Can I claim tax benefits on an under-construction property?

Yes, a Home Loan borrower is eligible for tax subsidies, if their property is under-construction, with certain things to keep in mind: The property construction must be completed within 5 years of seeking the Home Loan amount Tax exemptions for an under-construction property is valid only on the interest component of the Home Loan Pre-construction interest paid during the time the property was under-construction can be claimed within 5 instalments after receiving possession

What is the maximum one can avail, as interest deduction?

Home Loan interest deductions are considered under Section 24B, with the following considerations: Up to Rs.2 Lakh for self-occupied properties No limit on claim, for rented residential properties* *Terms and conditions apply

How to Calculate Tax Benefits on Home Loan?

You can use an income tax calculator to calculate your maximum benefits on Home Loan. For example, Let’s say your annual income is 14,00,000. Your EMI is split into interest and principal – so accordingly, you shell out 4,80,000 as interest and 1,20,000 as principal amount in a year. This means, if according to your salary slab you are paying a tax of 2,32,500, then you can reclaim 96,000 from your tax as benefit.

Home Loan Tax Benefits (FY 2025-26)

Q: Can I claim tax benefits on two Home Loans?

Yes, you can. If your Home Loans meet all the required tax deduction norms, you are eligible to claim tax benefits for two simultaneous Home Loan repayments. However, note that both houses will be considered self-occupied, and cannot exceed the exemption limit under each category.

Q: Does Home Loan Top-Up offer Tax benefit?

You can avail a maximum deduction of Rs.30,000 on a Top-up Home Loan if you have receipts and documents proving that the Top-up Home Loan has been used for acquisition/ construction/repair/renovation of a residential property. The limit of Rs 30,000 is available for a self-occupied house only. In case repairs and renovations have been done on a let-out property, no deduction can be claimed.

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Home Loan Tax Benefits: Overview

Housing Loan Tax Benefits: Overview

Individuals can avail of various tax benefits on their Home Loans under the Income Tax Act, 2025. To save a significant amount of funds on your tax payments, it is important to understand the various exemptions available on a Home Loan under the old tax regime.

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Housing Loan Income Tax Exemptions 2026-27

You can claim tax exemptions on both the components of your Home Loan, namely the principal and the interest component. Here is the list of tax benefits homebuyers can claim under various provisions under the old tax regime:

1. Section 22 of the Income Tax Act: This section allows a deduction on the interest paid for a self-occupied property. Tax exemption of up to Rs.2 Lakh can be claimed.

2. Section 123 of the Income Tax Act: This section allows a deduction of up to Rs.1.5 Lakh on the principal repayment of the Home Loan.

3. Section 130 of the Income Tax Act: Under this section, first-time homebuyers can claim additional tax benefits of up to Rs.50,000 on the Home Loan interest component. However, one must not have any property in one's name at the time of sanctioning a Home Loan.

To sum up, you can avail of an exemption on your Home Loan principal and the interest payments under Section 123 and Section 22.

Home Loan Tax Benefits Under Different Sections in Tax Year 2026-27

The Home Loan tax benefits under the applicable sections of the Income Tax Act, 2025, are given below:

Deduction Applicable On	Income Tax Section	Maximum Deduction (in Rs.)/p.a.	Parameters
Home Loan Principal	123	1.5 Lakh	A residential property financed by a Home Loan cannot be sold within the first 5 years of possession.
Home Loan Interest	22	2 Lakh	The funds procured through a Home Loan must be used for the purchase or construction of a residential property. The construction must be completed within 5 years from the end of the tax year in which the loan amount was disbursed.
Home Loan Interest	130	50,000	The funds procured through a Home Loan cannot exceed Rs.35 Lakh, and the value of the property cannot exceed Rs.50 Lakh.
Stamp Duty Charges	123	1.5 Lakh	The stamp duty calculated on the property has to be claimed within the same year in which the expense was incurred.
Joint Home Loan Principal and Interest	123 and 22	1.5 Lakh and 2 Lakh (respectively)	The tax benefits on a Joint Home Loan can be availed by all, only if they are also the joint owners of the property. Alongside that, beneficiaries must also contribute toward the Home Loan repayment as a financial co-applicant. Note that tax benefits can be claimed only in the year in which the construction of the property has been completed.
Additional Home Loan Interest Deductions on Affordable Homes	131	1.5 Lakh	The Home Loan must be sanctioned between 1 April 2019 and 31 March 2022. The stamp duty value of the residential property should not exceed Rs.45 Lakh. The borrower must be a first-time homebuyer and should not be claiming benefits under Section 130. This deduction is available over and above the interest deduction allowed under Section 22.

Also Read: Know About Income Tax Slabs

Eligibility Criteria for Home Loan Tax Benefits_WC

Eligibility Criteria for Housing Loan Tax Benefits

Home Loan tax deduction is applicable for residents and NRI individuals. It is not applicable for HUF (Hindu United Families), AOP, a company, or any other kind of taxpayer who is not an individual.

Here are other eligibility criteria according to the respective sections:

Section	Criteria
Section 22	Home Loans should have been taken before 31 March 2022 The home must be constructed within 5 years of loan application
Section 123	The property must be fully constructed The property should not be sold within 5 years of completion Stamp duty should be claimed in the same year it was spent
Section 130	The loan amount should be up to Rs.35 Lakh or less The property value should be up to Rs.50 Lakh or less

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Tax Deductions on Interest Paid on Home Loan

Following are the ways in which you can save the income tax payable on your Home Loan interest payments every year:

Tax Benefits Under Section 22

The interest claimed under Section 22 can go up to Rs.2 Lakh for self-occupied properties
The interest paid on a Home Loan for a rented residential property can be claimed without any upper limit; claims can only go up to only Rs.2 Lakh under ‘Housing Properties’ in a year
The interest claimed under Section 22 has to be calculated on an accrual basis, which means that even if you don’t actually pay the amount that year (in case of a moratorium), you can still claim the amount as a deduction
Joint Home Loan borrowers can claim a rebate of up to Rs.2 Lakh each, provided they contribute to the EMI payments and are the co-owners of the property
A certificate detailing the Home Loan interest calculations is mandatory to claim the deductions
In the case of an under-construction property, the construction work must be completed within 5 years of borrowing the Home Loan amount
Interest deductions on an under-construction property can begin from the year the construction has ended
The interest deduction will be restricted to Rs.30,000 if the construction of the property is not completed within the first 5 years of borrowing the Home Loan

Note that homebuyers who have funded the purchase of their property out of their own pocket are also eligible for claims under Section 22 (not applicable to self-occupied properties).

Tax Benefits Under Section 130

Tax benefits under Section 130 can be claimed only after exhausting the interest waivers under Section 22
Tax Exemption under 130 for a housing loan can be claimed by first-time homebuyers only
The Home Loan amount cannot exceed a valuation of Rs.35 Lakh and the property’s value cannot exceed Rs.50 Lakh

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Tax Deductions on Home Loan Principal Repayment

Listed below are the tax provisions under which you can claim benefits for the principal component of your Home Loan repayment:

Tax Benefits Under Section 123

The maximum deductions claimed under Section 123 cannot exceed Rs.1.5 Lakh
In the case of Joint Home Loans, all borrowers can claim Rs.1.5 Lakh individually if they all contribute toward the Home Loan EMI and are co-owners of the property
Spouses who wish to claim a deduction under section 123 must also be co-borrowers and co-owners of the property
Claims under Section 123 are given on a payment basis, which means that beneficiaries should have made a Home Loan principal amount payment as a part of their Home Loan repayment, in order to seek the benefit. It is not calculated based on projections
Home Loans taken for the construction of a new residence will only be eligible for a rebate if the construction is completed within 5 years of taking the Home Loan principal
The property for which the Home Loan claims have been made, cannot be sold within the first 5 years of possession. If the property in question is sold, all tax subsidies will be reversed and considered as income
Stamp Duty and property registration charges can also be claimed under Section 123, provided it is done in the same year the costs were borne. However, the claim must fall within the Rs.1.5 Lakh limit that is extended under Section 123

*Terms and conditions apply.

Home Loan Tax Benefits for Women Home buyers_WC

Home Loan Tax Benefits for Women Homebuyers

Conditions for claiming housing loan tax exemption for women homebuyers

Women homebuyers who have availed of Home Loans or joint Home Loans are eligible for tax benefits. As per the old tax regime, in a joint Home Loan, the woman co-owner can avail of tax deductions separately on both principal and interest amounts.

According to Section 123 of the Income Tax Act, 2025, financial co-applicants can avail of benefits of up to Rs.1.5 Lakh each a year on the principal amount and up to Rs.2 Lakh on the interest paid. These concessions provided to women significantly lower the cost of purchasing a home.

Under the old tax regime, a first-time woman homebuyer can claim Rs.50,000 deduction on the principal, in addition to other claims under Section 130.

Home Loan Tax Benefits for Senior Citizens_WC

Home Loan Tax Benefits for Senior Citizens

Conditions for claiming Home Loan tax exemption as a senior citizen

According to the law, a senior citizen is an individual resident between the age group of 60 and 80 years at any time during the respective financial year. A super senior citizen is above 80 years of age. To claim tax benefits as senior citizens, you should fulfil the above age criteria.

How to Claim Tax Benefits on Home Loans?_WC

How to Claim Income Tax Benefits on a Home Loan?

You can claim income tax rebates on your ongoing Home Loan by following these steps:

Calculate the tax deduction that you are eligible for.
Ensure that you have all the documents required to prove the ownership of the property along with a Home Loan certificate with interest and principal details .
Submit your Home Loan interest certificate to your employer to adjust TDS.
Claim the deductions by visiting the official website of the Income Tax Department.
Download your tax statement for verification.

*Terms and conditions apply.

Tax Benefits on Joint Home Loans

Tax deductions on a Home Loan can be maximised when the loan is taken jointly. In such cases, each co-borrower who is also a co-owner of the property and contributes towards loan repayment is eligible to claim separate deductions under the Income Tax Act, 2025. This allows both applicants to make the most of the benefits available under Sections 123 and 22, subject to certain conditions.

Section	Benefit Type	Deduction Limit (per borrower)
Section 123	Deduction on principal repayment of Home Loan, including stamp duty and registration charges	Up to Rs.1.5 Lakh per financial year
Section 22	Deduction on interest paid on Home Loan	Up to Rs.2 Lakh per financial year (for self-occupied property)
Section 123 (within the same limit)	Deduction on stamp duty and registration charges	Included within Rs.1.5 lakh limit

To claim tax benefits on a joint Home Loan, the following conditions must be met:

All co-borrowers must also be co-owners of the property.
The Home Loan must be sanctioned in the name of all borrowers claiming the benefit.
Each borrower must contribute to the loan repayment from their own income.
Deductions can be claimed only after the construction of the property is complete.

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Tax Deduction on Interest Paid for Under Construction Property

When you avail of a Home Loan to build or buy a property that is still under construction, the interest you pay during that time—also referred to as ‘pre-construction interest’—can be deductible under the Income Tax Act, 2025, but only under certain conditions and in accordance with certain rules.

What is Pre-Construction Interest?

This is the interest you incur on a Home Loan while the house property is under construction, before obtaining an occupancy or completion certificate.
Deductions for Home Loan interest are not allowed during the construction phase. The interest up to the tax year ending just before the year in which the construction is completed is treated as ‘pre-construction interest.’

Conditions to Claim Deduction

You can claim pre-construction interest only if all the following criteria are met:

The loan must be for the acquisition or construction of a residential property.
The construction of the property should be completed within 5 years from the end of the tax year in which the loan was taken.
You must not have already claimed a deduction for that interest under any other section.

How to Claim Tax Deduction on Pre-Construction Interest?

Once construction is completed, you can begin claiming the deduction. The total pre-construction interest (that is, interest paid from the date of borrowing till 31 March of the tax year immediately preceding the year of completion) is added up. That total is then allowed to be claimed in five equal annual instalments, starting from the year in which construction is completed.

Tax Benefits on Second Home Loan

If you’ve taken a Home Loan for a second house, or are planning to, there are specific tax rules you should know about. The benefits depend on whether your properties are rented out or self-occupied.

Tax Benefits Based on Usage of the Property

How you use your properties affects the benefits you can claim:

Both homes are self-occupied: You can claim principal repayment under Section 123 (up to Rs.1.5 Lakh annually). For interest, the combined deduction for both homes is capped at Rs.2 Lakh per year.
One home is rented: Principal repayment still qualifies under Section 123. For the self-occupied house, the Rs.2 Lakh limit applies, while for the rented house, there is no upper cap on interest deduction, though the net loss from house property that can be set off against other income is restricted to Rs.2 Lakh per year. Rental income must be declared, too.
Both homes are rented out: You can continue to claim principal repayment under Section 123. There is no capping on interest deduction for rented properties, though the net loss from house property that can be set off against other income is restricted to Rs.2 Lakh per year. Any excess can be carried forward.

Additional Tax Benefits for First-time Homebuyers

First-time homebuyers are eligible for special deductions over and above the regular tax benefits available on Home Loans:

Section 130 – Extra Deduction on Interest

First-time buyers can claim an additional deduction of up to Rs.50,000 on the interest paid towards their Home Loan.
Key eligibility conditions:
- The Home Loan must have been sanctioned between 1 April 2016 and 31 March 2017
- The loan amount should not exceed Rs.35 Lakh
- The property value must not exceed Rs.50 Lakh
- The buyer should not own any other house at the time of loan sanction
This deduction is available over and above the standard Rs.2 Lakh interest deduction under Section 22.

Section 131 – Additional Deduction for Affordable Homes

Introduced after Section 80EE, this section provides up to Rs.1.5 Lakh additional deduction on Home Loan interest.
Eligibility rules:
- The loan must be sanctioned between 1 April 2019 and 31 March 2022
- The stamp duty value of the property should not exceed Rs.45 Lakh
- The individual must be a first-time homebuyer and must not be claiming a deduction under Section 130
This deduction too is available in addition to the regular Section 22 interest deduction.

Home Loan Tax Deductions: FAQs

Housing Loan Tax Benefits: FAQs

The eligibility criteria for claiming tax benefits on your Home Loan repayment are simple – one must have borrowed a Home Loan and be the legal owner of the residential property. In the case of a joint Home Loan, everybody must be equal co-borrowers and co-owners, including spouses.

Yes, a Home Loan borrower is eligible for tax subsidies, if their property is under-construction, with certain things to keep in mind:

The property construction must be completed within 5 years of seeking the Home Loan amount
Tax exemptions for an under-construction property is valid only on the interest component of the Home Loan
Pre-construction interest paid during the time the property was under-construction can be claimed within 5 instalments after receiving possession

Yes, you can claim tax benefits on two Home Loans. If your Home Loans meet all the required tax deduction norms, you are eligible to claim tax benefits for two simultaneous Home Loan repayments. However, note that both houses will be considered self-occupied, and the exemption limit cannot be exceeded in either category.

Home Loan interest deductions are considered under Section 22, with the following considerations:

Up to Rs.2 Lakh for self-occupied properties
No limit on claim for rented residential properties*

*Terms and conditions apply.

You can avail a maximum deduction of Rs.30,000 on a Home Loan Top-up if you have receipts and documents proving that the Top-up Home Loan has been used for acquisition/construction/repair/renovation of a residential property. The limit of Rs 30,000 is available for a self-occupied house only. In case repairs and renovations have been done on a let-out property, no deduction can be claimed.

You can use an Income Tax Calculator to calculate your maximum benefits on your Home Loan. For example, let’s say you pay out Rs.4,80,000 as interest and Rs.1,20,000 as principal amount in a year. This means, if according to your salary slab, you are paying a tax of Rs.2,32,500, then you can reclaim Rs.96,000 from your tax as a benefit.

Sections 130 and 131 of the Income Tax Act, 2025 provide tax benefits to eligible individuals on the interest paid towards Home Loans. Here are the eligibility criteria for both sections:

130:

The eligible candidate is a first-time homebuyer whose Home Loan amount is less than Rs.35 Lakh and the stamp value of the property is within Rs.50 Lakh. Also, the Home Loan should have been sanctioned between 1 April 2016 and 31 March 2017. Note that only individual buyers are eligible.

131:

The eligible candidate is a first-time homebuyer whose Home Loan amount is less than Rs.25 Lakh and the stamp value of the property is within Rs.45 Lakh. Also, the Home Loan should have been sanctioned between 1 April 2019 and 31 March 2022. Note that only individual buyers are eligible.

Please note that these criteria may change over time and it is advisable to check the latest rules before applying for any tax benefit.

Section 130: Section 130 is a Home Loan interest deduction section that allows income tax benefits on the interest portion of the residential house property loan availed from any financial institution. The deduction limit is Rs.50,000 and can be claimed only by individual borrowers.

Section 22 of the Indian Income Tax Act, 2025 provides for deductions that can be claimed by taxpayers on the interest paid on a Home Loan for a self-occupied property or on the rental income received from a property.

The deductions available under Section 22 are as follows:

Interest on Home Loan: A taxpayer can claim a deduction on the interest paid on a Home Loan taken to purchase, construct, repair, or renovate a self-occupied property. The maximum deduction allowed under this section is Rs.2 Lakh per annum.

Interest on Loan for Let-out Property: A taxpayer can also claim a deduction on the interest paid on a loan taken to purchase, construct, repair, or renovate a property that is let out. There is no upper limit on the amount of deduction that can be claimed.

First, you can exhaust your deductible limit under Section 22 of Rs.2 Lakh, then go on to claim the additional benefits under Section 130.

Yes, if you meet the eligibility conditions for both, you can claim deductions under both Section 22 and Section 131. However, the total deduction claimed under both sections cannot exceed the actual amount of interest paid on the Home Loan during the tax year.

Section 22 and Section 130 are two different provisions under the Indian Income Tax Act, 2025, that allow taxpayers to claim deductions on the interest paid on a Home Loan. The key differences between these two provisions are as follows:

Eligibility: Section 22 is applicable to all taxpayers who have taken a Home Loan to purchase or construct a self-occupied property, while Section 130 is applicable only to individual taxpayers who are first-time homebuyers.

Quantum of Deduction: Under Section 22, a taxpayer can claim a deduction of up to Rs.2 Lakh per annum on the interest paid on a Home Loan. On the other hand, under Section 130, a taxpayer can claim an additional deduction of up to Rs.50,000 per annum on the interest paid on a Home Loan.

Time Period: Section 22 allows a deduction for the interest paid on a Home Loan in any financial year, while Section 130 is applicable only for Home Loans taken between 1 April 2016 and 31 March 2017.

Conditions: Under Section 22, there are no specific conditions to be fulfilled to claim the deduction, except that the Home Loan should have been taken to purchase or construct a self-occupied property. However, under Section 130, the following conditions must be fulfilled to claim the deduction:

a. The taxpayer must be a first-time homebuyer.

b. The value of the property purchased should not exceed Rs.50 Lakh.

c. The Home Loan taken should not exceed Rs.35 Lakh.

d. The loan should have been sanctioned between 1 April 2016 and 31 March 2017.

In summary, Section 22 is a more general provision that allows deductions on the interest paid on a Home Loan, while Section 130 is a specific provision that provides additional deductions to first-time homebuyers meeting certain conditions.

The maximum income tax exemption on a Home Loan in India is the sum of the deductions that can be claimed under Section 22 and Section 130, subject to the conditions mentioned above. Currently, the maximum housing loan tax exemption in India is Rs.3.5 Lakh per annum.

Foreclosure or prepayment does not stop you from claiming Home Loan tax deductions already accrued. You can continue to claim the interest and principal repayments made up to the date of foreclosure in that tax year. However, once the loan is fully closed, you cannot claim any further deductions because no future interest or principal payments remain.

Yes, co-applicants can claim separate tax deductions on Home Loan interest, provided both are co-borrowers and co-owners of the property. Each person can claim deductions individually based on their share of the loan repayment, subject to the limits under the Income Tax Act, 2025.

Yes, there is a tax benefit on a Home Loan taken for renovation or repair. The interest portion is deductible under Section 22, but with a reduced limit of up to Rs.30,000 per year. However, the principal amount of a renovation loan is not eligible for deduction under Section 123.

Disclaimer:

Disclaimer

The information remains subject to change depending on the laws and government guidelines, applicable at the time being. However, Bajaj Housing Finance Limited (‘BHFL’) is under no obligation to update or keep the information current. Users are advised to seek independent legal and professional advice before acting on the basis of the information contained in the Website. Placing reliance on the aforementioned information shall always be the sole responsibility and decision of the User and the User shall assume the entire risk of any use made of this information.

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