loan

When two or more people take a home loan jointly, each co-owner can claim deductions independently — effectively doubling (or tripling) the tax benefit.

Each co-owner can claim:

Section 24(b)

Up to ₹2L interest per person (self-occupied, old regime) or no cap (let-out)

Section 80C

Principal repayment — part of ₹1.5L basket per person

But all three conditions must be met for each claimant:

check_circle Co-owner of property
check_circle Co-borrower of loan
check_circle EMI paid from own bank account
warning COMMON MISTAKE

Only the primary borrower claims the deduction. The spouse (co-owner but not co-borrower) gets zero benefit. Make sure both names appear on the loan application AND the property title.

06

Section 80C: Home Loan Principal

OLD REGIME ONLY

The principal repayment of your home loan qualifies for deduction under Section 80C — but it shares the ₹1,50,000 basket with other instruments:

80C Instrument Cap Old Regime New Regime
Home Loan Principal Within ₹1.5L check close
Stamp Duty + Registration Within ₹1.5L check close
PPF Within ₹1.5L check close
ELSS Within ₹1.5L check close

Stamp duty and registration charges also qualify for 80C — but only in the year of payment, not the year of possession.

07

Section 80EE: First-Time Buyer

OLD REGIME ONLY

Section 80EE provides an extra ₹50,000 deduction on home loan interest — over and above the ₹2L cap under 24(b). This is specifically for first-time buyers.

Criterion Requirement
Loan Sanctioned FY 2016-17 only
Loan Amount ₹35,00,000 or less
Property Value ₹50,00,000 or less
First-Time Buyer No other house property owned on date of sanction
Deduction ₹50,000
Over and Above 24(b) ₹2L cap

LIMITATION

80EE is only for loans sanctioned in FY 2016-17. If your loan was sanctioned after that, this section does not apply. Check Section 80EEA instead.

08

Section 80EEA: Affordable Housing

OLD REGIME ONLY

Section 80EEA provides an extra ₹1,50,000 deduction on home loan interest — over and above the ₹2L cap under 24(b). This is for affordable housing.

Criterion Requirement
Property Value ₹45,00,000 or less (stamp duty value)
Loan From Approved financial institution / housing finance company
Loan Sanctioned Between 1 Apr 2019 and 31 Mar 2022
First-Time Buyer No other house property owned at time of sanction
Deduction ₹1,50,000
Over and Above 24(b) ₹2L cap

MAXIMUM BENEFIT (SELF-OCCUPIED, OLD REGIME)

24(b) ₹2,00,000 + 80EEA ₹1,50,000 = ₹3,50,000 total interest deduction per year. Plus 80C principal up to ₹1,50,000.

09

New Regime Warning

warning OLD REGIME ONLY — READ THIS

The following deductions are NOT available under the New Regime:

  • Section 24(b) interest on self-occupied property (₹2L cap)
  • Section 80C principal repayment (₹1.5L basket)
  • Section 80EE first-time buyer (₹50K)
  • Section 80EEA affordable housing (₹1.5L)

What IS allowed in New Regime:

Deduction Old Regime New Regime
24(b) self-occupied ₹2L NOT ALLOWED
24(b) let-out No cap Allowed (loss ring-fenced)
80C principal ₹1.5L NOT ALLOWED
80EE ₹50K NOT ALLOWED
80EEA ₹1.5L NOT ALLOWED

ACTION ITEM

If you have a home loan, run the numbers under both regimes. The New Regime's higher standard deduction (₹75K vs ₹50K) may or may not compensate for losing 24(b), 80C, 80EE, and 80EEA. Use the Home Loan Tax Calculator to compare.

10

Worked Example: Joint Loan ₹40L in Bengaluru

calculate SCENARIO

Both spouses are co-owners and co-borrowers. Loan: ₹40,00,000. Property: self-occupied in Bengaluru. EMIs paid from individual bank accounts.

Deduction Per Person Both Together
24(b) Interest (self-occupied, old regime) ₹2,00,000 ₹4,00,000
80C Principal ₹1,50,000 ₹3,00,000
Total per Person ₹3,50,000 ₹7,00,000
OLD REGIME
Total Deduction₹7,00,000
Tax Saved (30% slab)₹2,10,000
NEW REGIME
24(b) Self-Occupied₹0
80C₹0
Total Deduction₹0