Most home loan borrowers in Tamil Nadu are leaving real money on the table every year. They service their EMIs faithfully but never claim the full tax deductions they're entitled to. In 2026, with home loan interest rates still hovering between 8.5% and 9.25% across lenders like SBI, HDFC, and ICICI Bank, getting your tax claims right is just as important as getting a good rate.
Here's the short version: a ₹50 lakh home loan at 9% over 20 years generates roughly ₹4.5 lakh in interest in year one alone. Under Section 24(b), you can claim up to ₹2 lakh of that interest as a deduction. Add another ₹1.5 lakh on principal repayment under Section 80C. That's ₹3.5 lakh knocked off your taxable income — every single year.
What Section 24(b) Actually Covers — and What It Doesn't
Section 24(b) of the Income Tax Act allows you to deduct interest paid on a home loan, up to ₹2 lakh per financial year, for a self-occupied property. If you've rented the property out, there's no upper cap — you can claim the full interest amount, though any net loss from house property is capped at ₹2 lakh set-off against other income.
Here's what most applicants miss: the property must be fully constructed. If you've taken a home loan for an under construction property, the interest paid during the construction period is pooled into what's called Pre-EMI interest. You can claim this in five equal instalments starting from the year possession is handed over. Not from the year you started paying EMIs. Miss this and you lose those deductions permanently.
The ₹2 lakh limit applies per borrower. If it's a joint home loan — say you and your spouse are co-borrowers — each of you can independently claim up to ₹2 lakh under Section 24(b), provided both are co-owners of the property. That effectively doubles the benefit to ₹4 lakh on interest alone.
Section 80C: Principal Repayment and the Other Deductions
Section 80C gives you a ₹1.5 lakh deduction on the principal portion of your home loan EMI. This sits inside the same ₹1.5 lakh 80C bucket that includes PPF, ELSS, life insurance premiums, and EPF contributions. So if you're already maxing 80C with other instruments, your home loan principal repayment won't give you additional room — but it should still be claimed, because it might be replacing something you'd otherwise pay for.
Stamp duty and registration fees paid for the property are also deductible under 80C in the year you pay them. On a ₹60 lakh property in Tamil Nadu, that's typically ₹4–5 lakh in registration costs — claim it the year you register, not later.
Use our home loan affordability calculator to understand how your EMI breaks down between principal and interest each year. The interest component is highest in early years — which is exactly when your Section 24 deduction matters most.
New Tax Regime vs Old Regime: Which Works Better for Home Loan Borrowers?
This is the question that trips up most salaried borrowers in 2026. The new tax regime offers lower slab rates but removes almost all deductions — including Section 24(b) and 80C. The old regime lets you claim everything but applies higher rates.
Let me be direct: if your home loan interest alone is ₹2 lakh or more per year, most people in the ₹10–20 lakh income bracket are still better off with the old regime. Run the numbers with your CA before filing. The National Housing Bank periodically publishes housing finance guidance that's worth checking for policy updates that affect these calculations.
If you're considering a loan balance transfer guide to reduce your interest rate, remember that moving to a new lender resets nothing on the tax side — you continue claiming on the same property. But your interest-to-principal ratio changes, so your Section 24 deduction in the first year with the new lender might be slightly different.
Documents You Need to Claim These Deductions
Your employer or your ITR filing needs specific proof. Get these from your lender every April:
- Home loan interest certificate for the financial year
- Principal repayment statement
- Possession certificate or OC (for completed properties)
- Co-borrower details if claiming jointly
Check our loan document checklist for a full breakdown of what to collect at each stage of your loan journey. Keep the original sale deed, registration receipt, and all EMI payment records — the IT department has been tightening scrutiny on housing deductions in recent assessment years.
Frequently Asked Questions
Can I claim Section 24 deduction on a second home loan?
Yes. If the second property is rented out, you can claim the full interest without the ₹2 lakh cap. If it's treated as self-occupied (you can only declare two properties as self-occupied now), the ₹2 lakh limit applies. The net loss from house property, however, is capped at ₹2 lakh set-off against salary income.
What happens if my under construction property is still not handed over after 5 years?
The ₹2 lakh cap under Section 24(b) drops to just ₹30,000 if possession isn't received within 5 years from the end of the financial year in which the loan was taken. This is a costly trap many buyers in delayed projects fall into — factor construction timelines into your property decision, not just price.
My spouse and I have a joint home loan. Do we both file separately for deductions?
Yes — each co-borrower who is also a co-owner files their own ITR and claims their share of the deduction independently. Both can claim up to ₹2 lakh under Section 24(b) and up to ₹1.5 lakh under Section 80C on the principal, subject to actual repayment amounts. Make sure ownership proportions are clearly stated in the sale deed.
If you're planning to take a new home loan or want to check whether your existing loan structure is tax-optimised, our team at Guhan Capitals works with borrowers across Pollachi and Udumalpet every day on exactly this. Use our loan eligibility calculator to see where you stand, then apply for a loan with us and we'll help you structure it right from day one.