Section 24: Interest on Home Loan

Section 24: Interest on Home Loan

Section 24 of the income tax act,1961 defines that any individual can claim tax deductions on the interest paid for the property or home loans.

Section 24 is also known as ‘ Deductions From Income From House Property’.

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Section 24

Section 24 states that one can get tax deductions due on interest paid for the property or home loans. There are two components of a house loan – the interest and principal amount. Both of these are calculated differently for tax calculations.

Section 24 deals with the taxation area of the home loan’s interest. The maximum tax deduction limit under this section is Rs 1,50,000 and one does not have to reside in the house from which the tax is claimed on.

The income from the residential property is considered as given below-

  • If the individual rents the property, the rent acquired from the property is considered a part of income.
  • If a person has more than one property, then the net value of all the property except the property in which the person lives is considered the individual’s income.
  • Whereas, the individual who has one property and resides in it the income is therefore considered to be NIL.

Deductions From Income Tax Under Section 24

  • Municipal Tax – This is the yearly sum paid to the city company of that space. Civil duties are to be deducted from the Gross Annual worth to infer the house property’s net yearly worth. Derivation of civil expense is permitted just if it has been borne by the proprietor and paid during that financial term under section 24.
  • Standard Deduction Standard Deduction is 30% of the Net Annual Value determined previously. This 30% derivation is permitted in any event, when your genuine consumption on the property is sequential. Subsequently, this derivation is regardless of the real consumption you might have caused on protection, fixes, power, water supply, and so on for a self-involved house property since the Annual Value is Nil, the standard allowance is likewise zero on such a property
  • Allowance of Interest on Home Loan for the property – Homeowners can guarantee a derivation of up to Rs.2 lakh on their home advance interest if the proprietor or his family dwells in the house property. A similar treatment applies when the house is empty. If you have leased the property, the whole interest on the home advance is permitted as a derivation under section 24. Your allowance on interest is restricted to Rs.30,000 if you neglect to meet any of the conditions given underneath for the Rs.2 lakh discount.-
  1. The home credit should be for the buy and development of the property.
  2. The credit should be taken on or after 1 April 1999.
  3. The buy or development should be finished within a long time from the finish of the monetary year in which the credit was taken.

Conditions To Claim Deductions Under Section 24

  • The loan has been taken after April 1999 for buy or development
  • The procurement or development is finished inside 5 years (3 Years till FY 2015-16) from the finish of the monetary year where the advance was taken
  • There is an interest certificate guaranteed for the interest payable on the advance. Note that your interest allowance might be restricted to Rs 30,000 if any of these conditions are met –
  1. The loan is acquired before 1 April 1999 for procurement, development, fixes, or remaking of house property
  2. The loan is acquired on or after 1 April 1999 for procurement, development, fixes, or reconstruction of house property.

Calculation Of Income Under House Property

Say, an individual reimburses a lodging loan of Rs 4 lakh yearly out of which Rs 2 lakh is the interest segment. He has additionally brought about a pre-development interest of Rs 3 lakh. He is procuring Rs 7000 month to month from a let-out property and pays city duties of Rs 3000 for the house. We should figure his Income from house property in both situations: 1. He has a self-involved property, or 2. The property is leased.

Type of House Property Self residence Rented property
The gross annual value of the property (Rent paid- 7000*12) NIL 84,000
Less: Municipal Taxes (Taxes paid to local authorities) NA 3,000
Net Annual Value(NAV) Nil 81,000
Less: Standard Deduction(30% of NAV) NA 24,300
Less: Interest on Housing Loan 200,000 200,000
Less: Pre-construction interest (1/5th part of 3 Lacs) 60,000 60,000
Income from House Property (260,000) (203,300)
Overall loss (200,000) (200,000)


Nikita Dhyani

Nikita Dhyani is a Content Writer at Ionic Digitech. A passionate content writer and has been using her content writing skills to develop various content related to financial and business-related topics. She has done BAJMC (Bachelors in media and mass communication and journalism) from Graphic Era University. Her specialties include - Content creation, Content development, Media managing, Communications skills.

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