Section 24 of Income Tax (I-T) Act is among many provisions that help taxpayers in India to save taxes. Section 24 is meant specifically to cut down on tax imposed under ‘Income from House Property’.
What is Section 24 of the Income Tax Act?
While Section 24 of the I-T Act provides for levying tax on rental income from the property belonging to owners under income from house property, its sub- sections – Section 24A and Section 24B – talk about deductions they can claim in two different scenarios.
See also: Know more about income tax on cooperative housing society
Applicability of Section 24A: Standard deduction
Section 24A provides a flat 30% deduction on net annual value of the rented property if the property is bought using the owner’s own money. So, if Ram bought a house and gave it on rent for an annual rent of Rs 1,00,000, he can claim tax deduction of Rs 30,000. However, claiming deduction under Section 24A will not be possible if Ram self-occupies the property. However, Section24B gives you a window to claim deduction in case of self-occupied properties too, provided housing loan is involved.
Applicability of Section 24A on rented property: Deduction against home loan interest payment
| Particulars | Amount |
| Gross annual value (GAV) | Rs 10.20 lakh |
| Deduct from GAV the municipal tax to arrive at net annual value (NAV) | Rs 20,000 |
| NAV | Rs 10 lakh |
| Exemptions available | |
| Standard deduction of 30% on NAV under Section 24(A) | Rs 3 lakh |
| Deduction of up to Rs 2 lakhs on home loan interest paid | NIL |
| Total deduction | Rs 3 lakh |
Applicability of Section 24B
In case of self-occupied property, its annual value is considered as ‘nil’. This would, in fact, result in loss for the property. In such a case, the borrower can claim tax deduction of up to Rs 2 lakh on home loan interest paid in a financial year under Section 24B. In case the property is generating rental income, the entire home loan interest component is allowed as deduction.
Applicability of Section 24 of I-T Act on self-occupied house property
| Particulars | Amount |
| Gross annual value (GAV) | Nil |
| Deduct from GAV the municipal tax to arrive at net annual value (NAV) | Nil |
| NAV | Nil |
| Exemptions available | |
| Standard deduction of 30% on NAV under Section 24(A) | Nil |
| Deduction of up to Rs 2 lakhs on home loan interest paid | Rs 2 lakh |
| Loss from house property | Rs 2 lakh |
Note, this deduction would be restricted to Rs 30,000 only, in case:
- The home loan was taken before April 1, 1991.
- The loan is used for repairs, renewal, or reconstruction, even though it was borrowed after April 1, 1991
- The loan was taken on April 1, 1991, or after that, but house construction was not completed in five years. So, if the loan was taken on April 1, 2022, the house must be completed by March 31, 2027. In such case, the deduction amount is reduced to flat Rs 30,000.
Also note, this deduction will not be allowed unless you provide a certificate about the home loan interest payment from your lender.
“No deduction shall be made … unless the assessee furnishes a certificate, from the person to whom any interest is payable on the capital borrowed, specifying the amount of interest payable by the assessee for the purpose of such acquisition or construction of the property, or conversion of the whole or any part of the capital borrowed which remains to be repaid as a new loan,” reads Section 24.
Applicability of Section 24 on rented property purchased using home loan
In case you have taken a home loan to buy a property and have now given it on rent, the entire amount paid as the home loan interest component can be claimed as deduction under Section 24.
Sec 24: Various scenarios
| Property type | GAV | Deduction for property tax | NAV | Standard deduction | Exemption on home loan interest |
| Self-occupied/vacant | Nil | Nil | Nil | Nil | Rs 2 lakhs |
| Rented | The rent earned or the expected rent, whichever is higher | The amount paid during the year | The amount after subtracting property tax | 30% of NAV | Entire amount paid during the year |
Section 24 versus Section 80C
Unlike Section 80C, which offers tax deduction on home loan principal component on a ‘payment basis’, Section 24 allows deductions on an ‘accrual basis’. Basically, interest payment would be calculated for each year separately and deductions can be claimed, even if no actual payment has been made.
Section 24 and Section 80EE of Income Tax Act
Both the sections allow homebuyers to claim tax deductions against home loan interest paid. But, they are quite different in their application.
- Section 24 is applicable on all borrowers. Section 80EE used to apply only to first-time homebuyers.
- Section 80EE is applicable for property value of up to Rs 50 lakh. The loan value is not specified under Section 24.
- Section 80EE is applicable for loan amount of up to Rs 35 lakh. The loan value is not specified under Section 24.
- Section 80EE was applicable on home loans taken between April 1, 2016, to March 31, 2017. Section 24 is applicable on loans taken after April 1, 1999.
See also: All about Section 80EEA
Must-know facts
What is Income from House Property?
Income from house property is the rent generated by letting building or land. This income is taxed under Section 24 of the income tax law in India in the hands of the owner. The head under which this income is taxed is called “Income from house property”. Rent generated by letting out vacant land is not taxed under this category, but under the head ‘Income from Other Sources’. Income from house property is charged only on land which forms part of a building —a parking lot, for instance.
What is Gross Annual Value?
Goss annual value is the yearly income that can be earned from a property whether or not it is rented.
FAQs
How much interest on housing loan can be claimed as deduction under Section 24?
What is the maximum deduction limit under Section 24?
The maximum deduction limit under Section 24 could either be 30% of GAV of the rented property, or Rs 2 lakh-deduction against home loan interest payment of self-occupied property, or The entire home loan interest payment in case of rented properties.
When it comes to home loan, what is the difference between Section 80C and Section 24?
