Section 24 of Income Tax Act: Claim Interest Deduction on Home Loans & Save Tax

🏠 Section 24 of Income Tax Act: Claim Interest Deduction on Home Loans & Save Tax

Buying a house with a home loan? Then you’re already paying interest—but here’s the good news: that interest may help you save on taxes.

Section 24(b) of the Income Tax Act, 1961 allows homeowners to claim a deduction on interest paid on home loans, significantly reducing your taxable income.

This section applies whether the property is self-occupied, let-out, or even under construction—subject to some rules. Understanding Section 24 is essential for anyone taking or already repaying a home loan.

✅ What Is Section 24 of the Income Tax Act?

Section 24 falls under the head "Income from House Property", and it allows two types of deductions:

1. Standard Deduction:
   A flat 30% of net annual value of the property (applicable only for let-out property).
2. Interest on Borrowed Capital (Section 24(b)):
   Deduction on interest paid on loans taken for:
   • Purchase
   • Construction
   • Repair
   • Renewal or reconstruction of property

This blog focuses on Section 24(b)—the home loan interest deduction.

💸 How Much Deduction Can Be Claimed Under Section 24(b)?

📌 The ₹2 lakh limit is per taxpayer, not per property. So if both spouses are co-owners and co-borrowers, they can claim ₹2 lakh each, provided all conditions are met.

📅 When Can You Claim the Deduction?

You can claim this deduction only if:

• Loan is taken for purchase or construction of property
• Construction is completed within 5 years from the end of the financial year in which the loan was taken
• Interest certificate is obtained from the lender

If the construction is not completed within 5 years, the deduction is restricted to ₹30,000 instead of ₹2 lakh.

🧾 What Is Pre-Construction Interest?

If you start paying EMIs before the construction of the house is complete, you can accumulate the interest paid before completion, and claim it in five equal installments starting from the year in which construction is completed.

For example:

• Loan taken in FY 2021–22
• Construction completed in FY 2024–25
• Interest paid before completion = ₹3 lakh
• You can claim ₹60,000 every year for 5 years (in addition to regular interest)

🧠 People Also Ask

❓ Can I claim deduction under both Section 24 and Section 80C?

Yes. You can claim:

• Section 24(b) for interest paid (up to ₹2 lakh)
• Section 80C for principal repayment (up to ₹1.5 lakh), stamp duty, and registration charges

❓ Is deduction allowed under the new tax regime?

No. If you opt for the new tax regime (under Section 115BAC), you cannot claim deduction under Section 24(b), 80C, or 80EEA.

❓ What if I have two home loans?

You can claim deduction on both, but subject to:

• Overall cap of ₹2 lakh for self-occupied properties
• Full interest deduction for let-out property (subject to ₹2L set-off cap against other heads)

❓ Do I need to submit any proof while filing the return?

You don’t need to submit proof while filing ITR, but you must keep:

• Interest certificate from lender
• Loan sanction letter
• Completion certificate (for under-construction property)

In case of a tax notice, these documents may be requested.

⚠️ Common Mistakes to Avoid

• Claiming interest deduction without possession
• Not accounting for pre-construction interest
• Claiming interest deduction under new regime (not allowed)
• Filing without interest certificate
• Claiming more than ₹2 lakh deduction for self-occupied house

📌 Where to Show in the ITR?

• Use ITR-1 or ITR-2, based on your income sources
• Report under "Income from House Property" → Interest payable on borrowed capital
• Adjust the loss if applicable, and carry forward unabsorbed loss (up to 8 years)

🎯 Final Thoughts from a CA’s Desk

“Section 24 can help you save up to ₹60,000 in tax every year—but only if claimed correctly with proof and planning.”

Most taxpayers either forget to claim pre-construction interest or wrongly apply the limit to multiple properties. Also, if you’re opting for the new regime, you lose out on this major benefit—so choose wisely based on your actual deductions.

📞 Need Help Claiming Home Loan Deductions or Filing ITR?

At CallmyCA, we help:

• Calculate and claim correct home loan deductions
• Guide on choosing between new vs old tax regime
• File your ITR with full property and loan disclosures
• Avoid mismatch and notices from the tax department

👉 Click here to book your tax filing service via CallmyCA