Section 24B: Tax deduction against home loan interest payment

In India, tax deductions are available against home loan principal as well as home loan interest payments under different sections of the income tax law. Section 24B is among the multiple provisions in the income tax law that talk about tax deductions against home loan interest payments. Additional tax deduction against home loan interest payment is also offered under Section 80EE and Section 80EEA. A tax deduction of Rs 1.50 lakh on home loan principal payment in a year is allowed under Section 80C.

 See also: Tax deduction against rent paid: Section 80GG vs Section 10(13A)

Section 24B: Applicability 

Home loan repayment has two components: principal and interest. Section 24B deduction is available on home loan interest payments only.

 See also: Section 24 of income tax law

Section 24B: Deduction amount

Section 24B provides for tax deductions of varying amounts, based on the type of the property and its use. 

Rs 2 lakh in a year

Borrowers can claim a tax deduction of up to Rs 2 lakh in a year under section 24B of the income tax law if:

• The property is self-occupied. This rules out an application on rented property.
• The home loan was borrowed on or after April 1, 1999. 
• The house is purchased or constructed within 5 years of taking the loan. 

Rs 30,000 in a year

A home loan borrower can claim only Rs 30,000 lakh as tax deduction against home loan interest payment if the loan has been taken for repairs and renovation work. Deduction for interest on home loan will be limited to Rs 30,000 in the following circumstances, too:

• If the loan is sanctioned before April 1, 1999, to buy or build a property
• If the loan is sanctioned on or after April 1, 1999, but construction of the house is not completed within 5 years from the end of the previous year in which the loan was borrowed.

Entire interest paid in a year

The whole amount paid as home loan interest in a year will be allowed as a deduction for rented properties. This rule is applicable whether the loan is taken for a home purchase, home construction, home repairing or home re-construction.

Section 24B deduction against multiple properties

From Assessment Year 2020-21, Section 24B deduction is allowed in respect of two self-occupied house properties. However, the aggregate amount of deduction remains the same i.e. Rs 30,000 or Rs 2 lakh, as the case may be.

Applicability of Section 24B on under-construction property

Also note that home loan interest paid prior to the year of acquisition/ construction of the house is allowed as a deduction in 5 equal installments, starting with the year in which the property was acquired/constructed.

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