Home Loan Tax Benefits: What You Need to Know About Section 24
Summary
If you’ve taken a home loan or are planning to apply for one, you may already know that it helps you save more than just rent — it can also reduce your income tax. One of the most important tax-saving tools for homebuyers is Section 24 of the Income Tax Act. It allows you to claim deductions on the interest you pay on your home loan. But many people either don’t know about it or don’t use it properly. In this blog, we break down what Section 24 is, how it works, and how you can make the most of it to lower your tax burden.
Key Takeaways
- Section 24 lets you claim a tax deduction on home loan interest
- You can claim up to ₹2 lakh per year under certain conditions
- It applies to both self-occupied and rented properties
- The deduction is different from what you get under Section 80C
- Knowing the rules can help you plan your loan and taxes smartly
Table of Contents
- What Is Section 24 of the Income Tax Act?
- Who Can Claim This Deduction?
- How Much Deduction Can You Claim?
- Conditions to Keep in Mind
- Section 24 vs. Section 80C: What’s the Difference?
- Tips to Maximise Your Home Loan Tax Benefits
- Final Thoughts
- FAQs
1. What Is Section 24 of the Income Tax Act?
Section 24 deals with the deductions available on the interest paid on a home loan. This means that a portion of the interest you pay every year can be subtracted from your total income, lowering the amount on which you’re taxed.
This deduction applies under the head “Income from House Property”, and it helps both homeowners and real estate investors reduce their annual tax liability.
2. Who Can Claim This Deduction?
You can claim the tax deduction on home loan interest under Section 24 if you meet these conditions:
- You have taken a home loan for purchasing, constructing, repairing, or renovating a residential property
- You are the owner or co-owner of the property
- You are also the person repaying the loan
- The construction is completed within 5 years from the end of the financial year in which the loan was taken
Both self-occupied and let-out (rented) properties are eligible, but the deduction limits vary.
3. How Much Deduction Can You Claim?
Under Section 24(b), the following limits apply:
| Type of Property | Maximum Deduction Allowed |
|---|---|
| Self-Occupied | ₹2,00,000 per financial year |
| Let-Out Property | Full interest amount (no upper limit)* |
*However, the total loss under the head “Income from House Property” is capped at ₹2 lakh. Any extra loss can be carried forward for up to 8 years.
If the construction is not completed within 5 years, the deduction is limited to ₹30,000 for that year.
4. Conditions to Keep in Mind
- Construction completion: The property must be ready within 5 years of taking the loan
- Proof of interest paid: Get the interest certificate from your lender
- Ownership: Only the person who owns the property and is repaying the loan can claim this benefit
- Pre-construction interest: You can also claim a deduction on interest paid during the construction phase, but only in 5 equal installments after completion
5. Section 24 vs. Section 80C: What’s the Difference?
Many people confuse these two sections. Here’s how they differ:
| Feature | Section 24 | Section 80C |
|---|---|---|
| Applies to | Interest on home loan | Principal repayment |
| Deduction Limit | ₹2,00,000 | ₹1,50,000 |
| Type of Expense | Interest | Principal (and stamp duty, registration) |
| Available for | Self-occupied and rented homes | Only for residential self-occupied properties |
| Additional Deduction | No | Can be combined with Section 24 and 80EEA |
You can claim both deductions if you meet the conditions, allowing for more total tax savings.
6. Tips to Maximise Your Home Loan Tax Benefits
- Apply for a joint loan: Both borrowers can claim deductions separately if they are co-owners.
- Keep documents organised: Maintain sanction letter, interest certificate, and possession documents.
- Time your construction smartly: Complete it within 5 years to avoid reduced deductions.
- Claim pre-construction interest: Deductible in 5 equal parts after completion.
- Know your limit: Loss from house property is capped at ₹2 lakh per year.
7. Final Thoughts
If you're paying off a home loan, Section 24 can be a valuable tool to reduce your annual tax outgo. But like every tax benefit, it comes with rules. Knowing how and when to claim the deduction ensures that you don’t miss out. Whether you’re a first-time buyer or already servicing a loan, understanding Section 24 can help you plan your loan and taxes more efficiently — and get the most value from your investment in a home.
8. FAQs
Q1. What is Section 24 in home loan tax benefits?
It’s a section under the Income Tax Act that allows you to claim a deduction on the interest paid on a home loan.
Q2. What is the maximum deduction allowed under Section 24?
You can claim up to ₹2 lakh per year for a self-occupied property. For rented property, there’s no cap on interest, but overall house property loss is limited to ₹2 lakh per year.
Q3. Can I claim Section 24 and Section 80C both?
Yes, you can claim deductions under both sections if you meet the required conditions.
Q4. What if my home is under construction?
You can claim pre-construction interest in five equal parts starting from the year of completion.
Q5. What if the construction is delayed beyond 5 years?
In that case, your deduction limit reduces to ₹30,000 for that financial year.
Q6. Is registration or stamp duty covered under Section 24?
No, those are covered under Section 80C. Section 24 only covers interest on the home loan.
Q7. Can both husband and wife claim tax benefits on the same home loan?
Yes, if both are co-owners and co-borrowers, each can claim separate deductions.
Q8. How do I prove the interest paid for the year?
Ask your lender for an interest certificate showing the total interest paid for the financial year.