The Union Budget presented by Finance Minister Nirmala Sitharaman on Sunday brought several important announcements aimed at benefiting the middle class. Among them, homebuyers received significant relief related to income tax deductions on home loan interest.

Under the new budget proposal, the income tax deduction of up to ₹2 lakh on interest paid on home loans for self-occupied properties will now also include interest paid before the completion or possession of the house.

What Does This Mean for Homebuyers?

Simply put, if you have taken a loan to buy or construct a house and have been paying interest even before getting possession, you will now be able to add that pre-possession interest to your total deduction—up to the existing limit of ₹2 lakh.

Earlier, this benefit was not available for interest paid during the construction period, which often caused confusion and financial strain for homebuyers.

Change in Income Tax Rules

To implement this relief, the government will amend Section 22(2) of the Income Tax Act, 2025. The revised provision will be applicable under the new Income Tax law, which will come into effect from April 1, 2026.

So far, Section 22(2) allowed a maximum deduction of ₹2 lakh on home loan interest for self-occupied properties, but pre-construction or pre-acquisition interest was excluded. The budget proposal now ensures that this interest will also be covered within the ₹2 lakh limit.

Highlights of the Union Budget

Finance Minister Nirmala Sitharaman presented a ₹53.5 lakh crore budget, outlining a long-term roadmap to strengthen the economy amid global uncertainties.

Key highlights include:

• Capital expenditure of ₹12.22 lakh crore, the highest ever

• Measures to boost small enterprises and manufacturing

• No change in personal income tax slabs

• Reduction in TCS on foreign tour packages to 2%

• TCS on overseas education and medical expenses under LRS also reduced to 2%

The Finance Minister also announced that the new Income Tax Act, 2025, with simplified rules and forms, will come into force from April 1.