Home Loan Tax Benefit Calculator
What your home loan actually saves you in tax under Section 24(b) and 80C — and why the answer is zero on the new regime (FY 2025-26 (AY 2026-27)).
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A home loan's headline rate is not what it costs you if you are claiming the deductions. Under the old regime, tax relief can knock well over a percentage point off the effective rate — and under the new regime it knocks off nothing at all.
Year one on a ₹40 lakh loan
₹40,00,000 at 8.75% over 20 years, taxpayer at the 30% slab, old regime:
| Interest paid in year 1 | ₹3,46,952 |
| Principal repaid in year 1 | ₹77,230 |
| Claimable under Section 24(b) — capped at ₹2,00,000 | ₹2,00,000 |
| Claimable under 80C — the principal | ₹77,230 |
| Tax saved this year | ₹83,169 |
| Effective interest rate after tax | 7.24% |
The same loan on the new regime saves ₹0, and the effective rate stays 8.75%.
Two separate deductions, two separate caps
Section 24(b) covers the interest, capped at ₹2,00,000 a year for a self-occupied property. Notice that year-one interest of ₹3,46,952 is well above the cap — so a large loan hits the ceiling immediately and the extra interest earns no relief.
Section 80C covers the principal, within the shared ₹1,50,000 limit. Shared is the operative word: EPF, ELSS, life insurance premiums, children's tuition fees and PPF all compete for the same ₹1,50,000. If your EPF alone is ₹1,20,000, only ₹30,000 of home loan principal actually earns anything.
The deduction shrinks every year
Early EMIs are almost entirely interest, so the Section 24(b) benefit is at its maximum in the first years and falls away later — while the 80C principal component rises. On a ₹40 lakh loan the interest crosses below the ₹2,00,000 cap somewhere in the second decade, and the tax benefit declines from there.
This matters for the prepay-or-invest decision. The tax argument for keeping the loan is strongest at the start and weakest at the end, which is the opposite of most people's intuition.
Let-out property works differently
The ₹2,00,000 cap applies to a self-occupied property. For a let-out property, the full interest is deductible against rental income — but the net loss you can set off against other heads of income is restricted to ₹2,00,000 a year, with the balance carried forward for up to eight years.
The new regime removes all of it
No Section 24(b) on a self-occupied property, no 80C. If you are on the new regime, your home loan costs exactly its stated rate.
This is worth running properly rather than assuming. For someone with a large home loan and a substantial HRA claim, the deductions can be enough to push the old regime past its break-even — see the old vs new regime calculator, which computes the exact deduction figure at which the two are equal.
Home Loan Tax — frequently asked questions
How much tax does a home loan actually save?
On a ₹40,00,000 loan at 8.75% over 20 years for a 30%-slab taxpayer on the old regime, year one saves ₹83,169 — from ₹2,00,000 of interest under Section 24(b) plus ₹77,230 of principal under 80C. That brings the effective interest rate down from 8.75% to about 7.24%. On the new regime the saving is zero.
What is the limit on home loan interest deduction?
₹2,00,000 a year under Section 24(b) for a self-occupied property. On a ₹40 lakh loan, first-year interest is around ₹3,46,952 — comfortably above the cap — so a large loan hits the ceiling immediately and the excess interest earns no relief at all.
Does the principal repayment count under 80C?
Yes, but within the shared ₹1,50,000 limit, and "shared" is the point. EPF, ELSS, PPF, life insurance premiums and children’s tuition fees all draw on the same ₹1,50,000. If your EPF contribution alone is ₹1,20,000, only ₹30,000 of home loan principal actually produces any additional benefit.
Why does my home loan tax benefit fall every year?
Because early EMIs are almost entirely interest and later ones almost entirely principal. The Section 24(b) benefit is at its maximum in the first years and declines once annual interest drops below the ₹2,00,000 cap — somewhere in the second decade on a ₹40 lakh loan. The tax case for keeping the loan is therefore strongest at the start, not the end.
Are the rules different for a rented-out property?
Yes. The ₹2,00,000 cap applies to a self-occupied property. For a let-out property the entire interest is deductible against rental income, but the net loss you can set off against other income heads is limited to ₹2,00,000 a year, with the remainder carried forward for up to eight years.
Do home loan deductions work in the new tax regime?
No. Neither Section 24(b) on a self-occupied property nor 80C survives the new regime, so your loan costs exactly its stated rate. For someone with a large loan and a substantial HRA claim, those lost deductions are often the main reason the old regime still wins — worth computing rather than assuming.
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Results from this calculator are estimates for informational use only — not financial, medical, or professional advice. Read our full disclaimer before acting on any number you see here.