Home Loan Interest Deduction Under Section 24 of Income Tax Act

Purchasing a home is a significant milestone, and understanding the tax benefits associated with a Home Loan can make this journey financially rewarding. In India, Section 24 of the Income Tax Act offers deductions on the interest paid towards a housing loan, providing substantial relief to homeowners.

What is section 24 of the Income Tax Act?

Section 24 deals with the deductions in relation to the income from house property. It allows homeowners to claim deductions on the interest component of their home loan, thereby reducing their taxable income. This provision is particularly beneficial for those servicing a housing loan, as it offers financial relief and encourages investment in residential properties.

Also Read: Home Loan: All You Need to Know

Key Feature of Deduction under section 24

Looking to save on taxes through your home loan? Section 24 of the Income Tax Act offers valuable home loan tax benefits that can reduce your financial burden significantly.

1. Deduction on Home Loan Interest

Under Section 24b of income tax, you can claim a home loan interest deduction of up to ₹2 lakh per year for a self-occupied property. For rented properties, there is no upper limit on the housing loan interest exemption.

Key Highlights:

• Claim up to ₹2 lakh tax deduction on home loan interest for self-occupied homes
• No limit on income tax exemption on home loan interest for rented properties
• Applicable only on the interest component, not principal repayment

2. Standard Deduction for Maintenance

If your property is not self-occupied, you can claim a flat 30% standard deduction on the net annual value—regardless of your actual expenses on repairs or maintenance.

Key Highlights:

• Flat 30% deduction allowed for maintenance expenses (non-self-occupied homes)
• One of the key home loan benefits in income tax
• Helps maximize your home loan deduction in income tax
• Contributes to total income tax rebate on home loan

Conditions to Avail Deductions under Section 24

To avail home loan deduction in income tax under Section 24b of the Income Tax Act, certain conditions must be fulfilled. Meeting these ensures you can maximize your housing loan interest exemption and reduce your taxable income effectively.

1. Purpose of the Home Loan

The home loan deduction in income tax is applicable only if the loan is taken for the purchase, construction, repair, renewal, or reconstruction of a residential property—qualifying you for housing loan interest exemption.

2. Completion Timeline

To claim the full interest on home loan deduction of up to ₹2 lakh, the construction or purchase must be completed within 5 years from the end of the financial year the loan was sanctioned. Delays may reduce your home loan tax deduction to ₹30,000 under Section 24b of income tax.

3. Interest Certificate Requirement

An interest certificate from the lender is mandatory to claim income tax rebate on home loan. This document specifies the annual interest paid and is essential to receive the tax rebate on home loan during filing.

Deduction for Pre-Construction Interest - House Property

Did you know you can also claim home loan interest deduction for the pre-construction home loan interest? Under Section 24b of the Income Tax Act, this benefit helps maximize your home loan tax exemption, even before moving in.

Joint Home Loans

If a Home Loan is taken jointly, each co-borrower can claim deductions on the interest paid, up to INR 2 lakh each, provided they are also co-owners of the property. This can effectively double the tax benefits, making joint home loans an attractive option for many.

Impact of the New Tax Regime

It's important to note that under the new tax regime introduced in 2020, several exemptions and deductions, including those under Section 24 (b) of the Income Tax Act, are not available. Taxpayers can either opt into the old regime, which allows for these deductions, or the new regime, which provides for lower tax rates without deductions. This requires carefully examining the respective regimes to establish the one that would suit one’s financial position most.

Also Read: Income Tax Return - New Tax Regime vs. Old Tax Regime

Latest Tax Changes Affecting Section 24b in 2025

As of February 2025, the Indian government has introduced significant tax reforms, aiming to simplify the tax structure and reduce litigation. These reforms may impact various sections of the Income Tax Act, including Section 24 (b) of the Income Tax Act. Taxpayers are encouraged to stay updated with these changes to make informed financial decisions.

The Bottom Line

Understanding the provisions of Section 24 of the Income Tax Act can lead to substantial tax savings for homeowners. By effectively utilising deductions on Home Loan interest, individuals can reduce their taxable income, easing the financial burden of homeownership. It's essential to stay informed about current tax laws and consult with financial advisors to maximise the benefits.

Embarking on the journey of owning a home is a significant step. To make this process financially rewarding, consider Apply for loan with favourable interest rates and terms.

Moreover, use an Home loan EMI Calculator to calculate your EMIs accurately and plan your loan repayment schedule according to your financial goals.

FAQs

Q.1. Is Section 24 exemption applicable to home loan interest?

A. Section 24 of the Income Tax Act allows homeowners to claim a deduction of up to INR 2 lakh on home loan interest if they or their family reside on the property and are filing returns for the previous financial year. If the property is rented out, the entire interest amount can be claimed as a deduction.

Q.2. Can we claim tax benefits under Sections 24 and 80EE?

A. Yes, you can claim a tax benefit under both Section 24 and Section 80EE in a single fiscal year. To do this, you will have to meet the eligibility criteria for both. Once these are met, you can maximise the benefits of your home loan interest payments.

Q.3. What is Section 80C and Section 24 of house property?

A. Under Section 24, also termed as the "deductions from income from house property", you can claim exemptions on the interest you pay on home loans. Another section, Section 80C, allows you to claim tax benefits on the repayment of the principal amount.

Q.4. What is Section 24 of the Income Tax Act personal loan?

A. Under Section 24(b) of the Income Tax Act, 1961, if you take a personal loan for the purpose of renovating or repairing your home, you can claim a deduction on the interest paid on the loan.

Q.5. Can I claim both HRA and home loans?

A. Yes, Indian taxpayers can claim both HRA (Housing Rent Allowance) and home loan interest deductions. You can significantly reduce your taxable income if you claim both of these simultaneously.

Disclaimer:

The contents of this article are for information purposes only and are not financial advisory. The information is subject to update, revision, and amendment and may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject Godrej Capital or its Affiliates to any requirements. Godrej Capital or its Affiliates shall not be responsible for any direct/indirect loss or liability incurred by the reader for making any decisions, financial or otherwise, based on the contents and information mentioned. For more information, please visit www.godrejcapital.com.