TAX DEDUCTION SECTION 24(b)

Section 24(b): Home Loan Interest Deduction.

Section 24(b) lets you deduct interest paid on your home loan from taxable income. The deduction amount depends on whether the property is self-occupied or let-out — and which tax regime you choose. FY 2026-27.

What is Section 24(b)?

Section 24(b) of the Income Tax Act allows a deduction on interest paid on a loan taken for (self-occupied interest capped at ₹2,00,000 per CBDT threshold table, AY 2026-27):

check_circle Purchase of a house property

check_circle Construction of a house property

check_circle Repair or renewal of a house property

check_circle Reconstruction of a house property

This deduction is separate from the 30% standard deduction under Section 24(a). Both can be claimed together on the same property.

24(a) vs 24(b)

24(a): 30% standard deduction from Net Annual Value — no proof required, applies to all let-out properties. 24(b): Deduction on actual interest paid — requires loan documents, amount varies by property type.

Self-Occupied: ₹2L Cap

For a self-occupied property, the interest deduction under Section 24(b) is capped at ₹2,00,000 per financial year.

DEDUCTION LIMIT

₹2,00,000

Maximum interest deduction per year for self-occupied property.

IF INTEREST < ₹2L

Actual amount

You can only deduct what you actually pay — you cannot claim the full ₹2L if your interest is lower.

Loss set-off: If your 24(b) deduction creates a loss under House Property (GAV is NIL for self-occupied, so any interest above other HP income creates a loss), you can set off that loss against other heads of income — but capped at ₹2,00,000 per year. Remaining loss is carried forward for up to 8 years.

CONDITION

Self-occupied means: you live in it, your family lives in it, or it is vacant — provided you own no more than 2 residential properties. If you own 3+, the extra properties are deemed let-out.

Let-Out: No Cap

For a let-out property, there is no cap on the interest deduction under Section 24(b). You can deduct the entire interest paid on the home loan.

DEDUCTION LIMIT

NO CAP

Full interest amount is deductible — even if it runs into lakhs.

LOSS SET-OFF

Unlimited (Old Regime)

Old Regime: loss can offset other income. New Regime: loss ring-fenced within HP only.

The Gross Annual Value (GAV) for let-out property is the higher of municipal value, fair rental value, or actual rent received. After deducting 30% under 24(a) and the full interest under 24(b), the resulting loss (if any) has different treatment depending on the regime.

Joint Ownership

When a home loan is taken jointly, each co-owner can claim a deduction on their share of the interest — but only if all three conditions are met:

check_circle Co-owner of property

check_circle Co-borrower of loan

check_circle EMI paid from own bank account

Each co-owner can claim up to ₹2,00,000 (self-occupied, old regime) or no cap (let-out) independently. This means a married couple who are both co-owners and co-borrowers can claim ₹4,00,000 in 24(b) deductions on a self-occupied property under Old Regime.

warning ALL THREE MUST BE MET

Being a co-owner alone is not enough. If your spouse is on the property title but not on the loan application, they cannot claim 24(b). Similarly, if both are co-borrowers but EMIs are paid only from one account, only that person can claim.

Pre-Construction Interest

Interest paid on a home loan before construction is completed (or before the property is acquired) is called pre-construction interest. This amount is not lost — it can be claimed as a deduction in 5 equal annual installments starting from the FY in which construction is completed.

HOW IT WORKS

Suppose you took a loan in FY 2023-24 and construction completed in FY 2026-27. The interest paid from FY 2023-24 to FY 2025-26 is pre-construction interest. You can claim 1/5th of it each year from FY 2026-27 to FY 2030-31 — in addition to your regular 24(b) deduction for that year.

The pre-construction interest deduction is subject to the same caps as regular 24(b):

Property Type	Pre-Construction Cap	Regime
Self-Occupied	Within ₹2L combined with regular 24(b)	OLD ONLY
Let-Out	No cap combined with regular 24(b)	BOTH

Old vs New Regime

Section 24(b) treatment differs significantly between the two regimes:

Scenario	Old Regime	New Regime
Self-Occupied Interest	₹2,00,000 cap	NOT ALLOWED
Let-Out Interest	No cap	Allowed (loss ring-fenced)
Loss Set-Off Against Salary	Up to ₹2L per year	NOT ALLOWED (HP loss only)
Loss Carry Forward	8 years	8 years (within HP only)

warning KEY TAKEAWAY

If you have a self-occupied property with a home loan, 24(b) is only useful under Old Regime. Under New Regime, you get zero benefit on self-occupied interest. For let-out property, both regimes allow it — but the loss cannot offset salary under New Regime.

Common Mistakes

close Not Claiming Pre-Construction Interest

Many taxpayers forget to claim pre-construction interest. If your loan started before construction completed, you're leaving money on the table. The 5-installment spread means you can claim it gradually — but only if you actually claim it.

close Only Primary Borrower Claims in Joint Loan

In a joint home loan, only the primary borrower typically claims 24(b). If your spouse is a co-owner AND co-borrower AND pays EMIs from their own account, they can also claim — but most people don't realize this.

close Assuming New Regime Allows 24(b) Self-Occupied

The New Regime does NOT allow 24(b) interest deduction on self-occupied property. If you're on the New Regime and have a self-occupied home loan, you get zero tax benefit on the interest. Only let-out interest is allowed under New Regime — and even then, the loss is ring-fenced.

close Claiming 24(b) and 80C Without Loan Documents

You need the loan sanction letter, interest certificate from the bank, and proof of EMI payments. Without these, the deduction can be denied during assessment.

Read the full House Property & Home Loan Tax Guide or use the Home Loan Tax Calculator to compute your exact deduction.