How do you use the home loan tax benefit calculator?
- Enter your yearly income before deductions, and say if the home is lived in or let out.
- Enter the interest and principal you will pay this year (your lender’s certificate shows both), and your other 80C savings such as PF, PPF or ELSS.
- Read your tax under both regimes and what the loan saves in each. Salary status, other deductions, pre-construction interest and property tax are under “Adjust income type, other deductions and loan details”.
How it’s calculated
The calculator works out your tax with and without the home loan under both regimes, using the tax year 2026-27 slabs, and shows the saving.
Formulas used by the calculator
Deduction = min(₹ 1,50,000, Principal + Other section 123 / old 80C items)Allowed = min(Interest + Pre-construction instalment, ₹ 2,00,000)House income = (Rent − Municipal tax) × 70% − Interest; old regime sets off a loss up to ₹ 2,00,000, new regime noneTaxable = Income − Standard deduction (₹ 50,000 old / ₹ 75,000 new) − Deductions ± House incomeTax = Slab tax − Rebate (up to ₹ 5 L old / ₹ 12 L new) + 4% cess; Saving = Tax without loan − Tax with loanSource: Income Tax Department e-filing portal (Income-tax Act; slabs and limits for tax year 2026-27).
How does a home loan cut your income tax?
Since 1 April 2026 the Income-tax Act, 2025 applies. Interest on a home loan is deducted from income from house property under section 22, which replaced section 24(b). For a home you live in, the deduction is capped at ₹ 2 lakh a year, or ₹ 30,000 if the loan was for repairs or the home was not completed within five years of the end of the year you borrowed. For a let-out home, all the interest is deducted from the rent, but a resulting loss can be set off against salary only up to ₹ 2 lakh in the old regime; the rest is carried forward for up to eight years.
Principal repaid counts towards section 123 (the old section 80C), within the ₹ 1.5 lakh limit shared with PF, PPF, ELSS, life insurance and other items. Stamp duty and registration on the purchase count in the year you pay them.
These deductions are for the old regime. The new regime, which is the default, allows neither the interest on a self-occupied home nor section 123, but has lower slab rates. For a let-out home, the new regime still deducts interest from the rent, but a loss cannot be set off against other income. That is why the calculator works out both regimes.
How the comparison is worked out
Income − ₹ 50,000 − min(principal + other 80C, ₹ 1.5 lakh) − interest (capped) − other deductionsIncome − ₹ 75,000 (salary), no home loan deduction for a lived-in homeSlab tax − rebate (₹ 12,500 to ₹ 5 lakh old; ₹ 60,000 to ₹ 12 lakh new) + 4% cessTax without the loan − tax with it, in each regimeWorked example: ₹ 25 lakh salary, ₹ 2.5 lakh interest
With ₹ 1 lakh of principal and ₹ 50,000 of other 80C savings, the old regime deducts ₹ 1.5 lakh under section 123 and ₹ 2 lakh of the interest (the other ₹ 50,000 is above the cap). Old regime tax comes to ₹ 4,60,200, ₹ 93,600 less than without the loan. The new regime gives no home loan deduction but still comes to ₹ 3,19,800, which is lower by ₹ 1,40,400.
Worked example: when the old regime wins, and a let-out flat
On ₹ 15 lakh of salary with the same loan and ₹ 3 lakh of other old-regime deductions and exemptions (house rent allowance, health cover, NPS), the old regime tax is ₹ 75,400 against ₹ 97,500 in the new regime. With only ₹ 1 lakh of such deductions, the new regime would be lower. If the ₹ 25 lakh earner instead lets the flat out for ₹ 3 lakh a year with ₹ 5 lakh of interest, the house property loss is ₹ 2,97,000; the old regime sets off ₹ 2 lakh and carries ₹ 97,000 forward, and the new regime tax falls by ₹ 63,336 because the interest wipes out the rent income.
Which regime is lower at different incomes?
| Income | Old regime | New regime | Lower |
|---|---|---|---|
| ₹ 10,00,000 | ₹ 33,800 | ₹ 0 | New |
| ₹ 15,00,000 | ₹ 1,48,200 | ₹ 97,500 | New |
| ₹ 20,00,000 | ₹ 3,04,200 | ₹ 1,92,400 | New |
| ₹ 25,00,000 | ₹ 4,60,200 | ₹ 3,19,800 | New |
| ₹ 35,00,000 | ₹ 7,72,200 | ₹ 6,31,800 | New |
What should you keep in mind?
- Joint borrowers who are also co-owners can each claim their share of the interest and principal, each within their own limits.
- Interest for the years before possession is claimed in five equal parts from the year the home is completed, and for a self-occupied home it sits inside the ₹ 2 lakh cap.
- Without business income you can pick either regime each year when you file your return; with business income, switching is restricted.
Frequently asked questions
Related answers and guides
- Home Loan Tax Benefit Under the Income-tax Act 2025
- Joint Home Loan Tax Benefit: Co-Owner Rules for Couples
- Old Madras Road vs Hoskote: Guidance Values by Station
- Resale vs New Flat in Bengaluru: Price, Tax and Risk in 2026
Sources
- Income-tax Act, 2025, section 22 (interest on borrowed capital; ₹ 2 lakh and ₹ 30,000 caps) and section 123 with Schedule XV (₹ 1.5 lakh), in force from 1 April 2026; Income Tax Department house property guidance on set-off and carry forward.
- Finance Act, 2026: slabs, rebates and standard deductions unchanged for tax year 2026-27 (Income Tax Department threshold limits). Checked 19 Oct 2026.
Indicative only. Your tax depends on your full income, deductions and regime choice. Please verify with your Chartered Accountant before acting.
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