Section 24: Deductions From House Property Income

• Section 24 allows tax deductions for income earned from house property, including rental properties.
• A standard deduction of 30% of the Net Annual Value is allowed for let-out properties.
• Interest paid on a home loan can is also allowed as a deduction under different sections depending on the property type and applicable limits.
• Self-occupied properties have a deduction limit of ₹2 lakh on home loan interest. Let-out properties can claim the entire interest paid as deduction.
• The new tax regime allows deductions only on the home loan interest paid for let-out properties and not for self-occupied properties.
• Pre-construction interest can be claimed in five equal annual instalments after construction is completed.
• Eligible first-time homebuyers may qualify for additional deductions under Sections 80EE and 80EEA, subject to specified conditions.
• Relevant documents are needed to claim deduction on home loan interest paid.

To be able to buy and live in one's own house is a dream of many. But the increasing property rates are making it difficult to fulfill this dream without taking a loan; however, thanks to banks and several financial institutions that are providing home loans with easy and convenient EMI options. Not only banks but the Government also provides several benefits to individuals availing a home loan. One of such benefits includes tax deduction from income of house property. Section 24 of the Indian Income Tax Act 2025 talks about such deductions.

Section 24) of the Indian Income Tax Act, 2025 takes into consideration the amount of interest an individual pay for home loans. This is also known as “Deductions from income from house property.” Basically, it allows you to claim tax exemptions on the interest amount of your home loan. The maximum tax deduction limit under section 24 is Rs. 1,50,000. And one does not have to particularly live in that house to be able to apply for tax deductions. The income from house property is considered for tax deductions under the following circumstances.

• If you are renting a house, then the rent amount is considered income.
• If you have more than one house, then the net annual value of all the houses is considered as income.

However, if an individual has only one house and is living in that one, then the income from that property is considered nil.

As per the Income Tax Act, 2025, the following incomes are taxable under the Income from house property category.

• Rental income from let out property
• Annual value of self-occupied property stays Nil
• Annual value of the property that is deemed to be out for income tax purpose.

The deductions available under this section are split into two distinct provisions, covered below.

Section 24(1)(a) under the Income Tax Act of 2025 - Standard Deduction on Rental Income

Municipal tax deduction

The annual amount paid to the municipal corporation of the area is the municipal tax. These taxes are to be deducted from the gross annual value to get the net value of the house property. Deduction on municipal tax is granted if it is borne by the house owner and paid during that financial year.

Standard deduction

30% of the net annual value calculated is standard deduction. This is allowed when your expenditure on the property is higher or lower as well. It is irrespective of the expenditure that you incur on insurance, electricity, repairs, water supply, etc. The annual value is Nil for self-occupied property, and the standard deduction is zero in that case.

Section 24(1)(b) under Income Tax Act 2025 - Deduction on Home Loan Interest

Homeowners get to claim a deduction of up to ₹2 lakh on the home loan interest if their own family resides in that property. The same is applied when the house is vacant. In case you let out the property on rent, the entire interest on the home loan is allowed as a deduction.

• Self-occupied property: Interest deduction under Section 24(1)(b) is capped at ₹2 lakh per financial year.
• Let-out property: There is no cap - the entire home loan interest paid during the year is deductible.
• If the rental income is lower than the interest paid, the resulting loss under 'Income from House Property' can be set off against other heads of income, subject to a maximum of ₹2 lakh in a financial year.

• Self-occupied property: The Section 24(1)(b) interest deduction is NOT available under the new tax regime.
• Let-out property: The Section 24(1)(b) interest deduction remains available under the new tax regime, and, importantly, there is still no ₹2 lakh cap for let-out property.

This distinction is widely misunderstood: many taxpayers assume the new regime blocks all home loan interest deductions, but that is only true for self-occupied property. Interest on a loan for a let-out property continues to be fully deductible even under the new regime.

Example: Suppose a taxpayer pays ₹10 lakh in total interest during a 3-year construction period. This pre-construction interest cannot be claimed as it accrues - it must be aggregated and claimed in 5 equal annual instalments starting from the financial year in which construction is completed and possession is taken. In this example, the taxpayer would claim ₹2 lakh per year for 5 years after possession, subject to the overall Section 24(1)(b) cap applicable to the property (₹2 lakh per year for self-occupied property, inclusive of both regular and pre-construction interest).

One must meet all of the following conditions to claim this deduction.

• The loan is borrowed before 1st April 1999 for purchase, repair, reconstruction, construction purpose.
• The loan is borrowed on or after 1st April 1999 for purchase, repair, reconstruction, construction purpose.
• The loan must be taken after the 1st of April 1999 for purchase or construction purpose.
• The construction or acquisition must be completed within 5 years.
• For interest payable on the loan there is an interest certificate offered. Interest deduction may be limited to ₹30,000 in the following cases:

Note: The maximum loss set-offs allowed in one financial year is limited up to ₹2 lakh.

Here are the exceptions under Section 24:

• If the home is vacant, then you are eligible for an exemption from payment of any interest, up to an unlimited amount.
• Consider a scenario in which you do not reside in the home because you work or conduct your business in another town, and you instead buy or rent a home at the location of your employment. Then, you may only claim Rs. 2 Lakhs tax exemption on interest payments.
• For securing the loan or renter, there is no deduction for brokerage or commission.
• For you to be eligible to deduct the maximum amount of loan interest, you must purchase the house or finish building it within three years of availing of the loan. You can only claim Rs. 30,000 rather than Rs. 2 Lakhs if the construction or acquisition is not finished within three years.
• For the loan you are taking, an interest certificate is required.

In accordance with Sections 24 and Section 130 of the Income Tax Act, taxpayers may claim an extra deduction of up to Rs. 50,000 by meeting specified requirements. An assessee may claim a tax deduction for loan interest paid when determining total income. But only under the following circumstances:

• A home loan is obtained just to buy a residence for personal use.
• The taxpayer shall not have any other residential property as of the sanction date.
• They obtain a loan from a financial institution to purchase a residential home.
• The loan must be approved between the dates of April 1, 2016, and March 31, 2017, inclusive.
• The house's total property worth is less than Rs. 50 Lakhs.
• The loan sanction amount for the purchase of a residential home property is less than Rs. 35 Lakhs.

Both sections allow an assessee to make a tax deduction claim. You just need to meet the requirements in both areas. First, make a claim for up to Rs. 2 Lakhs in tax advantages under Section 24. Additionally, utilise Section 130 to collect the subsequent Rs. 50,000 in home loan interest. You can ensure you receive a deduction of a total of Rs. 2,50,000 in interest this way.

• The home loan is taken for a self-occupied property purchased for personal use
• The taxpayer should not have any other house property on the date of home loan sanction
• The loan should be from a financial institution.
• The loan must be approved between April 01, 2016, to March 31, 2017,
• The value of the house property must be less than Rs. 50 lakhs
• The loan sanction amount must be less than Rs. 35 lakhs

• The net annual income from house property will remain nil.
• The taxpayer can deduct the property paid in that financial year from the net annual income under income from the house property. Since the income is nil, this entire amount is available as a deduction.
• The taxpayer can claim a deduction of home loan interest under Section 24(1)(b) up to Rs. 2,00,000. This will also be deducted from the income from the house property section.
• The taxpayer can claim a deduction of the principal amount paid against the home loan. This deduction is available under Section 123. However, the total limit for deduction is Rs. 1,50,000. Therefore, taxpayers must be careful and check the other investments that give them deductions under Section 123.
• If the taxpayer meets the criteria to avail the deduction under Section 130, then an additional Rs. 50,000 deduction can be availed.

Also Read: Co-owner vs Co-applicant vs Co-signor of Home Loans

• The net annual income from the house property will be the annual rental income from the house property.
• The taxpayer gets a standard deduction of 30% on the net annual income.
• The taxpayer can deduct the property paid in that financial year from the net annual income.
• The taxpayer can claim a deduction of the entire home loan interest under Section 24(1)(b). This will also be deducted from the income from the house property section.
• The taxpayer can claim a deduction of the principal amount paid against the home loan. This deduction is available under Section 123. However, the total limit for deduction Rs. 1,50,000. Therefore, taxpayers must be careful and check the other investments that give them deductions under Section 80C.
• If the taxpayer meets the criteria to avail the deduction under Section 130, then an additional Rs. 50,000 deduction can be availed.

This type of interest is called pre-construction interest and can only be claimed after the construction of the property is completed.

The pre-construction interest can only be claimed in 5 equal annual instalments. For example, if a taxpayer paid interest on a home loan for 2 years amounting to Rs. 2,50,000, while the property was being constructed, the taxpayer can claim this pre-construction interest as a deduction in 5 equal instalments of Rs. 50,000 in each year after the construction has been completed.

The construction of the property should be completed within 5 years. Otherwise, the permissible deduction will be limited to Rs. 30,000.

If it is a self-occupied property, the maximum deduction on home loan interest available is Rs. 2,00,000 per year. Therefore, the total of the pre-construction interest instalment of that year plus the actual interest on the home loan paid in that year cannot exceed Rs. 2 lakhs.

• Interest certificate from the lending bank/financial institution, showing the total interest paid/payable during the financial year.
• Possession certificate - required to establish the date construction was completed, which is essential for claiming pre-construction interest in the 5 equal instalments.
• Home loan sanction letter and repayment schedule, as supporting documents for the claim.

These documents should be retained and be ready for submission if requested during ITR processing or assessment, even though they are not typically uploaded with the return itself.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.

Also Read: Home Loan Tax Benefit: Income Tax Deduction on Housing Loan