Section 24(b): Home Loan Interest Deduction Up to Rs 2 Lakh Explained

A home loan is the largest financial commitment most Indian households take on, and the tax code recognises this with two parallel deductions: Section 80C for principal repayment (up to Rs 1.5 lakh) and Section 24(b) for interest. Section 24(b) is the bigger of the two and the one most often misapplied: the Rs 2,00,000 limit, the let-out exception, the pre-construction quirk, and the regime switch each create their own calculation traps.

This guide walks through every leg of Section 24(b) so a salaried homeowner, a let-out landlord or a joint borrower can claim the full lawful deduction.

What Section 24(b) Actually Says

Section 24 of the Income Tax Act allows two deductions from "Income from House Property":

1. Section 24(a): A standard deduction of 30% of the Net Annual Value of the property (let-out only). This is automatic.
2. Section 24(b): Deduction of interest payable on borrowed capital used for acquiring, constructing, repairing, renewing or reconstructing the property.

The Rs 2,00,000 cap applies only to self-occupied property. For let-out property, there is no cap on the interest claim itself, although the resulting loss has its own set-off limit (covered below).

Self-Occupied Property: The Rs 2 Lakh Limit

If you own a residential property and use it for your own residence (or that of your family), the maximum interest deduction under Section 24(b) is Rs 2,00,000 per year, subject to two conditions:

• The loan was taken on or after 1 April 1999.
• The construction or acquisition is completed within five years from the end of the financial year in which the loan was taken.

If construction takes longer than five years, the limit drops from Rs 2,00,000 to Rs 30,000.

Example

Aman has a self-occupied flat in Hyderabad. His annual home loan interest for FY 2025-26 is Rs 2,80,000. Construction was completed in 2023, within the 5-year window.

Under Section 24(b), Aman can claim Rs 2,00,000 as a deduction. The remaining Rs 80,000 of interest is not deductible and is not carried forward (for self-occupied property, the loss from house property is capped at Rs 2 lakh per year and excess interest cannot be carried forward).

Let-Out Property: No Cap on Interest, Cap on Loss Set-Off

For a property that you have let out (or one that is treated as deemed let-out under the law), the entire interest paid is allowed as a deduction without the Rs 2 lakh ceiling. But there is a separate cap on how much loss you can adjust against other income heads.

The flow:

1. Compute Net Annual Value (NAV) of the let-out property: Annual rent received, reduced by municipal taxes paid.
2. Subtract Section 24(a) standard deduction (30% of NAV).
3. Subtract Section 24(b) interest. The full interest amount is allowed.
4. The result is your "Income from House Property". For most let-out properties with a home loan, this is a loss.
5. Section 71B and Section 71(3A) restrict the set-off of this loss against other income (salary, business, etc.) to Rs 2,00,000 per year.
6. The balance loss is carried forward for 8 assessment years and can be set off only against future house property income.

Example

Sanjana has a let-out flat in Pune. Annual rent: Rs 3,60,000. Municipal taxes paid: Rs 12,000. Annual home loan interest: Rs 4,50,000.

• NAV: Rs 3,60,000 minus Rs 12,000 = Rs 3,48,000.
• Standard deduction: 30% of Rs 3,48,000 = Rs 1,04,400.
• Interest under Section 24(b): Rs 4,50,000.
• Income from house property: Rs 3,48,000 minus Rs 1,04,400 minus Rs 4,50,000 = loss of Rs 2,06,400.

Sanjana can set off Rs 2,00,000 of this loss against her salary income in FY 2025-26. The balance Rs 6,400 is carried forward to FY 2026-27 and beyond, set off only against future house property income.

Pre-Construction Interest: The Five-Instalment Rule

Interest paid during the construction period of a property cannot be claimed in the year of payment. The Income Tax Act allows it in five equal annual instalments starting from the financial year in which the property is acquired or construction is completed, whichever is earlier.

Example

Vikram took a home loan on 1 April 2022. Construction was completed on 30 June 2025. He paid total interest of Rs 5,00,000 between 1 April 2022 and 31 March 2025 (the pre-construction period).

• Pre-construction period interest: Rs 5,00,000.
• Five equal instalments: Rs 1,00,000 per year.
• First instalment claimed: FY 2025-26 (the year construction was completed).
• Last instalment claimed: FY 2029-30.

The Rs 1,00,000 per year is added to the regular interest paid during the year for the purpose of the Section 24(b) calculation. The Rs 2 lakh self-occupied cap (or the no-cap for let-out) applies to the combined amount.

So if Vikram is paying current year interest of Rs 1,80,000 in FY 2025-26 on a self-occupied property, his combined claim would be Rs 1,80,000 plus Rs 1,00,000 (pre-construction instalment) = Rs 2,80,000, but capped at Rs 2,00,000 for self-occupied.

Joint Home Loans: Each Co-Borrower Claims Separately

When two or more people are co-owners of a property and co-borrowers on the home loan, each can claim Section 24(b) deduction in their own ITR, up to Rs 2,00,000 per person (for self-occupied) or full interest (for let-out, with the Rs 2 lakh loss set-off cap applying per person).

The conditions:

• You must be a co-owner of the property. Just being a co-borrower without ownership share does not qualify.
• The deduction is in proportion to ownership and EMI share. The most common setup is 50:50 ownership and 50:50 EMI, but this can vary.
• Both co-borrowers' EMI payments should ideally come from their own bank accounts.

Example

Ramesh and Sunita are spouses who jointly own a flat (50:50) and have a joint home loan with 50:50 EMI sharing. Annual interest: Rs 3,60,000. The property is self-occupied.

Ramesh's share: Rs 1,80,000. He claims Rs 1,80,000 under Section 24(b) (within the Rs 2 lakh cap). Sunita's share: Rs 1,80,000. She claims Rs 1,80,000 under Section 24(b).

Combined family deduction: Rs 3,60,000, fully utilised.

If they were single owner with single borrower, the combined claim would be capped at Rs 2,00,000 per year, leaving Rs 1,60,000 unutilised.

Section 80EE and 80EEA: Additional Interest Deductions

Two sections give additional interest deduction beyond Section 24(b), but only for specific borrower profiles:

• Section 80EE: Up to Rs 50,000 per year of additional interest for first-time homebuyers, available for loans sanctioned between 1 April 2016 and 31 March 2017 (now mostly historical).
• Section 80EEA: Up to Rs 1,50,000 per year of additional interest for first-time homebuyers, for loans sanctioned between 1 April 2019 and 31 March 2022, where the property stamp duty value is up to Rs 45 lakh. Most current homebuyers are past this window.

If your loan was sanctioned in the eligible window, these sections are claimed in addition to the Rs 2,00,000 under Section 24(b). Verify the exact sanction date with your bank's home loan statement.

Old vs New Regime: What Survives

Under the new tax regime under Section 115BAC, Section 24(b) treatment changes:

• Self-occupied property: Interest deduction under Section 24(b) is not allowed. The deduction is fully disallowed.
• Let-out property: Interest deduction is allowed, but the loss from house property cannot be set off against other heads. The loss can only be carried forward and set off against future house property income.

So the new regime protects the deduction for genuine landlords (let-out properties) but removes the salaried homeowner's deduction. If you have a self-occupied home loan with significant interest, the old regime is often the better choice. Run the math using our old vs new regime guide.

Documentation Required

When the assessing officer asks for proof, the following are typically needed:

• Home loan interest certificate issued annually by the bank (lists principal, interest, pre-construction interest separately).
• Sanction letter from the bank with the loan disbursement date.
• Possession or construction completion certificate for the property.
• Property purchase deed showing your ownership share.
• Bank statements showing EMI payments from your account (especially for joint loans).
• Rent agreement and rent receipts if the property is let out.

Ask your bank for the interest certificate at the start of every financial year and keep a digital folder organised by FY.

Common Errors at Filing Time

• Claiming pre-construction interest in the year of payment. Pre-construction interest is allowed only in five instalments after possession.
• Claiming Rs 2 lakh on let-out property. Let-out property has no Rs 2 lakh interest cap; the cap is on the loss set-off.
• Claiming both spouses' share without proportional ownership. Ownership and EMI share must support the claim.
• Forgetting Section 80C principal. The principal portion of EMI is deductible separately under Section 80C up to Rs 1.5 lakh. See our Section 80C deductions list.
• Claiming Section 24(b) on self-occupied in the new regime. Not allowed. The system rejects or recomputes.

Where Tax Garden Helps

Section 24(b) sounds simple but the pre-construction instalments, the joint borrower split, the let-out vs self-occupied classification, and the regime choice combine to make filing tricky. Tax Garden's tax compliance services include a full home-loan deduction review: we read the bank's interest certificate, allocate the pre-construction instalment, calculate ownership-based shares for joint loans, and pick the regime that minimises tax. For broader regime planning, see our old vs new regime guide and the Section 80C list.

Frequently Asked Questions

What is the maximum home loan interest deduction under Section 24(b)?

Rs 2,00,000 per year for a self-occupied property, provided construction is completed within 5 years from the end of the financial year of the loan. For a let-out property, the entire interest is deductible, but the loss from house property that can be set off against other heads is capped at Rs 2,00,000 per year.

Can I claim home loan interest on a property under construction?

Not in the year of payment. Interest paid during the construction period is accumulated and allowed in five equal annual instalments starting from the year of completion or acquisition. The current-year interest plus the instalment is then subject to the Rs 2 lakh cap (self-occupied) or full interest deduction (let-out).

Both my spouse and I are on the home loan. How much can each of us deduct?

Each co-owner who is also a co-borrower can claim up to Rs 2,00,000 per year of interest under Section 24(b) on a self-occupied property, in proportion to ownership and EMI share. So a 50:50 couple can together claim up to Rs 4,00,000 in deductions.

Is Section 24(b) available under the new tax regime?

On self-occupied property, no. On let-out property, yes, but the loss from house property cannot be set off against other heads in the new regime; it is only carried forward against future house property income.

What if my home loan interest exceeds Rs 2 lakh on a self-occupied house?

The excess is not deductible and cannot be carried forward. The loss from house property for a self-occupied home is effectively capped at Rs 2 lakh per year. Consider whether reclassifying the property as let-out (if you can rent it out genuinely) makes financial sense.

Can I claim HRA exemption and Section 24(b) in the same year?

Yes, if you actually live in a rented house in a different city or under genuine reasons, while owning a separate property where the loan is running. See our HRA guide for the conditions and documentation.

Sources

This guide is verified against Section 24, Section 71(3A), Section 80EE and Section 80EEA of the Income Tax Act 1961, the Income Tax Department's published guidance for AY 2026-27 on incometax.gov.in, and the standard interest certificate format issued by HDFC, SBI and other home loan lenders. Confirmatory practitioner coverage from ClearTax, Tax2Win, BankBazaar, and Bajaj Finserv was reviewed. Always reconcile the figures with your bank's interest certificate and sanction letter before filing.