Home Loan Tax Deductions Explained Simply: How Sections 80C and 24(b) Help Indian Borrowers

Buying a home remains the biggest non-refundable financial commitment for most Indian families, particularly salaried individuals in lower and middle-income groups. 

With long repayment tenures and rising EMIs, tax planning has become essential. The Income Tax Act, 1961 provides home loan tax benefits under Section 80C and Section 24(b) to ease this burden. However, awareness gaps persist. 

As reported by NewsXL in its December 2024 personal finance coverage, confusion around home loan deductions continues to result in underutilisation of available tax reliefs.

How Sections 80C and 24(b Reduce the Tax Burden

Home loan-related tax relief is divided into two components: principal repayment and interest payment. Under Section 80C, taxpayers can claim a deduction of up to ₹1.5 lakh per financial year on the principal portion of a home loan, including stamp duty and registration charges, provided the property is not sold within five years of possession. Section 24(b) allows a deduction of up to ₹2 lakh per year on interest paid for a self-occupied residential property.

The relevance of these deductions is highlighted by borrowing data. According to the Reserve Bank of India Household Finance Committee Report, released on September 26, 2017 (RBI/2017-18/15), housing loans account for 52 percent of total household debt in India. The report can be accessed on the RBI website here:

This high dependence on housing credit explains why home loan tax benefits play a crucial role in household financial stability.

Financial platform LoansJagat, in a December explainer, noted that many borrowers miss deductions due to confusion between the old and new tax regimes. As clarified by the Income Tax Department on April 1, 2024, deductions under Sections 80C and 24(b) are available only under the old tax regime:

Income Tax Deductions on Home Loans

Earlier Policy Developments and Market Trends

To promote homeownership, the government had earlier expanded housing incentives. Budget 2019 introduced Section 80EEA, allowing an additional ₹1.5 lakh deduction on interest for affordable housing loans. However, the Ministry of Finance confirmed through a circular dated February 1, 2022, that this benefit expired on March 31, 2022:

Interest rate movements have also shaped borrower behaviour. The RBI Monetary Policy Statement dated December 8, 2023, confirmed that the repo rate was maintained at 6.50 percent:

Meanwhile, RBI’s Monthly Bulletin released on November 21, 2024, showed housing credit growth at 37.8 percent year-on-year, reflecting sustained demand despite higher EMIs:

Experts quoted by NewsXL noted that higher interest outgo has increased the importance of deductions under Section 24(b).

Table 2: Key RBI Housing Loan Indicators

What Stakeholders Are Saying

Tax experts quoted by The Economic Times on December 6, 2024, advised taxpayers to review the old versus new tax regime annually before filing returns:

Banks such as SBI and HDFC also reiterated in December advisories that interest certificates and possession proof are mandatory to claim deductions correctly, an issue frequently highlighted by NewsXL.

Conclusion

With housing loans forming a significant share of household debt, understanding Sections 80C and 24(b is essential. When applied correctly, home loan tax benefits can meaningfully reduce annual tax liability for Indian homeowners.
 

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LoansJagat Team

‘Simplify Finance for Everyone.’ This is the common goal of our team, as we try to explain any topic with relatable examples. From personal to business finance, managing EMIs to becoming debt-free, we do extensive research on each and every parameter, so you don’t have to. Scroll up and have a look at what 15+ years of experience in the BFSI sector looks like.