Key idea
A home loan splits into two parts for tax: the principal you repay, and the interest you pay. Each has its own section and its own limit.
A home loan is one of the largest tax-relevant commitments a salaried person takes on. Its EMI has two components, and the tax system treats them separately (largely under the old regime).
Two parts, two sections
| EMI part | Section | Deduction up to |
|---|---|---|
| Principal repaid | 80C | ₹1,50,000 (shared 80C cap) |
| Interest paid | 24(b) | ₹2,00,000 (self-occupied) |
The principal you repay counts inside the ₹1.5 lakh 80C ceiling (competing with your other 80C options). The interest is deducted separately under Section 24(b), up to ₹2 lakh a year for a home you live in. Together they can shelter a meaningful slice of income.
The nuance worth knowing
In the early years, most of your EMI is interest, so the 24(b) benefit is largest exactly when the loan is youngest. For a let-out (rented) property the interest rules differ. And these benefits mostly live in the old regime, which feeds directly back into the regime choice.
A home loan can tilt the regime decision toward old, because a large interest deduction is one of the few things big enough to cross the break-even. Figures for FY 2026-27. The Budget can change them each year, so confirm the current year.
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