Owning a home — whether self-occupied, let out, or financed with a home loan — comes with a cluster of tax provisions: Section 24(b) interest deduction, Section 80C principal repayment, the ₹2 lakh loss set-off cap, and the computation of income from house property itself. Under the Income-tax Act, 2025, all of these get new section numbers, but the rules themselves are reported to carry forward. Here's the full picture for homeowners.
The Three Pillars of House Property Taxation
Under the Income-tax Act, 1961, taxation of house property and home loans rests on three main provisions:
- Section 24(b) — deduction for home loan interest: up to ₹2 lakh/year for self-occupied property (if construction completed within 5 years of loan); no cap for let-out property (but subject to the overall loss set-off cap)
- Section 80C — home loan principal repayment counted within the overall ₹1.5 lakh Chapter VIA limit (now Section 123, as covered in our Chapter VIA renumbering article)
- Section 71(3A) / Section 22-27 — computation of income/loss from house property, including the ₹2 lakh annual cap on set-off of house property loss against other income heads (with the balance carried forward for 8 years)
What Gets Renumbered
| Old Provision | Covers | Reported Change Under 2025 Act |
|---|
| Section 24(b) | Home loan interest deduction (₹2 lakh self-occupied cap) | New section number; ₹2 lakh cap, 5-year construction-completion condition unchanged |
| Section 80C (home loan principal) | Principal repayment within ₹1.5 lakh limit | Now Section 123 — see our Chapter VIA renumbering article; ₹1.5 lakh combined limit unchanged |
| Sections 22-27 | Computation of income from house property (annual value, standard 30% deduction, municipal taxes) | Renumbered; 30% standard deduction on net annual value unchanged |
| Section 71(3A) | ₹2 lakh cap on house property loss set-off against other income | Renumbered; ₹2 lakh cap and 8-year carry-forward unchanged |
| Section 80EEA | Additional ₹1.5 lakh interest deduction for affordable housing (subject to conditions/sunset dates) | Now Section 131 (per our Chapter VIA article) — subject to whatever sunset/eligibility conditions apply |
⚠ New regime reminder (unrelated to this Act): If you've opted for the new tax regime, remember that Section 24(b) interest deduction for self-occupied property is not available under the new regime (this restriction predates the Income-tax Act, 2025 and is a feature of the new regime introduced via Finance Acts, unaffected by this restructuring). For let-out property, interest deduction continues to be allowed even under the new regime, but the resulting loss cannot be set off against other income — only carried forward against future house property income.
Two Houses Under ITR-1: A Genuinely Useful Change
As covered in our ITR forms article, ITR-1 for AY2026-27 now permits reporting income/loss from up to 2 self-occupied house properties (previously ITR-1 was restricted to 1 house property, forcing taxpayers with 2 self-occupied properties — a common situation for those who relocated for work but retained their original home — to file the more complex ITR-2). This is a procedural simplification that directly benefits many salaried homeowners, independent of the broader renumbering exercise.
Worked Example: Self-Occupied Property with Home Loan
A salaried taxpayer under the old regime has a home loan with ₹2,20,000 annual interest and ₹1,80,000 principal repayment, on a self-occupied property completed within 5 years of the loan:
- Interest deduction: ₹2,00,000 (capped at the limit, even though actual interest is ₹2,20,000) — reported under the renumbered Section 24(b)-equivalent provision
- Principal repayment: Counted within the overall ₹1.5 lakh Section 123 (formerly 80C) limit, alongside any other Section 123 investments (PPF, ELSS, insurance, etc.)
Both the ₹2,00,000 interest cap and the ₹1.5 lakh combined Section 123 limit are reported to be unchanged — only the section citations differ on the taxpayer's computation sheet.
Worked Example: Let-Out Property
A taxpayer rents out a second property: annual rent ₹3,00,000, municipal taxes ₹15,000, home loan interest ₹3,50,000:
- Net Annual Value: ₹3,00,000 - ₹15,000 = ₹2,85,000
- Standard deduction (30%): ₹85,500
- Interest deduction: ₹3,50,000 (no cap for let-out property)
- Income/(loss) from house property: ₹2,85,000 - ₹85,500 - ₹3,50,000 = (₹1,50,500)
- This loss can be set off against other income (salary, etc.) up to ₹2,00,000/year — fully absorbed here since it's below the cap. Any excess beyond ₹2,00,000 would carry forward for 8 years.
This entire computation framework — the 30% standard deduction, no cap on let-out interest, and the ₹2 lakh set-off cap with 8-year carry-forward — is reported to carry forward unchanged under the Income-tax Act, 2025's renumbered provisions.
Frequently Asked Questions
Is the Rs 2 lakh home loan interest deduction for self-occupied property changing under the Income-tax Act 2025? ▼
No. The ₹2 lakh annual cap on home loan interest deduction for self-occupied property under the old regime (subject to the condition that construction is completed within 5 years of taking the loan) is reported to be carried forward unchanged under the Income-tax Act, 2025 — only the section citation (currently Section 24(b)) is renumbered. Note that this deduction remains unavailable under the new tax regime for self-occupied property, a pre-existing restriction unrelated to this Act.
Does the new Act change the Rs 2 lakh cap on setting off house property losses against other income? ▼
No. The ₹2 lakh annual cap on setting off losses from house property against other income heads (such as salary), with any excess carried forward for up to 8 assessment years, is reported to continue under the renumbered provisions of the Income-tax Act, 2025.
Can I now claim two self-occupied house properties in the simplified ITR-1 form? ▼
Yes — this is one of the changes covered in our ITR forms article. From AY2026-27, ITR-1 (Sahaj) permits reporting income/loss from up to 2 self-occupied house properties, where previously taxpayers with a second self-occupied property had to file ITR-2. This simplification benefits taxpayers who own a second home (e.g., in their hometown) while living elsewhere for work.