Under Income Tax, interest on home loan deduction is impacting a large section of society as it has been stated in the Financial Stability Report of the Reserve Bank of India, that the housing loans contribute to over 29% of the total household debt availed by the people in India. The Income Tax Act, 1961 as well as the revamped Income Tax Act, 2025, has certain benefits that can be availed by the assessee for interest on home loan deduction to allow them some relief in this segment. Section 130 and 131 of the new Income Tax Act, 2025 has replaced section 80EE and section 80EEA deduction as the two major deductions available for the assessees.
Interest on home loan deduction
As per section 130 of the Income Tax Act, 2025 (erstwhile section 80EE of the Income Tax Act, 1961), a deduction of upto Rs. 50,000 can be availed by the assessee on fulfilling certain conditions. Moreover, a separate section 131 of the Income Tax Act, 2025 (erstwhile section 80EEA deduction) focuses on the interest on home loan deduction for certain house properties i.e. affordable housing. Under 80EEA deduction upto Rs. 1,50,000 in a tax year can be availed by the assessee.
It is pertinent to note that these deductions are in addition to the deduction u/s 24 of the Income Tax Act, 1961. The deduction for any interest claimed under these sections will not be allowed under any other sections.
Section 80EE of Income Tax Act, 1961 (Section 130 of 2025 Act)
As per Section 130 of the Income Tax Act, 2025 (erstwhile section 80EE of the Income Tax Act, 1961), in respect of interest on home loan deduction, an assessee being an individual shall be allowed deduction of interest payable on loan taken by him from any financial institution for the purpose of acquisition of a residential house property.
The deduction under section 80EE shall not exceed Rs. 50,000 and shall be allowed for the tax year beginning on 1st April 2016 and subsequent tax years.
Section 80EE Deduction Eligibility
The deduction under section 130 of the Income Tax Act, 2025 (erstwhile section 80EE of the Income Tax Act, 1961), shall be allowed only on fulfillment of the following conditions –
- The loan has been sanctioned by a financial institution,
- The loan has been sanctioned between 1st April, 2016 and 31st March, 2017,
- The amount of loan sanctioned for acquisition of the residential house property does not exceed Rs. 35 lacs,
- The value of the residential house property does not exceed Rs. 50 lacs, and
- The assessee does not own any residential house property on the date of sanction of loan.
Section 80EEA of Income Tax Act, 1961 (Section 131 of 2025 Act)
As per Section 131 of the Income Tax Act, 2025 (erstwhile section 80EEA of the Income Tax Act, 1961), in respect of interest on home loan deduction, an assessee being an individual who is not eligible for deduction under section 130 (section 80EE), shall be allowed deduction of interest payable on loan taken by him from any financial institution for the purpose of acquisition of a residential house property.
The assessee will be allowed deduction upto a maximum limit of Rs. 1.50 lacs in a tax year for the tax year beginning on 1st April, 2019 and subsequent tax years.
Section 80EEA Deduction Eligibility
The deduction under section 131 of the Income Tax Act, 2025 (erstwhile section 80EEA of the Income Tax Act, 1961), shall be allowed only on fulfillment of the following conditions –
- The loan has been sanctioned by a financial institution,
- The loan has been sanctioned between 1st April, 2019 and 31st March, 2022,
- The stamp duty value of residential house property does not exceed Rs. 45 lacs, and
- The assessee does not own any residential house property on the date of sanction of loan.
Interest on home loan deduction example
Interest on Home Loan Deduction – Example – An assessee has paid an interest of Rs. 3 lacs in a tax year for affordable housing residential house property. What is the maximum benefit of interest on home loan deduction that can be availed by him?
The assessee can claim deduction u/s 24 of the Income Tax Act, 196 upto Rs. 2 lacs (if self-occupied), for the balance Rs. 1 lacs, he can claim 80EEA deduction of Rs. 1 lac (since the maximum limit u/s 80EEA is Rs. 1.50 lacs). Thus, he can claim a deduction of the entire amount of interest paid by him.
FAQs on interest on home loan deduction
Q1. Can an NRI take deduction under Section 80EE and 80EEA?
A1. Yes, all individuals (residents as well as NRIS) can claim deduction under section 80EE and 80EEA.
Q2. Can an assessee claim deduction under section 80EE and 80EEA in the new tax regime?
A2. No, deduction under section 80EE and 80EEA can only be availed under the old tax regime.
About the Author This article is written by FCA Eshita Krishna , an experienced Chartered Accountant with advanced ICAI certifications in DISA, Anti-Money Laundering, Real Estate Laws, and Forex & Treasury Management. With strong expertise in direct and indirect tax, audit, risk advisory, financial planning, and financial management, she delivers accurate, experience-backed financial insights to readers.