Section 24 of the Income Tax Act lets you deduct interest paid on a home loan from your taxable income. It applies if you own a house (self-occupied, rented, or vacant).
Key Benefits Under Section 24
There are two main parts to Section 24:
- Standard Deduction [24(a)]
- You get 30% flat deduction from your Net Annual Value (NAV) of the property.
- It covers maintenance, repairs, etc.
- Applies only if the house is rented or deemed to be let out.
- Not applicable for self-occupied houses (NAV = ₹0).
- Interest on Home Loan [24(b)]
- You can deduct interest paid on home loan from your total income.
- Maximum deduction depends on property type and usage.
Deduction Limits
| Property Type | Deduction Limit | Conditions |
|---|---|---|
| Self-Occupied | ₹2 lakh/year | Loan must be taken for purchase/construction, and completed within 5 years |
| Let-Out Property | No upper limit | Full interest on loan allowed |
| Under Construction | ₹2 lakh (post-possession) | Interest during construction can be claimed in 5 equal parts after possession |
Simple Example
- You own a self-occupied flat and pay ₹2.5 lakh/year as loan interest.
- You can claim ₹2 lakh as deduction under Section 24(b).
- The remaining ₹50,000 isn’t allowed (unless property is rented).
Why It Matters
- Reduces your taxable income significantly if you’re paying home loan interest.
- Especially helpful for new home buyers or those with multiple properties.
- Works alongside Section 80C, which gives separate deduction for principal repayment.
Quick Summary
| Section | Covers | Max Deduction | Applies To |
|---|---|---|---|
| 24(a) | 30% of Net Annual Value (NAV) | No limit | Only on rented property |
| 24(b) | Interest on home loan | ₹2 lakh (self-occupied) | Self-occupied or let-out |
| Pre-construction interest | Spread over 5 years | Included in ₹2 lakh limit | After possession only |
