Section 24 provides a tax benefit on the interest amount that one pays on home loans.
As property prices continue to rise, home loans are great financial tools to fulfill the dream of owning your own house. To reduce the burden, the Government of India offers tax benefits to individuals against the principal and interest amount paid against these loans.
Section 24 of the Income Tax Act of 1961 deals with such deductions and tax benefits on home loans. This section is also referred to as ‘Deductions from income from house property.’
The provisions of Section 24 of the Income Tax Act apply in the following circumstances:
You can compute the income from house property under this section when you have deducted an amount equal to 30% of the annual value
This is applicable when the property is acquired, constructed, repaired, renewed, or reconstructed with a home loan
The deduction amount must not exceed ₹2 Lakhs
Here are the details of the subsections included under Section 24 of the Income Tax Act:
1. Section 24A: Standard Deduction
Section 24A of the Income Tax Act has provisions for a flat 30% deduction on the NAV of a rented housing property. However, it applies if you buy a property with your own funds. You cannot claim this deduction if you self-occupy the property.
Here is an example to help you understand how these deductions work:
Parameters |
Amount |
Gross Annual Value (GAV) |
₹10.20 Lakhs |
Deducting the municipal tax from the GAV to calculate the NAV |
₹20,000 |
Net Annual Value |
₹10 Lakhs |
Available Exemptions |
|
30% Standard deduction on NAV u/s 24(A) |
₹3 Lakhs |
Deduction of up to ₹2 Lakhs on interest of home loan paid |
NIL |
Total deduction |
₹3 Lakhs |
Disclaimer: The above figures are indicative only and for illustrative purposes.
2. Section 24B
For a self-occupied housing property, the net annual value is ‘NIL’. This would result in the loss of the property value. In such a situation, you can claim deductions of up to ₹2 Lakhs on the housing loan interest u/s 24B of the Income Tax Act.
If this housing property is generating income, then the total housing loan interest is allowed as a deduction. Here is how deductions apply on the self-occupied property under this section:
Parameters |
Amount |
Gross Annual Value (GAV) |
NIL |
Deducting the municipal tax from the GAV to calculate the NAV |
NIL |
Net Annual Value |
NIL |
Exemptions that are available |
|
30% Standard deduction on NAV u/s 24(A) |
NIL |
Deduction of up to ₹2 Lakhs on interest of home loan paid |
₹2 Lakhs |
Loss from housing property |
₹2 Lakhs |
Note that the limit for this deduction is ₹30,000 in the case:
The housing loan was taken before April 1, 1999
If you use the borrowed capital for reconstruction, repair, or renovation
If you have availed of a housing loan on April 1, 1999, or later, but the housing construction was not complete in 5 years
Also, note that the deduction is not allowed until and unless you provide the certificate of payment of housing loan interest.
Here is how deductions under Section 24B apply to rented house property:
Type of Property |
Property Tax Deduction |
Gross Annual Value |
Standard deduction |
Net Annual Value |
Home loan interest exemption |
Vacant/Self-occupied |
NIL |
NIL |
NIL |
NIL |
₹2 Lakhs |
Rented |
The tax amount paid during the particular year |
The expected rent or the earned rent, whichever is more |
30% of the NAV |
The amount after reducing the property tax |
The entire amount that is paid during the particular year |
In order to claim deductions under Section 24 of up to ₹2 Lakhs, the taxpayers have to fulfil the following criteria:
The taxpayer was sanctioned a housing loan on or after 1st April 1999 to purchase or contract a property
The taxpayer has to have the certificate of payment of housing loan interest
The housing property has to be constructed or acquired within five years from the completion of a fiscal year in which the taxpayer borrowed the loan
Some of the exceptions under this section are:
The taxpayer has to submit the certificate for interest against the housing loan
No deductions for brokerage/commission, but municipal tax can be factored into housing property NAV calculation
In case the owner does not occupy the house, there is no upper limit to the tax that can be deducted
If the owner resides in a rented house due to business/employment, they can claim up to ₹2 Lakhs interest on home loan
FAQs on Tax Deductions on Home Loans
Where is Section 24 in the ITR form?
It appears under the head ‘Income from House Property.’
Are Sections 24 and 80EE different?
Yes, they are both different sections. Section 24 of the Income Tax Act offers a tax deduction on the payable interest amount.
On the other hand, Section 80EE offers tax benefits on home loan interest for first-time home buyers. The limit of Section 24 is ₹2 Lakhs, whereas, in Section 80EE, it is ₹50,000.
Who can claim Section 24?
This provision applies if the owner or his/her family is residing in the said house. If the house is on rent, the entire interest amount is waived off as a deduction.
Can I get tax benefits for an under-construction property?
Yes, you can claim tax benefits on the interest paid on a home loan before possession under Section 24 of the Income Tax Act, 1961.
Can I claim both Section 80EEA and Section 24?
Yes, you can claim benefits under both sections. However, you can claim benefits under both these sections only if you satisfy all conditions required for both of them.
What is the difference between sections 80C and 24?
As per Section 24, you can claim deductions of up to ₹2 Lakhs on interest payment. On the other hand, you can get deductions of up to ₹1.5 Lakhs on principal repayment according to Section 80C.
What is the Section 24 deduction list?
Section 24 deductions include a 30% deduction on let-out properties, up to ₹2 lakh for self-occupied properties, and interest on under-construction properties claimed in five instalments.
Can I claim both Section 24 and 80EE?
Yes, you can claim up to ₹2 lakh under Section 24 and an additional ₹50,000 under Section 80EE for home loan interest, provided you meet the eligibility conditions.
What is Section 24 of the new tax regime?
Under the new tax regime, Section 24 offers limited benefits. No deductions are allowed on interest paid for self-occupied properties under Section 24. Deductions on let-out properties can be claimed with no upper limit for the interest.
How do I claim Section 24?
To claim Section 24, ensure the loan is taken after April 1, 1999, for a self-occupied home. Provide the interest paid document, complete construction within 5 years, and limit the loan tenor to 15 years. Claims start after construction is completed and the occupancy certificate is received.
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