Tax Return Filing 2026: No Change in Home Loan Tax Benefit Of ₹2 Lakh Since April 1999

Key takeaways 

• In Budget 2026, the deduction limit of Section 24(b) on home loan interest remains capped at ₹2 lakh for AY 2026-27, with ITR-1 and ITR-2 filings due by July 31, 2026.
• It has been frozen since April 1999 despite property prices in Delhi and Mumbai having doubled in the last ten years.

What are Home Loan Tax Benefits in this ITR Filing Season?

CBDT released all ITR forms for AY 2026-27 on March 30, 2026. Individuals whose tax is deducted through salary need to file ITR-1 or ITR-2 by July 31, 2026. As per Section 24(b), the home loan interest tax benefit of ₹2 lakh has remained the same since it was introduced by the Income Tax Act in 1999. Section 80C provides another benefit of ₹1.5 lakh on home loan principal repayment, unchanged from 2014.

This implies that the limit has not increased with EMI costs for most individuals. As per analysis of Canara HSBC Life in its Budget 2026 report, the prices of properties in Mumbai, Bengaluru and Delhi have doubled or even tripled in the last decade. An individual who pays ₹3.5 lakh per year on interest can claim only a deduction of ₹2 lakh. The other ₹1.5 lakh will not be taxed in case the property is not rented out.

How helpful is the ₹2 lakh limit in 2026 for homebuyers?

This question is academic now for 72% of taxpayers who switched to the new tax regime in AY 2024-25, as per data by Bajaj Finserv.

The new regime blocks Section 24(b) entirely for self-occupied homes. Only interest on rented properties can be set off, and only against actual rental income, not salary.

Out of 1 lakh housing-related queries on LoansJagat.com, borrowers repeatedly ask why their EMI outgo does not match their tax savings. Housing loans account for 52% of total household debt in India, per the RBI’s Household Finance Committee Report dated September 26, 2017. That share explains why any freeze in deduction limits directly hits a large section of middle-class households, especially first-time buyers in metro cities.

What do Tax Advisors recommend?

According to The Economic Times of December 6, 2024, tax advisors have recommended comparing the two regimes annually prior to making returns. According to the April 2026 report of Bajaj Finserv, “It is advisable for borrowers to switch to the old regime only when their deductions, including 80C, 24(b), and 80D, exceed ₹4.5 lakh.” Below that threshold, the new regime's ₹75,000 standard deduction often works out better.

The solution experts recommend is simple. Salaried non-business taxpayers can switch regimes directly in the ITR every year before the July 31, 2026 deadline. The Income Tax Department’s e-filing portal offers a built-in regime comparison tool. Homebuyers with loans above ₹40 lakh should run both calculations before submitting Form 16 data.

Conclusion

The ₹2 lakh home loan interest cap under Section 24(b) has not moved since 1999, even as EMIs and property prices climbed sharply across Indian cities. Given the July 31, 2026 ITR filing deadline, the taxpayer should make a comparison of regimes rather than presume that their old-regime deductions will continue to yield the same benefit that they used to yield.

FAQs

Is the interest deduction of Section 24(b) going to be increased beyond ₹2 lakhs for AY 2026-27 as per Budget 2026?

No. As per Budget 2026, there is no increase in the interest deduction of Section 24(b) for AY 2026-27 under the old regime. 

What can I do if the tax department wrongly processes my home loan deduction?

Log in to incometax.gov.in and check your intimation under Section 143(1). If the ₹2 lakh interest was missed, submit a rectification request within the return's assessment year, attaching your lender's interest certificate as proof. 

Read Also