Section 24(b) of the Income Tax Act: Home Loan Interest Deduction Explained for ITR Filing (AY 2026-27)
Anurag Sodani • July 3, 2026
Quick Summary: Section 24b of the income tax act allows homeowners to deduct interest paid on a housing loan from their taxable income, up to ₹2 lakh a year for a self-occupied property under the old tax regime. This deduction falls under the “Income from House Property” head and applies to loans taken for purchase, construction, repair, or reconstruction of a residential property. The benefit is not available for self-occupied homes under the new tax regime, though let-out properties retain full interest deduction with no upper cap in both regimes. Co-owners who are also co-borrowers can each claim the deduction based on their ownership share. This guide walks through eligibility, documentation, and the exact steps to claim section 24b of the income tax act correctly while filing your ITR for AY 2026-27.
What Is Section 24(b) of the Income Tax Act?
Section 24b of the income tax act deals with deductions allowed from “Income from House Property.” It specifically covers the interest you pay on a home loan taken to buy, build, repair, renew, or reconstruct a residential property.
Homeowners often confuse this with Section 80C, which covers principal repayment. Section 24(b) only concerns the interest component of your EMI — the amount your bank or housing finance company charges you for borrowing the money, not the loan amount itself.
You claim this deduction under the head “Income from House Property” in your income tax return, and it directly reduces your gross total income for the year, which lowers your final tax liability.
If you’re planning to buy a home and want to estimate your EMI split between principal and interest before applying, a home loan EMI calculator can help you visualise how much interest you’ll be paying annually — useful context before you claim section 24b of the income tax act each year.
Who Can Claim a Home Loan Interest Deduction Under Section 24(b)?
Not everyone with a home loan automatically qualifies. You can claim the deduction under section 24b of the income tax act if you meet these conditions:
- You are the owner (or co-owner) of the property.
- You must obtain the loan from a recognised bank, housing finance company, or other eligible financial institution.
- You must use the loan specifically to purchase, construct, repair, renew, or reconstruct a residential house property.
- You hold a valid interest certificate from your lender confirming the interest paid during the year.
Tenants cannot claim this deduction, and neither can someone who has taken a personal loan not linked to a specific residential property. If your property is under construction, the Income Tax Act treats the interest paid during the construction period separately. The following section explains how you can claim this pre-construction interest.
Maximum Deduction Limit Under Section 24(b)
The limits differ based on how the property is used:
| Property Type | Maximum Deduction | Regime |
|---|---|---|
| Self-occupied | ₹2,00,000 per year | Old regime only |
| Let-out / rented | Full interest amount, no upper cap | Both regimes |
| Self-occupied, construction not completed within 5 years | ₹30,000 per year | Old regime only |
For let-out properties, if your interest outgo exceeds your rental income and creates a loss, you can set off up to ₹2,00,000 of that loss against your salary or other income in the same year. You can carry forward any unadjusted loss from house property for up to eight assessment years and set it off only against future income from house property.
Conditions to Claim Tax Benefits on Home Loan Interest
A few conditions frequently trip up first-time filers:
- Five-year construction rule: If your home isn’t completed within five years from the end of the financial year the loan was taken, your deduction drops from ₹2 lakh to just ₹30,000.
- Pre-construction interest: Interest paid before you take possession isn’t lost — it’s accumulated and claimed in five equal instalments starting from the year you get possession, in addition to the regular annual interest.
- Co-ownership: If you and a family member jointly own and jointly borrow, each of you can claim the deduction only up to your respective ownership share, not the full ₹2 lakh individually.
- Loan purpose must match usage: Diverting a home loan for another purpose can disqualify the claim during scrutiny.
Section 24(b) for Self-Occupied vs Let-Out Properties
This distinction matters more than most taxpayers realise:
Self-occupied property: You can claim a deduction of up to ₹2 lakh on home loan interest as annual value is considered nil under old tax regime, subject to the prescribed conditions. You can treat up to two residential properties as self-occupied.
Let-out property: You calculate the gross annual value based on expected or actual rent, deduct municipal taxes and a standard 30% deduction for maintenance, and then subtract the full interest amount — with no ceiling. The Income Tax Act allows you to claim the entire interest paid on a let-out property as a deduction, making rental properties attractive from a tax-planning perspective.
If you own more than two self-occupied residential properties, the Income Tax Act automatically treats the third and any additional properties as deemed let out. You must declare their notional rental income even if they remain vacant.
How to Claim Section 24(b) Deduction While Filing Your ITR
Follow these steps to correctly claim section 24b of the income tax act on your return:
- Collect the interest certificate from your lender, showing the interest and principal breakup for the financial year.
- Choose the correct ITR form — typically ITR-1 for a single self-occupied property, or ITR-2 if you have more than one property or other complexities.
- Go to the “Income from House Property” schedule on the e-filing portal.
- Enter the property type (self-occupied or let-out) and input the interest amount.
- For self-occupied property, this will typically show as a loss (up to ₹2 lakh) that gets adjusted against your other income.
- Cross-check the auto-filled data against your Annual Information Statement (AIS) before submitting, since discrepancies can trigger a notice.
You can review other applicable deductions and eligibility conditions on the home loan eligibility calculator page while planning your filing.
Documents Required to Claim Home Loan Interest Deduction
Keep these ready before you start filing:
- Interest certificate from your bank or housing finance company
- Loan sanction letter
- Property ownership documents (sale deed or allotment letter)
- Possession certificate (for construction-linked claims)
- Municipal tax receipts, if claiming for a let-out property
Reference the Income Tax Department’s official portal for the current year’s ITR utility and detailed instructions before filing.
Section 24(b) Under the Old vs New Tax Regime
This is where most confusion arises for AY 2026-27 filers:
Old regime: Full ₹2 lakh deduction available on self-occupied property interest, combinable with ₹1.5 lakh principal deduction under Section 80C.
Under the new tax regime (the default regime from AY 2024–25 onwards), you cannot claim a deduction for home loan interest on a self-occupied property. However, if you let out the property, you can claim the full home loan interest deduction against the rental income. The new tax regime does not allow you to set off any resulting loss from house property against salary income or income under other heads.
If your total home loan interest and other eligible deductions are substantial, running a comparison between both regimes before filing is worth the time — the gap in tax outgo can be significant for high-interest borrowers.
Common Mistakes to Avoid While Claiming Section 24(b) Benefits
- Many taxpayers continue to claim this deduction after switching to the new tax regime, even though the new regime does not allow it for a self-occupied property.
- Claiming the full ₹2 lakh individually when co-owning a property, instead of your proportionate share
- Forgetting to claim accumulated pre-construction interest in the five years after possession
- Missing the five-year construction deadline and still claiming ₹2 lakh instead of the reduced ₹30,000
- Not reconciling interest certificate figures with AIS data before submission
Frequently Asked Questions (FAQs)
What is the limit of Section 24(b) of the Income Tax Act?
The maximum deduction is ₹2 lakh per year for a self-occupied property under the old tax regime, and unlimited for a let-out property (subject to loss set-off restrictions).
What is the difference between 24(b) and 80EEA?
Section 24(b) is the standard interest deduction available to all eligible home loan borrowers, capped at ₹2 lakh. Section 80EEA is an additional deduction of up to ₹1.5 lakh specifically for first-time buyers of affordable housing, available only after exhausting the Section 24(b) limit and only for loans sanctioned within a specific window.
How to claim Section 24(b) in ITR?
Enter the interest amount under the “Income from House Property” schedule in your ITR form, specifying whether the property is self-occupied or let-out.
Can I claim both 24(b) and 80C?
Yes. Section 24(b) covers interest (up to ₹2 lakh), while Section 80C covers principal repayment (up to ₹1.5 lakh) — both can be claimed together under the old regime.
What are common mistakes in claiming Section 24(b)?
Claiming it under the new regime, overclaiming as a co-owner, and missing the five-year construction deadline are the most frequent errors.
Is Section 24 exemption on home loan interest available?
It’s technically a deduction, not an exemption, but functionally it reduces your taxable income by up to ₹2 lakh for interest paid on a self-occupied property loan.
What are the deductions allowed under Section 24?
Section 24 allows a standard 30% deduction for repairs/maintenance on let-out properties, plus the interest deduction under Section 24(b).
How much home loan interest is tax-free?
Up to ₹2 lakh annually for self-occupied property under the old regime; unlimited for let-out property, subject to set-off restrictions.
Are 80EE and Section 24 the same?
No. Section 24(b) is the base interest deduction; Section 80EE is a separate, additional benefit exclusively for certain first-time buyers.
Where is Section 24 in ITR-1?
It appears under the “Income from House Property” section of the form.
How much tax can be saved on a home loan?
Depending on your tax slab, combining Section 24(b) and Section 80C benefits can save anywhere from ₹40,000 to over ₹1 lakh annually for taxpayers in higher brackets under the old regime.
Can home loan principal be claimed under 80C?
Yes, principal repayment up to ₹1.5 lakh annually qualifies under Section 80C, separate from the interest deduction under Section 24(b).
Does HRA fall under the 80C category?
No, House Rent Allowance is a separate exemption under Section 10(13A), unrelated to Section 80C.
What are the deductions under Section 24 of the Income Tax Act?
Standard deduction of 30% on net annual value for let-out properties, and interest deduction under Section 24(b).
Who can claim a deduction under Section 24?
Any individual who owns the property and has taken a home loan from a recognised lender for purchase, construction, repair, or reconstruction can claim it, subject to regime and construction-timeline conditions.
For more details on home loan products and eligibility, you can explore HomeFirst Finance’s home loan offerings or check the FAQs page for additional clarity on documentation requirements.
