How to maximize your home loan tax benefits in FY 2024–25: Here's what you can claim

Understanding Home Loan Tax Benefits in FY 2024–25

With the financial year 2024–25 underway, homeowners and prospective borrowers are looking for smart ways to reduce their tax liability. A home loan not only helps in fulfilling the dream of owning a house but also offers substantial tax savings. Under the Income Tax Act, several provisions allow deductions on principal and interest repayments. However, to leverage these benefits optimally, taxpayers must understand the rules, limits, and strategic ways to claim them.

Key Tax Benefits on Home Loans

1. Deduction on Interest Payment (Section 24(b))

Under Section 24(b) of the Income Tax Act, individuals can claim a deduction of up to ₹2 lakh on the interest paid on home loans for a self-occupied property. In the case of a let-out property, there is no cap on the interest deduction, although the overall loss that can be claimed under the ‘Income from House Property’ head is restricted to ₹2 lakh per annum.

Eligibility:

• Loan must be taken for purchase or construction of a residential property.

• Construction must be completed within 5 years from the end of the financial year in which the loan was taken.

2. Deduction on Principal Repayment (Section 80C)

The principal component of home loan repayment is eligible for deduction under Section 80C, up to a maximum limit of ₹1.5 lakh per year. This includes other investments like PF, ELSS, PPF, etc.

Note: The benefit is available only if the property is not sold within 5 years from the end of the financial year in which possession is taken. Otherwise, the deduction claimed will be reversed.

3. Additional Deduction under Section 80EE & 80EEA

• Section 80EE: First-time homebuyers can claim an additional deduction of ₹50,000 on interest, provided the loan amount is less than ₹35 lakh and the property value does not exceed ₹50 lakh. The loan must have been sanctioned between April 1, 2016, and March 31, 2017.

• Section 80EEA (available until FY 2023–24, not extended in Budget 2024): Allowed an additional deduction of ₹1.5 lakh for home loans sanctioned between April 1, 2019, and March 31, 2022, for affordable housing. Since the sunset clause hasn’t been extended, this deduction is no longer available from FY 2024–25.

New Tax Regime vs Old Tax Regime: Choose Wisely

Under the new tax regime, most exemptions and deductions—including home loan benefits—are not available. As per Budget 2023, the new regime is now the default option, but taxpayers can still opt for the old regime if they wish to claim deductions.

Tax Consultant Insight:

“For individuals with home loans, especially those with significant interest or principal payments, sticking to the old regime is generally more beneficial,” says Naveen Bhardwaj, Chartered Accountant at InvestoEdge. “Before filing, compute your tax under both regimes and choose the one that offers higher savings.”

Joint Home Loans: Double the Benefits

If a home loan is taken jointly (say, by a couple), each co-borrower who is also a co-owner of the property can claim:

• Up to ₹2 lakh on interest (Section 24)

• Up to ₹1.5 lakh on principal (Section 80C)

This essentially doubles the tax benefit, provided both borrowers have independent income sources.

Under-Construction Property: Tread Cautiously

Interest paid during the construction phase is not deductible immediately. However, it can be claimed in five equal instalments post-completion (from the year the construction ends), along with the regular interest of that year.

Market Context: Interest Rates and Real Estate Trends

As of July 2025, home loan interest rates hover between 8.35% to 9.15%, depending on the lender and credit profile of the borrower. With inflation showing signs of moderation and the Reserve Bank of India maintaining a cautious monetary stance, rates are expected to remain stable in the near term.

Meanwhile, real estate demand remains robust, especially in Tier 1 and Tier 2 cities, driven by a growing salaried middle class and increased urban migration. Government-backed schemes like PMAY (Pradhan Mantri Awas Yojana) have also enhanced housing affordability.

Strategic Tips to Maximize Home Loan Tax Benefits

1. Prepay Smartly: If you receive a bonus or lump sum, consider prepaying the home loan partially to reduce interest outgo.

2. Joint Ownership: If possible, co-own the property with a spouse or parent to maximize deductions.

3. Declare in Time: Submit the loan certificate and other details to your employer at the start of the financial year.

4. Choose the Right Regime: If your total deductions (home loan + other investments) exceed the new regime’s benefit, opt for the old regime.

Investor Outlook

Owning a home continues to be a favored investment for Indian households, not only for emotional security but also for tax planning. The discontinuation of 80EEA deductions signals a narrowing scope for tax incentives in the affordable housing segment, pushing buyers to maximize what's still available under the old regime.

Shalini Rao, a tax advisor at Mumbai-based FinTax Consultants, summarizes:

“FY 2024–25 is a transition year. Taxpayers need to be vigilant. Home loan benefits are still potent—but only if used correctly and timely.”

Maximizing home loan tax benefits in FY 2024–25 is about timing, awareness, and strategic decision-making. With multiple provisions still active under the old tax regime, homeowners can significantly reduce their tax outgo. However, the shift towards a simplified new regime means these benefits may not last forever. As always, consult a tax professional to make the most informed choice.