Purchasing a home is a dream for many people. With property prices increasing everywhere, people are getting home loans to fulfil their dream. Although getting a home loan is a hassle-free process these days, it comes with a hefty monthly instalment. The Indian government, in order to reduce the burden, offers tax benefits to individuals against the principal and interest amount paid against the loan. Section 24 of the Income Tax Act, 1961 deals with such deductions and tax benefits on home loans.
Section 24 considers the interest paid against a home loan as a tax deduction. This section is also referred to as “Deductions from income from house property”. Its subsections, 24A and 24B, deal with the deductions taxpayers can claim in different circumstances. The taxpayer necessarily does not have to reside in the property to claim tax deduction.
The circumstances under which income arising from a housing property is considered:
In case the taxpayer rents a house, then the rental income is taken into account.
If the taxpayer is the owner of more than one property, then the Net Annual Value (NAV) of all the properties except his/her residence is considered as an income.
In case the taxpayer is the owner of the house and resides in the same, then the income arising from it is considered to be zero.
There are three types of deductions that are considered under Section 24 of the Income Tax. They are:
Taxpayers who are eligible for this deduction can claim 30% of the NAV. This deduction is applicable regardless of the expenses incurred on maintenance and repair of the house while buying the house. The standard deduction under Section 24 for a self-occupied house is zero as the NAV of a self-occupied property is zero.
Taxpayers have to pay municipal tax every year to the respective municipality of the area. This tax is deducted from the Gross Annual Value (GAV) to derive at the house’s NAV. Homeowners who have paid municipal tax in a fiscal year can claim municipal deductions for that particular year.
Individuals who have taken a housing loan can enjoy a tax deduction of up to ₹2 Lakhs. An individual can also claim up to ₹2 Lakhs while computing his or her total tax under the head of house property. This loan has to be taken to build, acquire, reconstruct or repair the housing property. This deduction is however not applicable for any commission or brokerage that an individual pays to an agent or middleman.
Some of the exceptions under this section are:
The taxpayer has to have the certificate for interest against the housing loan.
Deductions cannot be claimed against brokerage or commission. However, in order to calculate the NAV of the housing property, one can municipal tax from the gross value.
In case the owner does not occupy the house then there is no upper limit to the tax that can be deducted.
In case the owner lives in a rented house instead due to business/employment purpose, then they claim up to ₹2 Lakhs on interest paid to the home loan.
Section 24A has provisions for a flat 30% deduction on NAV of a rented housing property, if the property is bought with the owner’s own funds. However this deduction cannot be claimed if the house owner self-occupies the property. Section 24B provides an opportunity to claim tax deduction even in case of self-occupied housing properties if a housing loan is involved in the equation.
Parameters |
Amount |
Gross Annual Value (GAV) |
₹10.20 Lakhs |
Deducting the municipal tax from the GAV to calculate the NAV |
₹20,000 |
Net Annual Value |
₹10 Lakhs |
Exemptions that are available |
|
30% Standard deduction on NAV u/s 24(A) |
₹3 Lakhs |
Deduction of up to ₹2 Lakhs on interest of home loan paid |
NIL |
Total deduction |
₹3 Lakhs |
For a self-occupied housing property, the net annual value is ‘NIL’. This would result in the loss of the property value. In such a situation, the borrower can claim deductions of up to ₹2 Lakhs on the housing loan interest that is paid in that particular year u/s 24B. If this housing property is generating income, then the total housing loan interest is allowed as a deduction.
Parameters |
Amount |
Gross Annual Value (GAV) |
NIL |
Deducting the municipal tax from the GAV to calculate the NAV |
NIL |
Net Annual Value |
NIL |
Exemptions that are available |
|
30% Standard deduction on NAV u/s 24(A) |
NIL |
Deduction of up to ₹2 Lakhs on interest of home loan paid |
₹2 Lakhs |
Loss from housing property |
₹2 Lakhs |
Kindly note that this amount is restricted to ₹30,000 in case:
The housing loan was taken before the 1st April, 1999.
The loan was used for reconstruction, repair or renovation, even though the loan was taken after 1st April, 1999.
The housing loan was taken on 1st April, 1999, or later, but the housing construction did not complete in 5 years.
Also note that the deduction is not allowed until and unless the homeowner provides the certificate of payment of housing loan interest.
Type of Property |
Property Tax Deduction |
Gross Annual Value |
Standard deduction |
Net Annual Value |
Home loan interest exemption |
Vacant/Self-occupied |
NIL |
NIL |
NIL |
NIL |
₹2 Lakhs |
Rented |
The tax amount paid during the particular year |
The expected rent or the earned rent, whichever is more |
30% of the NAV |
The amount after minusing property tax |
The entire amount that is paid during the particular year |
In order to claim deductions under Section 24 of up to ₹2 Lakhs, the taxpayers have to fulfil the following criteria:
The taxpayer was sanctioned a housing loan on or after 1st April, 1999 to purchase or contract a property.
The taxpayer has to have the certificate of payment of housing loan interest.
The housing property has to be constructed or acquired within five years from the completion of a fiscal year in which the taxpayer borrowed the loan.
The deduction limit is restricted to ₹30,000 in the case of:
In case the taxpayer does not fulfil the aforementioned criteria, he/she can claim a deduction of up to ₹30,000
Taxpayers who were sanctioned the loan before 1st April, 1999 to reconstruct, repair, construct or purchase a new housing property.
Taxpayers who were sanctioned the loan on or after 1st April, 1999 to reconstruct, repair, construct or purchase an existing housing property.
A taxpayer has to pay an interest cost even during the construction period which is called a pre-construction cost. Section 24 has provisions for deduction on pre/post-construction interests.
The conditions mentioned below are applicable:
The deductions against pre-construction interest is limited just like post-construction interest to ₹2 Lakhs.
In case the loan is taken for reconstruction or repair then this tax deduction is not applicable.
This deduction under Section 24 of the Income Tax Act is available in five instalments for every fiscal year. The 1st instalment is accessible in the year in which the housing property is bought or its construction was completed.
Contrary to Section 80C of the Income Tax Act which has deductions on tax on housing loan principal on a ‘payment based’, Section 24 of the Income Tax Act is ‘accrual based’. The interest payment would basically be calculated for every year separately and the deductions can be made even if there were no payments made.
Both these sections allow homeowners to to claim deductions against interest paid for a housing loan. However, both of them have their own applications. They are:
Section 24 is available for all home loan borrowers whereas 80EE is only applicable for first-time/new home buyers.
The loan value is not mentioned for Section 24 whereas Section 80EE is available for loan amount of up to ₹35 Lakhs.
The loan value is not mentioned for Section 24 of the Income Tax Act whereas Section 80EE is available for housing property up to the value of ₹50 Lakhs.
Section 24 is available for loans that were sanctioned after 1st April,1999. Section 80EE is available for loans that were sanctioned after 1st April, 2016 to 31st March, 2017.
An individual can generate income from house property in the following circumstances:
Income Generated From Housing Property |
Case |
Income Amount |
Income from Rent |
The assessee gets income from rent from the tenant |
Rent amount/month - Maintenance charges. |
Self-Occupied |
The assessee resides in the house |
NIL |
Deemed to be let out |
The assessee has more than two housing property |
GAV (deemed income) |
Gross Annual Value or GAV is the income that is accrued yearly from a property whether it is being rented or not. It is a sum of the rent that the taxpayer expects to receive yearly.
To answer your question of “where to find section 24 in ITR”, Section 24 in the ITR form appears under the head “Income from House Property”.
Yes, they are both different sections as Section 24 of the Income Tax Act offers a tax deduction on the payable interest amount and Section 80EE offers tax benefits on home loan interest for first time home buyers. The limit of Section 24 is ₹2 Lakhs, whereas, in Section 80EE it is ₹50,000.
Section 24 provides a tax benefit on the interest amount that one pays on home loans. It also takes into consideration the income from house property and allows a tax deduction.
Any homeowner can claim an income tax deduction under Section 24 up to ₹2 lakh on the home loan interest if the owner or his/her family is residing in the said house. If the house is on rent, the entire interest amount is waived off as a deduction.
Yes, you can claim tax benefits on the interest paid on a home loan before possession under Section 24 of Income Tax Act, 1961.
Yes, if you are able to satisfy all conditions required for both Section 24 and 80EE of the Income Tax Act, you can claim benefits under both sections.