Homeā€ŗGlossaryā€ŗSection 24(b)

Section 24(b)

Tax

Home Loan Interest Deduction under Section 24(b)

An income tax deduction on the interest paid on a home loan, up to ā‚¹2 lakh per year for self-occupied property. For let-out property, the full interest is deductible with no upper limit.

Definition

Section 24(b) of the Income Tax Act allows a deduction on the interest paid on a home loan, reducing the taxable income of property owners. It is one of the most valuable tax deductions available to home loan borrowers.

The deduction works differently based on how the property is used:

  • Self-occupied property: Deduction limited to ā‚¹2 lakh per financial year on interest paid
  • Let-out (rented) property: Full interest deductible with no upper cap

Section 24(b) is separate from Section 80C ā€” which covers the principal repayment. Together, they form the complete tax benefit framework for home loan borrowers under the old tax regime.

Formula

Interest component of EMI (from amortisation schedule):

Deduction = min(Actual Interest Paid, ā‚¹2,00,000) ā€” for self-occupied property

Deduction = Actual Interest Paid ā€” for let-out property (no cap)

In early years of a home loan, the interest component is large. Use the home loan EMI calculator or amortisation calculator to see the interest vs principal split for each year.

Worked Example

Vikram has a home loan of ā‚¹60,00,000 at 8.75% for 20 years. In the first year:

  • Annual EMI payments ā‰ˆ ā‚¹6,36,000
  • Interest component in Year 1 ā‰ˆ ā‚¹5,19,000
  • Principal repaid in Year 1 ā‰ˆ ā‚¹1,17,000

Tax benefits (old regime):

  • Section 24(b) deduction: min(ā‚¹5,19,000, ā‚¹2,00,000) = ā‚¹2,00,000
  • Section 80C principal deduction: ā‚¹1,17,000

Total home loan tax deductions in Year 1 = ā‚¹3,17,000

At 30% tax slab, this saves ā‰ˆ ā‚¹99,000 in tax (including cess) ā€” nearly 2 months of EMI recovered as tax savings.

Key Things to Know

  • Joint home loan ā€” double benefit: If a home loan is taken jointly (e.g., husband and wife, both co-owners), each co-borrower can claim up to ā‚¹2 lakh separately under Section 24(b) and up to ā‚¹1.5 lakh under Section 80C ā€” effectively doubling the household tax benefit to ā‚¹7 lakh per year.
  • Possession mandatory: Section 24(b) deduction is available only after the property is ready for possession. For under-construction properties, interest during construction is accumulated as pre-construction interest and spread over 5 years from the year of possession.
  • Second home: If you own a second property and it is declared as let-out (or deemed let-out), the full interest on that property's loan is deductible ā€” but any net loss from house property can only be set off against ā‚¹2 lakh of other income per year. The remaining loss is carried forward for 8 years.
  • Amortisation schedule significance: The interest eligible for Section 24(b) changes every year ā€” it is highest in Year 1 and reduces as the loan amortises. Your bank's loan statement (or our amortisation calculator) shows the exact interest paid each financial year.
  • Not available under new regime for self-occupied: This is a key reason many home loan borrowers with high interest outgo prefer the old tax regime ā€” the combined 80C + Section 24(b) benefit of up to ā‚¹3.5 lakh can outweigh the lower slab rates of the new regime.

Related Calculators

Home Loan EMI Calculator ā†’Calculate your home loan EMI, total interest, and amortisation schedule instantly. Built for Indian borrowers ā€” results in seconds.
Income Tax Calculator ā†’Calculate income tax for FY 2025-26 under old and new tax regimes. Includes 87A rebate, surcharge, cess, and deductions (80C, 80D, HRA). India income tax.
Loan Amortization Calculator ā†’Generate a complete loan amortization schedule with monthly principal and interest breakdown. See exactly how your home loan, car loan, or personal loan gets paid off.

Related Terms

EMIEquated Monthly InstalmentSection 80CSection 80C ā€” Income Tax DeductionAmortisationLoan AmortisationLTVLoan-to-Value Ratio
Frequently Asked Questions
What is the maximum deduction under Section 24(b)?
For a self-occupied property, the maximum deduction on home loan interest under Section 24(b) is ā‚¹2 lakh per financial year. For a let-out (rented) property, there is no upper limit ā€” the full actual interest paid is deductible. However, the overall loss from house property that can be set off against other income is capped at ā‚¹2 lakh per year.
Is Section 24(b) available under the new tax regime?
Section 24(b) deduction on interest for a self-occupied property is NOT available under the new tax regime. However, for a let-out property, the interest deduction under Section 24(b) continues to be available even under the new tax regime, as it is treated as a business expense against rental income.
What is pre-construction interest and how is it treated?
Pre-construction interest is the interest paid on a home loan from the date of loan disbursement until the property is ready for possession (under-construction period). This pre-construction interest is not deductible in those years. Instead, it is aggregated and allowed as a deduction in equal instalments over 5 financial years starting from the year of possession, subject to the ā‚¹2 lakh annual cap.
Can I claim both Section 80C and Section 24(b) on the same home loan?
Yes. Section 80C covers the principal repayment component of the home loan EMI (up to ā‚¹1.5 lakh), while Section 24(b) covers the interest component (up to ā‚¹2 lakh for self-occupied). Together, they allow a combined deduction of up to ā‚¹3.5 lakh on the same home loan ā€” making homeownership very tax-efficient in the old regime.
What if my home loan interest exceeds ā‚¹2 lakh for a self-occupied property?
For a self-occupied property, you cannot claim more than ā‚¹2 lakh deduction on home loan interest regardless of how much interest you actually pay. The excess cannot be carried forward or used in any other way. However, if you have a second property declared as let-out, you can claim the full interest on that property's loan without a ā‚¹2 lakh cap.