Latest Income Tax Benefits on Home Loan Interest & Principal Repayment in 2025
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- by MI September 24, 2025
Owning your own home is a dream many work towards—and the government encourages this by offering significant tax benefits on home loans. In 2025, updated rules continue to allow deductions both for the interest component and the principal portion of your home loan. This blog explains the **latest income tax benefits** available for home loan holders, how to claim them, examples, and tips to maximize your tax savings.
1. Deduction on Interest Payments: Section 24(b)
Section 24(b) allows you to deduct the interest paid on a home loan taken for purchase or construction of a residential property. Key benefits in 2025 include:
- Self-occupied property: Deduction up to ₹2,00,000 per year on interest.
- Let-out / rented property: Entire interest paid is deductible (no upper limit), subject to loss from house property rules (loss capped at ₹2,00,000 set off against other income).
- Pre-construction interest: Interest paid before possession can be claimed in five equal installments starting the year of possession.
- Construction timeline: Construction or renovation must be completed within 5 years from the end of the FY in which loan was taken.
2. Deduction on Principal Repayment: Section 80C
The principal repayment component of your home loan qualifies under Section 80C (among other investments) subject to the overall cap of ₹1,50,000 per year.
- Includes repayment toward principal of the home loan, stamp duty, registration charges (in certain cases).
- Benefit is available whether the property is self-occupied or rented.
- Remember: you cannot claim principal + interest beyond permitted limits in a way that violates overall deduction caps.
3. Combined Impact — Example
| Component | Amount (₹) |
|---|---|
| Interest Paid (self-occupied) | ₹1,80,000 |
| Principal Repaid | ₹1,20,000 |
| Deduction Allowed (Interest under 24b + Principal under 80C) | ₹2,00,000 + ₹1,20,000 = ₹3,20,000 |
4. Old vs New Tax Regime: Home Loan Benefits (2025)
One of the most common doubts is whether to choose the **Old Tax Regime** or **New Tax Regime** in 2025. Here’s a side-by-side comparison:
| Particulars | Old Regime | New Regime |
|---|---|---|
| Home Loan Interest Deduction (Section 24b) | Available up to ₹2,00,000 (self-occupied), full for rented | Not available |
| Principal Repayment (Section 80C) | Available up to ₹1,50,000 (within 80C limit) | Not available |
| Other Deductions (80D, 80G, etc.) | Available | Mostly Not available |
| Tax Rates | Higher rates but deductions allowed | Lower rates, but no deductions/exemptions |
| Best For | People with high home loan + deductions | People with fewer deductions |
5. First-Time Home Buyer Schemes & Additional Benefits
While earlier there were additional sections like 80EE and 80EEA for first-time homebuyers, their continuation depends on the Finance Act and annual budget notifications. For 2025, verify whether such schemes are extended before relying on them.
6. How to Claim These Deductions
- Obtain home loan interest certificate and principal payment document from your lender.
- Submit to employer (if salaried) or retain for ITR filing.
- Fill in the “Income from House Property” and “Deduction under Chapter VI-A” sections in the ITR form.
- Reconcile with Form 26AS and supporting bank statements.
Conclusion
In 2025, the home loan interest deduction (up to ₹2,00,000) under Section 24(b) and principal repayment deduction under Section 80C continue to offer strong incentives for homeowners—but only under the Old Tax Regime. If you have significant home loan repayments, the Old Regime may save you more tax. If not, the New Regime with lower tax rates could be better. Evaluate your loan amount, repayment schedule, and deductions to make the best choice.
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