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 talks about such deductions.

What is Section 24?

Section 24 of the Indian Income Tax Act, 1961 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.

Deductions Under Section 24

Following deductions are allowed under section 24 of the Indian Income Tax Act of 1961

Standard deduction:

Under this section, the standard deduction in income tax is 30 % of the Net Annual Value. However, this deduction is not applicable to the self-occupied house.

Interest on loan:

Tax exemption is allowed on interest amount of property that is acquired, repaired, constructed, reconstructed, or renewed. So, if a loan is availed to carry out any such mentioned activity, then the interest on such loan is exempted and can be claimed as deduction under Section 24.

Important points to note:

  • No income tax benefit is provided on brokerage or commission that one has to pay to middle agents.

  • If the house is not occupied by the taxpayer, then he/she can claim exemptions on the entire interest amount without any upper limit.

  • To be able to claim the maximum deduction, house-owner should purchase or finish construction of home within three years of taking a home loan.

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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.

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