Budget 2026's Major Letdown for Home Loan Borrowers as Section 24b Remains at ₹2L

The Budget 2026 announcement left over one crore home loan borrowers disappointed as the much-anticipated increase in the Section 24b home loan deduction did not materialize. Despite rising home prices and inflation, the limit on the home loan interest deduction 2026 remains capped at ₹2 lakh per annum. This decision has sparked questions and concerns among taxpayers, prospective home buyers, and real estate stakeholders alike. This post explores the implications of this unchanged limit, the reasons behind the government's choice, and what it means for borrowers going forward.

What is Section 24b and Why Does It Matter?

Section 24b of the Income Tax Act allows taxpayers to claim a deduction on the interest paid on home loans for a self-occupied property. The current limit for this deduction is ₹2 lakh per year. This benefit significantly reduces the taxable income of home loan borrowers, easing their financial burden.

For many middle-class taxpayers, this deduction is a crucial part of their tax planning strategy. It helps make home ownership more affordable by lowering the effective cost of borrowing. With over one crore borrowers currently availing this benefit, any change in this limit has widespread impact.

Expectations from Budget 2026 on Home Loan Benefits

Ahead of Budget 2026, there was strong speculation that the government would increase the Section 24b home loan deduction limit. Rising property prices and inflation have pushed interest payments higher, making the ₹2 lakh cap less effective in providing relief.

Many expected the limit to be raised to ₹3 lakh or more, aligning with the increased cost of borrowing. This would have been a welcome move for borrowers who are already stretched thin by EMIs and other expenses. The hope was that the Budget 2026 home loan benefits would include enhanced tax relief to support home buyers and stimulate the real estate market.

Why Section 24b Was Not Increased in Budget 2026

The decision to keep the home loan interest deduction 2026 unchanged at ₹2 lakh surprised many. Several factors likely influenced this choice:

• Revenue Concerns: Increasing the deduction limit would reduce tax collections, impacting the government’s fiscal deficit targets.

• Policy Priorities: The government may be focusing on other sectors or schemes to boost affordable housing rather than increasing tax deductions.

• Inflation Management: With inflation still a concern, the government might avoid measures that could indirectly fuel demand and push prices higher.

• Equity Considerations: The current limit aims to balance benefits across different income groups, avoiding excessive relief to high-income borrowers.

  
  

This has led to widespread debate on why Section 24b not increased despite clear demand from taxpayers and industry experts.

Impact on Home Loan Borrowers

The unchanged deduction limit means that many borrowers will not get additional tax relief even as their interest payments rise. For example:

• A borrower paying ₹3 lakh in annual interest can only claim ₹2 lakh as a deduction.

• The remaining ₹1 lakh interest payment will not reduce taxable income, increasing the overall tax liability.

  
  

This situation affects:

• Middle-class families who rely on tax benefits to manage home loan costs.

• First-time home buyers calculating affordability and long-term expenses.

• Real estate developers who hoped for a boost in demand from increased tax incentives.

  
  

Borrowers need to factor this limitation into their financial planning and explore other ways to optimize tax savings.

Alternatives and Strategies for Tax Savings

While the Section 24b home loan deduction remains capped, borrowers can consider other options to reduce their tax burden:

• Principal Repayment Deduction: Under Section 80C, principal repayment on home loans is deductible up to ₹1.5 lakh.

• Additional Deductions: Investments in PPF, ELSS, and other tax-saving instruments can help maximize Section 80C benefits.

• Joint Home Loans: Co-borrowers can claim separate deductions, effectively doubling the tax benefit.

• Affordable Housing Schemes: Some government schemes offer additional tax incentives for affordable homes.

  
  

Understanding these alternatives can help borrowers make informed decisions despite the disappointment in Budget 2026.

What Home Buyers and Borrowers Should Watch Next

The unchanged limit on home loan interest deduction 2026 signals a cautious approach by the government. However, the real estate market and taxpayers should stay alert for:

• Future Budget Announcements: The government may revisit this limit in upcoming budgets based on economic conditions.

• State-Level Incentives: Some states offer additional benefits that can supplement central tax deductions.

• Policy Changes in Affordable Housing: New schemes or subsidies could provide indirect relief to home buyers.

• Interest Rate Movements: RBI’s monetary policy will influence home loan rates and overall affordability.

  
  

Borrowers should keep track of these factors to optimize their tax planning and home financing strategies.

Summary

Budget 2026’s decision to keep the Section 24b home loan deduction limit at ₹2 lakh is a major disappointment for over one crore home loan borrowers. Despite rising interest costs, the government chose not to increase this cap, citing fiscal and policy reasons. This means many borrowers will face higher tax liabilities than expected.