What is Section 24 of the Income Tax Act?

Introduction

Section 24 of the Income Tax Act, 1961 provides valuable tax relief to homeowners by allowing deductions on income earned from house property. For many middle-class Indians, buying a home represents a major life goal, often accompanied by long-term financial commitments like home loan EMIs. To ease this burden, the government introduced Section 24, which offers tax exemptions specifically on interest paid toward home loans. These deductions not only make homeownership more affordable but also benefit individuals earning rental income by helping reduce their overall taxable income.

In this article, we’ll break down the provisions of Section 24, including eligible deductions, applicable limits, and key exceptions. Maximize your tax savings—file your Income Tax Return with IndiaFilings and get expert assistance in claiming deductions under Section 24 and beyond.

What is Section 24 of the Income Tax Act?

Section 24 of the Income Tax Act, 1961—titled “Deductions from Income from House Property”—offers significant tax benefits to individuals with income from residential or commercial property. Specifically, it allows deductions on interest paid on home loans, making it easier for homeowners and property investors to manage their financial obligations.

For self-occupied properties, taxpayers can claim a deduction of up to ₹2 lakh per year on interest payments. In the case of rented (or deemed to be let-out) properties, the entire interest paid is eligible for deduction, without any cap. These provisions offer considerable relief, especially to those managing home loans.

Components of Section 24

Section 24(a): Provides a standard deduction of 30% on the net annual value of the property (excluding self-occupied homes).
Section 24(b): Allows deduction on interest paid on home loans taken for purchase, construction, or renovation.

Note: These deductions are applicable only when the income qualifies as “Income from House Property

What Is “Income from House Property”?

Under the Income Tax Act, “Income from House Property” refers to earnings derived from owning a building or land attached to it. It includes:

Rental Income: Earnings from renting residential or commercial properties.
Deemed to be Let-Out: If you own multiple properties and don’t rent them all out, only one can be treated as self-occupied. The rest are considered as let-out for tax purposes, and their annual value is taxable.

Deductions Under Section 24

1. Standard Deduction – Section 24(a)

Deduction: 30% of the Net Annual Value (NAV)
Applicability: Only for rented or deemed-to-be-let-out properties
Purpose: To cover maintenance and repair expenses (irrespective of actual spending)

Not applicable to self-occupied properties (where NAV = 0)

2. Interest on Borrowed Capital – Section 24(b)

Deduction Limit for Self-Occupied Property: Up to ₹2,00,000 per year
Deduction for Let-Out Property: Full interest amount, no upper limit
Eligibility:
- Loan must be taken for purchase, construction, or renovation
- Construction must be completed within 5 years from the end of the financial year in which the loan was taken
- A valid interest certificate is required

3. Pre-Construction Interest

Claimable for Loans Taken for: Purchase or construction only (not repairs or reconstruction)
Deduction Format: Total pre-construction interest is divided into 5 equal installments
Start Year: From the year construction is completed or possession is taken
Deduction Cap: ₹2 lakh limit (self-occupied) includes this amount.

Exceptions & Limitations Under Section 24

Not Deductible: Brokerage fees, processing fees, and service charges associated with the loan
Remote Work or Job Transfers: If you’re living in a rented property in another city due to work, you can still claim the ₹2 lakh deduction on your self-occupied home loan

Conditions for Claiming Deductions Under Section 24(b)

You are eligible for the ₹2 lakh deduction only if:

The loan was taken on or after 1st April 1999
The loan is used for purchase or construction, not repairs
The construction is completed within 5 years
You have an interest certificate

If these conditions are not met, the deduction is capped at ₹30,000

Computation of Deductions Under Section 24: An Illustrative Example

To better understand how deductions under Section 24 work, let’s consider the case of Meena:

Home Loan Amount: ₹5,00,000
Annual Interest Paid: ₹1,80,000
Interest Paid During Construction: ₹1,50,000 (pre-construction interest)
Construction Completion: Within 3 years
Rental Income: ₹25,000 per month
Municipal Taxes Paid: ₹12,000 annually

Step 1: Calculate Gross Annual Value (GAV)

Meena earns ₹25,000/month in rent:

GAV = ₹25,000 × 12 = ₹3,00,000

Step 2: Determine Net Annual Value (NAV)

NAV = GAV – Municipal Taxes
NAV = ₹3,00,000 – ₹12,000 = ₹2,88,000

Step 3: Apply Deductions Under Section 24

Standard Deduction (Section 24(a))

30% of NAV:
30% × ₹2,88,000 = ₹86,400

Interest on Borrowed Capital (Section 24(b))

Annual loan interest paid:
₹1,80,000

Pre-Construction Interest

Total interest during construction: ₹1,50,000
Deductible over 5 years:
₹1,50,000 ÷ 5 = ₹30,000 (per year)

Step 4: Compute Income from House Property

Income from House Property = NAV – (Standard Deduction + Interest + Pre-construction Interest)

= ₹2,88,000 – (₹86,400 + ₹1,80,000 + ₹30,000)
= ₹2,88,000 – ₹2,96,400
= -₹8,400 (Loss)

Summary Table

Particulars	Amount (₹)
Gross Annual Value (GAV)	3,00,000
Less: Municipal Taxes	12,000
Net Annual Value (NAV)	2,88,000
Less: Standard Deduction (30% NAV)	86,400
Less: Interest on Home Loan	1,80,000
Less: Pre-construction Interest	30,000
Income from House Property	-8,400 (Loss)

Additional Deductions on House Property Income: Section 80EEA

Apart from the tax benefits available under Section 24 for home loan interest, taxpayers may also claim additional deductions under Section 80EEA. This section was introduced to promote affordable housing and offers further tax relief on interest payments.

Section 80EEA – Key Highlights

Maximum Deduction: Up to ₹1,50,000 per year on home loan interest (over and above the ₹2 lakh under Section 24).
Applicable Only on Interest: This benefit is limited to interest payments and does not apply to principal repayment.

Eligibility Criteria for Claiming Section 80EEA

To avail this deduction, the following conditions must be met:

First-Time Home Buyer:
The property must be the first residential house purchased by the taxpayer.
Property Value Cap:
The stamp duty value of the house should not exceed ₹45 lakh.
Loan Sanction Period:
The home loan must have been sanctioned between
1st April 2019 and 31st March 2022.

Combined Tax Benefits

If eligible under both Section 24(b) and Section 80EEA, you can claim a total deduction of up to ₹3.5 lakh annually:

₹2,00,000 under Section 24
₹1,50,000 under Section 80EEA

About the Author

Rohit

Rohit is a skilled legal writer with a talent for simplifying complex legal issues into clear, practical guidance. His insights equip entrepreneurs with the knowledge they need to confidently navigate legal requirements, helping them launch, run, and expand their businesses with greater clarity and confidence.

June 13, 2025