10/20/22, 12:05 PM Home loan Interest Deduction Under Section 24 of Income Tax - ABC of Money

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Tax Deductions Under Section 24 of Income Tax

for Home Owners
Posted on 10 October 2022  3 UpVotes
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ABC of Money > Money > ABC of Taxes > Tax Deductions Under Section 24 o…
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 For Expert Advice on the Right
and several financial institutions that are providing home loans with easy and convenient EMI
options.

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details below..
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
Which of these Financial Solutions
24 of the Indian Income Tax Act talks about such deductions.

would you like advice on?

WHAT ARE TAXABLE INCOMES FROM HOUSE PROPERTY ? Life Health

Insurance Insurance
As per the Income Tax Act, 1961, the following incomes are taxable under the Income from
house property category.

Business Mutual Fund

Loan
• Rental income from let out property Home Loan Stocks &
Securities
• Annual value of self-occupied property stays Nil All of the
Above
• Annual value of the property that is deemed to be out for income tax purpose.

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WHAT ARE DEDUCTIONS UNDER HOUSE PROPERTY AS PER
SECTION 24? Please enter your lastname

• Municipal tax deduction
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10/20/22, 12:05 PM Home loan Interest Deduction Under Section 24 of Income Tax - ABC of Money

The annual amount paid to the municipal corporation of the area is the municipal tax. These taxes are
to be deducted from the gross annual value to get the net value of the house property. Deduction on Enter your Email ID
municipal tax is granted if it is borne by the house owner and paid during that financial year.

• Standard deduction  Enter your Pin Code

30% of the net annual value calculated is standard deduction. This is allowed when your expenditure on
the property is higher or lower as well. It is irrespective of the expenditure that you incur on insurance,
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electricity, repairs, water supply, etc. The annual value is Nil for self-occupied property, and the
OTP
standard deduction is zero in that case.

• Deduction of interest on home loan for property  Enter OTP

Homeowners get to claim a deduction of up to ₹2 lakh on the home loan interest if their own family
resides in that property. The same is applied when the house is vacant. In case you let out the property
on rent, the entire interest on the home loan is allowed as a deduction. I agree to the Terms &
Conditions
*All fields are mandatory.
PRE CONSTRUCTION INTEREST ON HOME LOAN
You can claim a deduction on the interest of pre-construction when you take a loan for buying I WANT TO BUY
or constructing a house property. However, you cannot claim in case of repair or
reconstruction. The total amount of pre-construction, including the interest on the housing
loan to be claimed, should not exceed ₹2 lakh. The deduction on this interest is allowed in five
equal instalments.

CONDITIONS FOR CLAIMING DEDUCTION ON HOME LOAN

One must meet all of the following conditions to claim this deduction.

Trending Articles
• The loan must be taken after the 1st of April 1999 for purchase or construction purpose.

• The construction or acquisition must be completed within 5 years. TRENDING IN MONEY

• For interest payable on the loan there is an interest certificate offered. Interest deduction may be
Tax Deductions Under Section 24
limited to ₹30,000 in the following cases: of Income Tax for Home Owners
Section 24 of the Indian Income Tax Act,
• The loan is borrowed before 1st April 1999 for purchase, repair, reconstruction, construction 1961 allows the taxpayer to claim…
purpose.
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• The loan is borrowed on or after 1st April 1999 for purchase, repair, reconstruction, construction
purpose.
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Gross annual Value (Rent NIL 84,000 A lot of people invest in a life insurance
paid- 7000*12) policy, but not many understand the pros…
Less: Municipal Taxes or NA 3,000
Taxes paid to local  4 UpVotes
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authorities
Net Annual Value(NAV) NA 81,000
Less: Standard NA 24,300 TRENDING IN INVESTING
Deduction(30% of NAV)
Less: Interest on Housing 200,000 200,000 How does a provident fund work
Loan – Known the Steps Involved
Less: Pre-construction 60,000 60,000 Learn more about the Employee Provident
interest (1/5th of 3 Lakhs) Fund or EPF and how the provident fund…
Income from House Property (260,000) (203,300)  4 UpVotes
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Overall loss restricted to (200,000) (200,000)

Note: The maximum loss set-offs allowed in one financial year is limited up to ₹2 lakh.

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10/20/22, 12:05 PM Home loan Interest Deduction Under Section 24 of Income Tax - ABC of Money

Income Tax Benefit

Tax Saving Investment

Tax Saving Investments Under

80C

WHAT IS SECTION 24 OF INCOME TAX? What is Tax

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 ABC OF CALCULATORS
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
HOME LOAN EMI CALCULATOR 
circumstances.

• If you are renting a house, then the rent amount is considered income. PERSONAL LOAN EMI CALCULATOR 

• If you have more than one house, then the net annual value of all the houses is considered as income. BUSINESS LOAN EMI CALCULATOR 

SIP CALCULATOR 
However, if an individual has only one house and is living in that one, then the income from
that property is considered nil.

MUTUAL FUND LUMPSUM CALCULATOR



Read also : Home Loan Tax Benefit Under Section 24

HOME LOAN ELIGIBILITY CALCULATOR

DEDUCTIONS UNDER SECTION 24 OF INCOME TAX PERSONAL LOAN ELIGIBILITY

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

Standard deduction under section 24:

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 home 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 BEFORE CLAIMING THE

MAXIMUM DEDUCTION ON HOME LOAN:
• 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.

WHAT IS SECTION 24 OF THE INCOME TAX ACT?

For many Indians, having their own home is a dream come true. As real estate prices rise
quickly, it is becoming more difficult to own a home without a mortgage. Obtaining a home loan
from a bank or other financial organisation is very simple. However, the loan has a high EMI,
which comprises interest and principal.

The Indian government recognises the individual's suffering. Hence, it offers a tax break against
the principal and interest payments. Such tax advantages or deductions for house loan interest
are covered by Section 24 of the Income Tax Act.

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10/20/22, 12:05 PM Home loan Interest Deduction Under Section 24 of Income Tax - ABC of Money

The interest that a person pays on house or property loans is covered by Section 24 of the
Income Tax Act. The phrase "Deductions from income from dwelling property" appears in this
section. Loan interest and standard deduction are both allowable deductions.

You are eligible for tax exemptions under a number of sections of the Income Tax Act for
particular investments and expenses. The purchase of residential property is one of the assets
that the Act frequently emphasises. Numerous investments made to purchase your first house
are exempt from taxes since the government acknowledges that housing is one of the most
significant requirements and an asset.

Section 24, which enables you to request exemptions on the interest that you pay on house
loans, is crucial when it comes to mortgages. You can also claim tax advantages for paying
back the principal through Section 80C.

"Deductions from income from house property" is the title of Section 24. In the following
circumstances, income from residential property is applicable:

a) If you rent out your home(s), then the rent you receive will be counted toward your income.

b) If you own more than one home, then the Annual Net Value of all of your homes—aside
from the one you live in—will be counted toward your income.

If you just have one home and live there, then the income from that property will be deducted
from your total income. After Section 24 deductions are taken into account, all rental income,
as well as the annual value of additional homes, will be taxed.

WHAT ARE THE DEDUCTIONS UNDER SECTION 24 OF THE

INCOME TAX ACT?
According to Section 24 of the Income Tax Act, there are two different tax deductions:

a) Amounts up to 30% of the net yearly value are exempt from taxation under this exemption,
which is available to all taxpayers. If you live in the sole residence you own, then this rule does
not apply to you.

b) Interest paid on loan: If you borrowed money to buy, build, or renovate a home, then the
interest you paid on the loan's principal amount is not subject to taxation. Subclauses in this
group include:

1) You may be eligible for exemptions of up to Rs. 2 Lakhs if the loan was taken for a self-
occupied property.

2) You could still claim the interest if you borrowed money to build or buy a property (not
renovate), even if you didn't really build or finish building it. In five equal instalments starting
in the year the house is purchased or the construction is finished, you can claim a deduction
for the interest paid before the purchase or construction is finished.

3) You cannot claim a tax exemption for a loan used to renovate or rebuild a home until the
work is finished.

In order to qualify for this deduction, you must separately calculate the interest payment you
need to make to the bank or other financial institution from which you borrowed the money.
You are eligible for an exemption for the total annual interest amount whether or not you have
paid the financier the specified sum.

WHAT ARE THE EXCEPTIONS UNDER SECTION 24 OF THE

INCOME TAX ACT?
Here are the exceptions under Section 24:

a) If the home is vacant, then you are eligible for an exemption from payment of any interest,
up to an unlimited amount.

b) Consider a scenario in which you do not reside in the home because you work or conduct
your business in another town, and you instead buy or rent a home at the location of your
employment. Then, you may only claim Rs. 2 Lakhs tax exemption on interest payments.

c) For securing the loan or renter, there is no deduction for brokerage or commission.

d) For you to be eligible to deduct the maximum amount of loan interest, you must purchase
the house or finish building it within three years of availing of the loan. You can only claim Rs.
30,000 rather than Rs. 2 Lakhs if the construction or acquisition is not finished within three
years.

e) For the loan you are taking, an interest certificate is required.

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10/20/22, 12:05 PM Home loan Interest Deduction Under Section 24 of Income Tax - ABC of Money

WHAT ARE THE CONDITIONS FOR CLAIMING INTEREST ON

HOME LOAN?
To be eligible for this deduction, you shall satisfy the three requirements listed below.

a) After April 1, 1999, the purchase or construction for which the loan was obtained.

b) The acquisition or construction is finished within five years (3 years until FY 2015–16)
following the end of the fiscal year in which the loan was taken.

c) An interest certificate for the loan is easily accessible. Your interest deduction can be limited
to Rs. 30,000 if one or more of these conditions is true.

1) The real estate was purchased, constructed, repaired, or rebuilt with the loan before April 1,
1999.

2) The loan is obtained on or after April 1, 1999, and is employed to purchase, construct,
renovate, or rehabilitate real estate for a residence.

WHAT IS SECTION 80EE OF THE INCOME TAX ACT?

In accordance with Sections 24 and 80EE of the Income Tax Act, taxpayers may claim an extra
deduction of up to Rs. 50,000 by meeting specified requirements.

An assessee may claim a tax deduction for loan interest paid when determining total income.
But only under the following circumstances:

a) A home loan is obtained just to buy a residence for personal use.

b) The taxpayer shall not have any other residential property as of the sanction date.

c) They obtain a loan from a financial institution to purchase a residential home.

d) The loan must be approved between the dates of April 1, 2016, and March 31, 2017,
inclusive.

g) The house's total property worth is less than Rs. 50 Lakhs.

f) The loan sanction amount for the purchase of a residential home property is less than Rs. 35
Lakhs

Both sections allow an assessee to make a tax deduction claim. You just need to meet the
requirements in both areas. First, make a claim for up to Rs. 2 Lakhs in tax advantages under
Section 24. Additionally, utilise Section 80EE to collect the subsequent Rs. 50,000 in home
loan interest. You can ensure you receive a deduction of a total of Rs. 2,50,000 in interest this
way.

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DISCLAIMER

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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