Section 24(b), 80C, 80EEA — the three deductions
Indian home-loan tax benefits stack only under the old tax regime:
| Section | What’s deductible | Cap (self-occupied) | Cap (let-out) |
|---|---|---|---|
| 24(b) | Annual interest paid | ₹2,00,000 | No cap |
| 80C | Annual principal repaid | ₹1,50,000 (shared with PF, PPF, ELSS, life-insurance premium, etc.) | Same |
| 80EEA | Additional interest, first-time buyers | ₹1,50,000 (over and above 24(b)) | N/A |
80EEA eligibility window: the loan must have been sanctioned between 1 April 2019 and 31 March 2022, and the property’s stamp value must be ≤ ₹45 lakh. Loans sanctioned outside this window are NOT eligible.
How it’s calculated (year-by-year)
For year N:
annual_interest = sum of interest portion across months 12(N-1)+1 through 12N
annual_principal = sum of principal portion across same months
s24b = min(annual_interest, ₹2L if self-occupied else ∞)
s80C = min(annual_principal, ₹1.5L)
s80EEA = min(annual_interest - s24b, ₹1.5L) if first-time buyer & self-occupied else 0
total_deduction = s24b + s80C + s80EEA
tax_saved = total_deduction × marginal_slab_%
Worked example — year 1 of ₹50L home loan at 8.5% over 20 years, 30% slab
- Year-1 interest paid ≈ ₹4,21,000 → Section 24(b) capped at ₹2,00,000
- Year-1 principal paid ≈ ₹99,511 → Section 80C uses ₹99,511 (under cap)
- Total deduction = ₹2,99,511
- Tax saved at 30% slab = ₹89,853 / year
Why the benefit decreases over the loan tenure
Reducing-balance amortisation means early years are interest-heavy and late years are principal-heavy. As the years progress, Section 24(b) becomes non-binding (annual interest drops below the ₹2L cap) and the tax saving from 24(b) shrinks materially. By year 18 of a 20-year loan, 24(b) deduction may be only ~₹50K instead of the full ₹2L.
Old vs new regime — quick decision rule
If your old-regime tax (post-deductions including home loan, 80C, etc.) is lower than your new-regime tax (post-standard-deduction at the lower headline rates), stay in the old regime. Most home-loan borrowers in 20%+ slabs benefit from the old regime; double-check via the IT Department’s official calculator.
Taking the deduction to your tax return
Once you have the Section 24(b) + 80C + 80EEA deduction figures from this calculator, the next step is computing your actual tax liability. Plug the combined deduction into the Income Tax Calculator under the relevant sections to see the final tax after all deductions — including standard deduction, 80D health insurance, and any other applicable items.
If you are deciding whether the old regime remains worth it, the Old vs New Tax Regime Calculator runs both regimes side by side, factoring in whether your home loan deductions tip the balance. For most borrowers in the 20%+ slab with a meaningful outstanding principal, the old regime still wins — but the regime choice shifts as the loan matures and the interest component shrinks.