Home Loan Interest Deduction Under Section 24 of Income Tax Act

Purchasing a home is a major financial step, and understanding the tax deduction on home loan interest Section 24 can make this journey more affordable. Under Section 24 of Income Tax Act, homeowners can claim deductions on the interest paid towards their Home Loan, reducing their overall tax liability and easing long-term financial pressure.

Section 24 is crucial for borrowers because it directly lowers taxable income, helping homeowners manage EMI commitments more comfortably. This provision not only encourages homeownership but also ensures that individuals benefit financially while building their most important asset a home.

What is section 24 of the Income Tax Act?

Section 24 of Income Tax Act deals with deductions related to income from house property and plays an important role for homebuyers. It allows individuals to claim deductions on the interest on home loan Section 24, helping reduce their taxable income. This provision is especially beneficial for those repaying a housing loan, as the interest on housing loan Section 24 deduction provides financial relief and supports investment in residential property.

Also Read: Home Loan: All You Need to Know

Key Features of Tax Deduction on Home Loan Interest 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

Eligibility Criteria for Claim Tax Deduction on Home Loan Interest

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.

4. Ownership of Property

To claim the deduction on home loan interest under Section 24, the applicant must be the legal owner or co-owner of the property. Only owners are eligible to receive tax benefits, even if they are the sole or primary borrowers servicing the loan.

5. Type of Property

The interest on housing loan Section 24 deduction is applicable for both self-occupied and let-out residential properties. While self-occupied homes have a deduction cap, let-out properties allow homeowners to claim the full interest paid, subject to overall loss-from-house-property limits.

6. Loan from a Recognised Lender

The home loan must be taken from a recognised financial institution or lender such as a bank, NBFC, or registered housing finance company. Loans taken from friends or relatives do not qualify for Section 24 benefits.

7. Loan Sanction Date

The sanction date of the loan plays an important role in determining eligibility for certain tax benefits. For instance, pre-construction interest deduction can be claimed only if the loan was sanctioned for purchase or construction of a property and not for renovation.

8. Completion and Possession Requirement

Deductions under Section 24 can be claimed only after construction is completed and possession is obtained. For under-construction properties, the interest paid prior to completion can be claimed in five equal instalments after possession.

9. Use of Property

The property must be used for residential purposes. Loans taken for commercial properties are not eligible for the interest deduction under Section 24.

How to Claim Deductions Under Section 24 of The Income Tax Act

Claiming the tax deduction on home loan interest Section 24 is a simple process when you file your Income Tax Return (ITR). To ensure a smooth claim experience, follow the step-by-step instructions below:

Step-by-Step Process to Claim Section 24 Deduction

1. Collect the Interest Certificate from Your Lender

Before filing, obtain the annual interest certificate that clearly states how much interest you paid during the financial year. This document is essential to claim the deduction on home loan interest under Section 24.

2. Identify the Correct ITR Form

Choose the appropriate ITR form based on your income sources:

• ITR-1 (Sahaj): For salaried individuals with one residential property.
• ITR-2: For those owning multiple properties or earning capital gains.

3. Report Income From House Property

In the ITR form, navigate to the ‘Income from House Property’ section. Enter details such as:

• Property type (self-occupied or let-out)
• Annual interest paid (as mentioned in the lender’s certificate)
• Pre-construction interest, if applicable

4. Enter the Interest Amount for Deduction

Under this section, enter the eligible interest amount—up to ₹2 lakh for self-occupied property or the actual interest paid for let-out property (subject to overall set-off limits).

5. Upload or Retain Supporting Documents

While documents are not uploaded with ITR, you must retain the following for verification:

• Home loan interest certificate
• Loan sanction letter
• Possession or completion certificate
• Property ownership documents

6. Verify and Submit Your ITR

After entering all details correctly, verify your ITR using Aadhaar OTP, net banking, or other available verification methods.

7. Keep Proofs for Future Reference

The Income Tax Department may request supporting documents anytime, so store all relevant papers safely.

Common Mistakes to Avoid When Claiming Deductions

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 Loan Deduction Under Section 24

If a Home Loan is taken jointly, the tax benefits can increase significantly. When both applicants are co-borrowers as well as co-owners of the property, each individual becomes eligible for claiming interest deduction for joint home loan under interest on housing loan Section 24.

Each co-owner can claim up to ₹2 lakh as interest deduction for a self-occupied property, effectively doubling the combined tax benefit to ₹4 lakh. For let-out properties, both borrowers can claim the actual interest paid, subject to overall loss set-off limits.

This makes joint home loans especially beneficial for couples or family members, as the shared ownership and repayment structure allows both to maximise tax savings while jointly building a long-term asset.

Impact of the New Tax Regime on Home Loan Deduction Under Section 24

Under the new tax regime introduced in 2020, most traditional exemptions and deductions - including the tax deduction on home loan interest Section 24 - are not available. In contrast, the old tax regime continues to offer these benefits, allowing eligible taxpayers to claim deductions on the interest on home loan Section 24. Choosing between the two regimes requires analysing your income structure, deductions, and long-term financial planning.

Old Tax Regime: Eligibility & Benefits (Section 24 Applicable)

Under the old regime, taxpayers can claim Section 24(b) deductions, making it beneficial for homeowners with active home loans.

• Deduction of up to ₹2 lakh for self-occupied property.
• Full interest deduction (subject to set-off limits) for let-out properties.
• Pre-construction interest deduction in five instalments.
• Advantageous if you claim multiple deductions (80C, 80D, HRA, etc.) along with home loan benefits.

New Tax Regime: Eligibility & Benefits (Section 24 Limited/Not Available)

Under the new regime (as per current provisions), Section 24(b) deduction on home loan interest for self-occupied property is not available, making it less beneficial for borrowers depending on housing loan tax relief.

• No deduction on home loan interest for self-occupied properties.
• Deduction may still be available for let-out properties, as only the net taxable income from house property is taxed.
• Lower slab rates help taxpayers who do not claim multiple deductions.
• Suitable for individuals with limited or no investments and minimal eligible deductions.

How to Choose Between the Two Regimes

• Opt for the Old Regime if you pay significant home loan interest and want to maximise tax deduction on home loan interest Section 24.
• Choose the New Regime if you have minimal deductions and prefer simplified taxation with lower tax rates.
• Evaluate your taxable income under both regimes before selecting one during ITR filing.

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.

Q.6. Can I claim home loan interest deduction under Section 24 for multiple properties?

A. Yes. You can claim home loan interest deduction under Section 24 for multiple residential properties. For self-occupied properties, the total deduction is capped at ₹2 lakh. However, for let-out properties, you can claim the entire interest paid, subject to overall loss set-off limits under Income Tax laws.

Q.7. What happens if my house construction is delayed beyond five years?

A. If construction is delayed beyond five years from the end of the financial year in which the loan was sanctioned, the maximum deduction on self-occupied property reduces from ₹2 lakh to ₹30,000 under Section 24(b). This significantly lowers the tax benefit for borrowers facing prolonged construction delays.

Q.8. How to claim pre-construction home loan interest deduction under Section 24?

A. Pre-construction interest can be claimed in five equal instalments, starting from the year the construction is completed or possession is obtained. The total amount of pre-construction interest, combined with regular annual interest, is eligible for deduction under Section 24, subject to the ₹2 lakh limit for self-occupied properties.

Q.9. Are home loan interest deductions allowed under the new tax regime?

A. Under the new tax regime, home loan interest deduction for self-occupied properties is not available. However, for let-out properties, the interest component may still be allowed as it is adjusted against rental income. Taxpayers should compare both regimes carefully to determine which provides better overall tax benefits.

Q.10. Can joint loan borrowers claim individual tax deductions under Section 24?

A. Yes. Joint borrowers who are also co-owners of the property can claim individual deductions under Section 24. Each co-owner can claim up to ₹2 lakh for a self-occupied property, effectively doubling the tax benefit. This makes joint loans highly favourable for couples or family members purchasing a home together.

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