Section 24(b) of Income Tax Act: Maximize Your Home Loan Tax Benefits

Introduction: Why Section 24(b) Matters

Home loans have become an essential financial tool in today’s housing market, helping millions of Indians fulfil their dream of owning a house. But beyond ownership, one of the key tax-saving opportunities lies in Section 24(b) of the Income Tax Act. This section permits deductions on the interest of a loan taken for the purchase, construction, repair, renewal, or reconstruction of a residential property.

Whether your property is self-occupied or generates rental income, Section 24(b) provides an efficient way to reduce your taxable income. In this article, we’ll break down the eligibility, limits, and practical aspects of using Section 24(b) to your financial advantage. "

What is Section 24(b) of the Income Tax Act?

Section 24(b) falls under the broader category of “Income chargeable under the head 'Income from house property'.” This provision is focused exclusively on allowing interest deductions paid on home loans.

If you have taken a home loan, this section allows you to claim a deduction up to ₹2 lakh annually on the interest portion of the loan repayment for a self-occupied residential property. For let-out properties, there's no upper limit on interest deductions, making it highly beneficial for landlords and real estate investors. "

Key Highlights of Section 24(b)

Let’s look at some of the key benefits and rules:

• Self-Occupied Property: For individuals owning a residential property that generates rental income or is self-occupied, Section 24(b) still applies.
• Dedication Limit: It offers annual deductions up to Rs. 2 lakh for repayment of home loans on self-occupied property.
• Let-Out Property: For let-out or rented properties, there is no cap on the interest amount that can be claimed, though loss from house property is restricted to ₹2 lakh in the overall income tax return.
• Under Construction Property: Interest paid during construction is also deductible, but only in five equal instalments starting from the year construction is completed.
• Multiple Properties: If you own multiple homes, only one can be treated as self-occupied (as per older tax rules), & others are considered deemed to be let-out unless exempted under recent amendments.

Eligibility Conditions Under Section 24(b)

To avail the benefits of deduction under Section 24(b) of the Income Tax Act, the following conditions must be met:

1. Purpose of Loan: The home loan should be for the purchase, construction, repair, or renovation of residential property.
2. Completion of Construction: To claim the ₹2 lakh deduction, the construction should be completed within 5 years from the end of the financial year in which the loan was taken.
3. Loan Source: The loan should be taken from a recognised financial institution, bank, or housing finance company.
4. Documentation: The interest certificate from the lender must be retained as proof while filing returns.

Section 24(b) in Different Assessment Years

Section 24(b) has been consistently referenced in different assessment years (AY):

• Section 24(b) of the Income Tax Act ay 2022-23
• Section 24(b) of the Income Tax Act ay 2023-24
• Section 24(b) of the Income Tax Act ay 2024-25

This consistency across years ensures long-term reliability for those who plan on repaying their loans over an extended period.

Section 24(b) in the New Tax Regime

One important caveat: under the new tax regime, introduced in Budget 2020 and continuing into section 24(b) in the new regime, most exemptions and deductions — including this one — are not allowed. So if you're opting for the new regime, you cannot claim the Section 24(b) benefit. Hence, it’s vital to assess whether the old or new regime suits your income structure & housing loan situation better.

How to Claim the Deduction

Here’s how you can claim your deduction under section 24(b) of the Income Tax Act:

1. Obtain Interest Certificate: Your bank or lending institution will provide this document, showing the total interest paid.
2. Declare Income: In your ITR, report income under “Income from House Property.”
3. Fill Details Carefully: Mention the interest deduction under the appropriate section while calculating your gross total income.

Difference Between Section 24(b) and Section 80EE

If you're a first-time homebuyer, you may also qualify for Section 80EE, which provides additional benefits on top of Section 24(b). Here's a quick comparison:

Knowing this difference helps you maximise your total home loan interest deductions.

Conclusion: Make the Most of Section 24(b)

In conclusion, Section 24(b) of the Income Tax Act is a powerful tool for homeowners to reduce their taxable income significantly. Whether your property is let out or self-occupied, it simplifies claiming tax benefits on your home loan interest & helps you save up to ₹2 lakh annually.

So, if you’re servicing a housing loan, make sure you don’t miss out on this deduction. Understanding and using Section 24(b) wisely can go a long way in helping you manage your finances, invest smartly, & reduce your overall tax burden.