Home Loan Interest Deduction Under Section 24

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.

Understanding 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 Features of Section 24

• Deduction on Home Loan Interest: Homeowners can claim a deduction of up to INR 2 lakh on the interest paid towards a Home Loan for a self-occupied property. For rented properties, the entire interest amount paid is eligible for deduction.
• Standard Deduction: You are allowed to make a standard deduction of 30% off the net annual value of the property. You can take this deduction for maintenance and repairs, regardless of the amount spent. However, this applies only to properties that are not self-occupied.

Conditions to Avail Deductions under Section 24

To benefit from the deductions under Section 24(b) of the Income Tax Act, certain conditions must be met:

• Loan Purpose: The Home Loan should be taken for the purchase, construction, repair, renewal, or reconstruction of a residential property.
• Completion Timeline: If construction or acquisition of self-occupied property is not completed within 5 years from the end of the financial year in which the loan is taken, the limit for deduction is reduced to INR 30,000.
• Interest Certificate: Before a deduction can be claimed by a homeowner, he/she must acquire a certificate of interest from the lender containing the sum of interest chargeable per year.

Pre-Construction Interest

Deductions can also be claimed for interest paid during the pre-construction phase. The deduction should be available in 5 equal instalments from the year construction is completed or property is obtained. The limit is INR 2 lakh for self-occupied houses, which applies to the total deduction, including pre-construction interest.

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

Recent Developments

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 applying for a Home Loan with favourable interest rates and terms.

Moreover, use an 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.