How to Claim Section 24(b) for Home Loan Interest in Your ITR
- Farheen Mukadam
- Sep 11
- 9 min read
Section 24(b) of the Income Tax Act is a significant provision for individuals who own a property and are paying interest on a home loan. This section provides a tax deduction for interest paid on loans taken for purchasing, constructing, or renovating a house property. For taxpayers, this section offers a substantial tax benefit by reducing their taxable income. The deduction is available for both self-occupied and let-out properties, which allows individuals to claim a deduction against the interest paid on their home loan. This section is crucial for anyone who has a home loan and wants to reduce their overall tax burden. Let us understand the details of Section 24(b), including eligibility criteria, how to claim the deduction, and important factors like whether it applies under the old or new tax regime.
Table of Contents
What is Section 24(b)?
Section 24(b) of the Income Tax Act allows taxpayers to claim a deduction for the interest paid on loans taken to purchase, construct, or renovate a property. This provision is specifically designed to provide relief to homeowners by reducing their taxable income. Under this section, individuals can claim a deduction of up to ₹2 lakh per year on the interest paid on home loans for self-occupied properties. For let-out properties, there is no upper limit to the deduction, and the taxpayer can claim the entire interest amount paid during the year as a deduction. This section is widely used by taxpayers with home loans, offering them a substantial reduction in their overall tax liability.
Eligibility Criteria for Claiming Section 24(b)
To claim a deduction under Section 24(b), certain eligibility criteria must be met:
Home Loan Requirement: The loan must be taken for the purpose of purchasing, constructing, or renovating a property. The property should be owned by the taxpayer or a co-owner.
Interest Payment: The deduction is available for the interest paid on the home loan during the financial year. The principal repayment does not qualify for deduction under Section 24(b), as it is covered under Section 80C for principal repayments.
Property Ownership: The property for which the loan is taken must be in the taxpayer’s name. This applies to both self-occupied and let-out properties.
No Income Ceiling: There is no specific income ceiling to claim this deduction, making it available to all taxpayers who meet the above conditions.
Self-Occupied vs. Let-Out Properties
The tax treatment of interest under Section 24(b) differs based on whether the property is self-occupied or let out.
Self-Occupied Property: If the property is self-occupied, the taxpayer can claim a deduction of up to ₹2 lakh per year on the interest paid on the home loan. This deduction applies only to one property, irrespective of how many properties the taxpayer owns.
Let-Out Property: For let-out properties, there is no upper limit on the interest deduction. The taxpayer can claim the entire interest amount paid on the home loan as a deduction. However, the rental income from the property will be added to the taxpayer’s income, and the net income (after deducting the interest and other expenses) will be taxed.
In both cases, the property must be used for the purpose of generating income or for self-use. For let-out properties, additional deductions may apply, such as maintenance and repair costs, which can further reduce the taxable rental income.
How to Claim Section 24(b) in Your ITR
To claim a deduction under Section 24(b), taxpayers need to follow a straightforward process whilefiling their Income Tax Return (ITR):
Provide Loan Details: While filing your ITR, you will need to provide details of the home loan, including the interest paid during the year. This can be found in the Form 16provided by your lender, or you can refer to your loan statements.
Fill in ITR Form: In the ITR form, there is a section for deductions under "Income from House Property." You need to enter the details of the interest paid under Section 24(b) here.
Claim the Deduction: If you have a self-occupied property, claim up to ₹2 lakh in interest under Section 24(b). For let-out properties, you can claim the full interest amount, provided you also report rental income and account for any additional expenses related to the property.
Submit Supporting Documents: Keep records such as loan statements and interest certificates from the bank, which may be required for verification in case of an audit.
Tax Regime Applicability: Old vs. New
Section 24(b) is applicable under both the old and new tax regimes. However, there are significant differences in how taxpayers can benefit depending on the regime they opt for:
Old Tax Regime: Under the old tax regime, taxpayers can claim the full benefit of Section 24(b) (up to ₹2 lakh for self-occupied properties and the entire interest amount for let-out properties) while also utilizing other exemptions and deductions, such as HRA, 80C, and 80D.
New Tax Regime: The new tax regime offers lower tax rates but removes most exemptions and deductions, including Section 24(b). Therefore, if a taxpayer opts for the new tax regime, they will not be able to claim any deductions under Section 24(b) for home loan interest payments.
Taxpayers must evaluate which regime provides the best tax benefits for them based on their income and available deductions.
Pre-Construction Interest: Claiming Deductions
In addition to the interest paid during the year, Section 24(b) allows taxpayers to claim a deduction for interest paid during the pre-construction period, i.e., the period before the construction of the house is completed.
Pre-Construction Interest: The interest paid during the pre-construction phase can be claimed as a deduction in five equal installments starting from the year in which the construction of the property is completed.
Conditions: This deduction is available only if the loan is taken for the construction or purchase of the property, and the property is completed within five years from the end of the financial year in which the loan was taken.
The pre-construction interest is added to the total interest paid, and the taxpayer can claim deductions in subsequent years until the full amount is exhausted.
Joint Home Loans and Section 24(b)
If the home loan is jointly taken by two or more individuals, each borrower is entitled to claim a deduction under Section 24(b) for the interest paid on the loan, provided they are co-owners of the property.
Claiming Deduction: Each co-owner can claim a deduction of up to ₹2 lakh per year on the interest paid for the self-occupied property. For let-out properties, the entire interest can be claimed by each co-owner, depending on their share in the property.
Interest Distribution: The interest deduction is divided based on the proportion of the loan each borrower repays. If both co-owners contribute equally to the loan repayment, the deduction is split equally. If the loan repayment is made in unequal proportions, the deduction is allocated based on each individual's contribution.
Conclusion
Section 24(b) offers a significant tax benefit to homeowners by allowing them to claim deductions on the interest paid on home loans. Whether the property is self-occupied or let-out, taxpayers can significantly reduce their taxable income, thus lowering their overall tax liability. It is crucial for homeowners to understand the rules and eligibility criteria for claiming this deduction, including the tax regime they fall under. While joint home loans offer additional benefits, it is essential to ensure that the property is properly documented and the loan repayment share is accurately reflected in tax filings. By following the guidelines provided, taxpayers can ensure that they make the most of Section 24(b) and reduce their tax burden. For anyone looking for assistance in tax filing, it is highly recommended to download theTaxBuddy mobile app for a simplified, secure, and hassle-free experience.
FAQs
Q1: Can I claim the interest deduction for both a self-occupied and a let-out property?
Yes, you can claim interest deductions for both types of properties. For a self-occupied property, the maximum deduction allowed is ₹2 lakh per year on interest paid on the home loan under Section 24(b). For a let-out property, you can claim the full amount of interest paid, with no upper limit, provided you are reporting rental income from the property. The deduction for the let-out property is based on the income earned from it, and any excess interest beyond rental income can be carried forward to subsequent years to offset future income.
Q2: Can I claim deductions on pre-construction interest for my home loan?
Yes, you can claim deductions on the interest paid during the pre-construction period. The total interest paid before the construction is completed can be claimed in five equal installments starting from the year the construction is completed. The pre-construction interest is included in the overall interest deduction under Section 24(b) once the property is constructed and ready for possession or occupation.
Q3: How is the interest deduction split if I have a joint home loan?
If you have a joint home loan, each co-owner can claim a deduction for the share of the interest paid. The interest amount is divided based on the loan repayment share of each co-owner. For instance, if the loan is equally shared between two people, each can claim a deduction for 50% of the total interest paid, subject to the ₹2 lakh limit for self-occupied properties or no limit for let-out properties.
Q4: Can I claim Section 24(b) under the new tax regime?
No, the new tax regime does not allow taxpayers to claim deductions for home loan interest under Section 24(b). While the new tax regime offers reduced tax rates, it eliminates many common deductions and exemptions, including those for home loan interest. If you are opting for the new tax regime, you will not be able to claim this deduction, and you will need to assess whether the tax savings from the lower tax rates outweigh the loss of these deductions.
Q5: What documents do I need to claim deductions under Section 24(b)?
To claim deductions under Section 24(b), you will need the following documents:
Loan statement from your bank or lender showing the interest paid.
Interest certificates provided by your lender.
Proof of property ownership (e.g., sale deed, possession letter).
Any other documents that verify your claim, such as rent agreements for let-out properties.
Having these documents ready while filing your ITR will help ensure a smooth process and avoid any delays or issues.
Q6: Can I claim both the principal repayment under Section 80C and the interest under Section 24(b) for the same home loan?
Yes, you can claim both the principal repayment underSection 80C and the interest paid under Section 24(b) for the same home loan. The principal repayment qualifies for a deduction under Section 80C (with a limit of ₹1.5 lakh), while the interest paid qualifies for a deduction under Section 24(b) (up to ₹2 lakh for self-occupied property). These deductions fall under separate sections, so they can be claimed simultaneously without any overlap.
Q7: How does the interest deduction work for properties under construction?
Interest paid on loans for properties under construction can be claimed as "pre-construction interest." The total interest paid during the construction period can be claimed in five equal installments starting from the year in which the construction is completed. This allows taxpayers to spread out the deduction for the pre-construction period across multiple years, making it easier to claim without a large upfront tax burden.
Q8: Is there any limit on the interest deduction for let-out properties?
No, there is no limit on the interest deduction for let-out properties. You can claim the full interest paid on the home loan, as long as you report rental income from the property. The interest deduction is based on the rental income you earn, and if your rental income is lower than the interest paid, you can offset the remaining interest against your other income, subject to applicable tax laws.
Q9: Can I claim deductions under Section 24(b) if my property is rented out but I am not receiving rental income?
No, you must report rental income to claim deductions for a let-out property under Section 24(b). If the property is vacant but still available for rent, you may still be eligible to claim deductions as long as it is being made available for rent and there is no personal use. However, if there is no rental income, you cannot claim the deduction for the home loan interest unless you report some income or rent received.
Q10: What is the maximum amount I can claim under Section 24(b) for self-occupied properties?
For self-occupied properties, you can claim a maximum deduction of ₹2 lakh per year for the interest paid on your home loan under Section 24(b). If you own more than one self-occupied property, the deduction limit of ₹2 lakh is applicable only to one of them. For other properties, the interest will not be eligible for deduction as self-occupied properties.
Q11: Can I claim deductions if I have multiple properties?
Yes, you can claim deductions for multiple properties, but there are certain limitations. For self-occupied properties, you can claim up to ₹2 lakh in interest for one property only. For let-out properties, you can claim the full interest paid on the home loan for each property, as long as rental income is being reported. If you have multiple let-out properties, you can claim the interest deduction for each property, subject to the rental income.
Q12: What happens if I make a mistake while claiming deductions under Section 24(b)?
If there is an error in your claim for deductions under Section 24(b), you can file a revised return to correct the mistake. It's crucial to ensure that your filing is accurate from the start to avoid penalties or interest charges. Filing a revised return allows you to make corrections if you realize an error after the initial submission, ensuring that your tax returns remain compliant with the Income Tax Act.
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