What is Section 24(b)?
Section 24(b) of the Indian Income Tax Act lets borrowers deduct home loan interest from taxable income. Self-occupied properties get a maximum of INR 2,00,000 per financial year. Let-out properties have no cap on the interest itself but loss set-off is limited to INR 2 lakh per year. Old Regime only.
Detailed definition
Section 24(b) is the workhorse home loan interest deduction in India, applied against Income from House Property under Chapter IV-C of the Income Tax Act 1961. The deduction reduces the gross annual value of the property, and any resulting loss can be set off against other heads of income (subject to limits) in the same year, making housing loans one of the most tax-efficient ways to own a primary residence. The cap was raised from INR 1.5 lakh to INR 2 lakh in the Finance Act 2014; the New Tax Regime under Section 115BAC (default from FY 2023-24 after Budget 2024) removed the deduction for self-occupied properties while retaining it for let-out.
Self-occupied properties (where you live yourself) have an annual interest deduction cap of INR 2,00,000 if the loan was taken after 1 April 1999 and the property was completed within 5 years from the end of the financial year in which the loan was disbursed. The cap drops to INR 30,000 if these conditions are not met, which is the original 1986 limit kept as a punitive baseline. Pre-construction interest (paid before possession) can be claimed in 5 equal instalments starting from the year of possession, with the total still subject to the INR 2 lakh annual cap.
Let-out properties have no cap on the deduction itself; the full interest paid is allowed against rental income. However, the resulting loss (rental income minus standard 30% deduction minus interest) can only be set off against other income heads up to INR 2,00,000 per year, a restriction added in the Finance Act 2017 to plug a popular high-leverage tax shelter where investors bought multiple properties on loan and set off unlimited losses against salary. Any excess loss can be carried forward 8 years and set off only against future house-property income, which means the carry-forward is useful only if you continue to own income-producing real estate.
Joint loans amplify the benefit. If both spouses are co-owners and co-borrowers, each can independently claim Section 24(b) up to INR 2 lakh per year (combined INR 4 lakh) and Section 80C principal up to INR 1.5 lakh each (combined INR 3 lakh). The structure requires both to actually pay EMIs from their own bank accounts in proportion to their ownership; co-ownership without co-borrowing, or vice versa, breaks the dual claim.
Formula
Income from House Property = (Gross Annual Value - Property Tax) x (1 - 30%) - Interest on Home Loan
- Gross Annual Value = Higher of expected rent or actual rent received (zero for self-occupied)
- Property Tax = Municipal tax paid in the year
- 30% Standard Deduction = Statutory deduction for repairs and maintenance (does not apply to self-occupied)
- Interest on Home Loan = Interest paid during the financial year - capped at INR 2 lakh for self-occupied
Worked example
Suppose you have a home loan of INR 50 lakh at 9% interest and pay INR 4,50,000 of interest in FY 2024/25 on your self-occupied home. You are in the 30% slab under the Old Regime.
- Total interest paid in FY 2024/25: INR 4,50,000
- Section 24(b) cap for self-occupied: INR 2,00,000
- Deductible interest under 24(b): INR 2,00,000
- Loss from house property: INR 2,00,000
- Tax saved at 30% + 4% cess: INR 2,00,000 x 31.2% = INR 62,400
Related terms
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Frequently asked questions
What is the Section 24(b) interest deduction limit?
For a self-occupied property, the maximum interest deduction under Section 24(b) is INR 2,00,000 per financial year. For a let-out property, the full interest is deductible, but the set-off against other income is capped at INR 2 lakh.
Is Section 24(b) available in the New Tax Regime?
Only for let-out properties. The Section 24(b) interest deduction for self-occupied properties was removed in the New Tax Regime under Section 115BAC.
What is pre-construction interest under Section 24(b)?
Interest paid before the financial year in which possession is taken is called pre-construction interest. It can be claimed in 5 equal annual instalments starting from the year of possession, subject to the overall INR 2 lakh cap (self-occupied).
Can I claim Section 80C principal and Section 24(b) interest together?
Yes. The principal repayment of a home loan qualifies under Section 80C (within the INR 1.5 lakh cap) and the interest qualifies under Section 24(b) (within INR 2 lakh for self-occupied) - they are independent deductions.
What if I have two home loans?
You can claim Section 24(b) on both, but the INR 2 lakh self-occupied cap applies overall to the property you designate as self-occupied. The other property is deemed let-out unless you treat one as truly let-out with rental income.
Can I claim Section 24(b) for a property under construction?
Yes. Interest paid during the construction period (pre-construction) can be claimed in 5 equal instalments starting from the year of possession. The property must be completed within 5 years of loan disbursement to keep the full INR 2 lakh cap.
How does Section 24(b) work for joint home loans?
If both spouses are co-owners and co-borrowers, each can claim Section 24(b) up to INR 2 lakh per year individually (combined INR 4 lakh) and Section 80C principal up to INR 1.5 lakh each (combined INR 3 lakh), provided each pays from their own bank account in their share of ownership. Co-ownership without co-borrowing, or vice versa, breaks the dual-claim structure.
Does the Section 24(b) limit change if I rent the property out?
Yes. The INR 2 lakh hard cap is on self-occupied properties only. For let-out properties, you can deduct the full interest paid against rental income, with the resulting loss set off against other heads up to INR 2 lakh per year. Excess loss carries forward 8 years against future house-property income only, which is why high-interest, low-rent loans often benefit from a 'let out at notional rent' structure under earlier rules (now mostly closed).