Renovating a home can involve more than choosing new tiles, paint or fittings. The way you fund the work can also affect your tax position. If you borrow for repairs or renovation, the interest paid may qualify for a deduction under Section 24(b), subject to the property type and tax regime. For 2026, the point is that the benefit on a home renovation loan is not the same as the deduction available on a loan used to buy or construct a home. Knowing the rules before borrowing can help you plan the cost carefully.
Tax benefit on renovation loan interest
Under the old tax regime, interest paid on a home renovation loan used for repairs of a self-occupied property can qualify for deduction under Section 24(b). The maximum deduction for this purpose is ₹30,000 in a financial year. This is separate from the ₹2 lakh limit that can apply to interest on borrowing for purchase or construction of a self-occupied house.
For a let-out property, tax treatment is different. Interest on borrowed capital can be deducted while calculating income from house property, subject to the rules that apply to the property and tax regime. The Income Tax Department also notes that the new tax regime allows Section 24(b) interest deduction for let-out property in specified cases, while the self-occupied interest deduction is not available under the new regime.
What about the principal amount?
The tax benefit for renovation borrowing is mainly linked to interest. Do not assume that every principal repayment on a home renovation loan qualifies under Section 80C. The Income Tax Department lists housing loan principal among eligible 80C payments, but the provision is linked to qualifying housing loan payments and should not be treated as a blanket deduction for renovation borrowing.
Check home improvement loan interest rates before borrowing
Tax savings should not be the only reason to choose a loan. Compare home improvement loan interest rates, processing charges, repayment period and the total interest payable. A ₹30,000 deduction does not mean you save ₹30,000 in tax. The actual saving depends on your taxable income and applicable tax rate.
Also check whether the lender classifies the borrowing as a renovation or improvement loan and keeps the purpose clearly recorded. Keep the sanction letter, loan statement, interest certificate and invoices or other documents related to the renovation. These records can make it easier to support your claim if required.
Old tax regime versus new tax regime
This is one of the most important checks for 2026. If you own a self-occupied home and are relying on the Section 24(b) deduction for renovation interest, the old tax regime is relevant because the new tax regime does not allow the self-occupied interest deduction. For let-out property, Section 24(b) treatment under the new regime is different.
Before taking a home renovation loan, compare your full tax position rather than looking at this deduction alone. Your salary, investments, insurance payments, other eligible deductions and house property income can all change the outcome.
How Grihum Housing Finance can help borrowers plan
Grihum Housing Finance has spent years helping salaried and self-employed borrowers navigate home loans, including renovation and improvement financing, with transparent terms and support at every step.
From understanding eligibility to structuring repayments that fit your income pattern, the team focuses on making the borrowing process straightforward rather than confusing. For homeowners planning repairs or upgrades, having a lender who explains the fine print clearly, rather than burying it in paperwork, makes a real difference to how smoothly the whole experience goes.
Conclusion
Tax benefits can reduce the effective cost of borrowing for eligible home renovation expenses, but the benefit depends on the property, purpose of the loan and tax regime you choose. Before applying, check the applicable Section 24(b) rules and compare the overall borrowing cost. Safely keep your loan and renovation documents for smooth tax filing.
Reliable financial institutions like Grihum Housing Finance can help borrowers understand the loan process and manage the documentation needed during their home loan journey.
