Section 24: Deduction for House Property Income

Section 24: Deduction for House Property Income

A house purchase provides homeowners with security while allowing them to obtain major tax advantages. The Indian Income Tax Act includes different incentives for homeowners under Section 24, which stands as the most influential subsection. The provision of Section 24 enables taxpayers to claim house property income tax deductions, which are fundamental aspects for home loan borrowers to optimise their tax situations.

The following article provides comprehensive details about Section 24, including essential aspects such as applicable content, as well as deduction methods, together with eligibility requirements supported by illustrative examples.

What is Section 24 of the Income Tax Act?

Section 24 of the Income Tax Act contains everything about house-related income deductions.

Section 24 deals with deductions from income from house property. The Income Tax Act provides owners of self-occupied properties, along with rental property owners, the option to deduct specific expenses from the income calculation before taxation.

The deductions categorised under Section 24 include two primary categories, which comprise:

1. Standard Deduction

2. Deduction on Home Loan Interest 

1. Standard Deduction under Section 24(a)

The flat deduction stands at 30% of the net annual value (NAV) of the house property. The deduction is permitted even when actual repair and maintenance costs differ from the declared figure.

The calculation method for Net Annual Value (NAV) uses the equation below.

Gross Annual Value (GAV) – Municipal Taxes Paid by Owner

Then,

Standard Deduction = 30% of NAV

According to Section 24(a) standard deduction applies when the property remains unoccupied or self-occupied, yet it does not need to be let out.

2. Deduction on Home Loan Interest under Section 24(b)

For buyers, the opportunity to save tax ranks among the greatest benefits offered by this provision. You may deduct up to ₹2 lakh per year of home loan interest payments according to Section 24(b) when you occupy your house by yourself.

For let-out properties, there is no specific limit regarding the allowed amount of interest deduction. The maximum amount of house property loss that can be deducted against other income throughout one financial year amounts to ₹2 lakh. The remaining loss amount can be brought forward using 8 years.

Conditions to Claim This Deduction:

• Taxpayers need to secure this loan for home acquisition, along with building or fix-up needs, or to rebuild properties.
• When claiming deductions on self-occupied properties worth ₹2 lakh, the property construction should be finished within 5 years starting from when you took the loan.
• The helpful tax benefit limit of ₹30,000 applies if house construction takes more than five years to finish from when the loan was taken.

Example: Calculating Income from House Property

You possess a rented house while earning ₹25,000 per month rent from it. Municipal taxes paid are ₹10,000 annually. The combination of your home loan and paid interest amount reached ₹1.8 lakh this fiscal year.

Step-by-Step Calculation:

1. Gross Annual Value (GAV): ₹25,000 × 12 = ₹3,00,000

2. Less: Municipal Taxes Paid = ₹10,000

3. Net Annual Value (NAV) = ₹2,90,000

4. Less: Standard Deduction @ 30% = ₹87,000

5. The lesser amount representing interest paid on the home loan totalled ₹1,80,000.

6. Income from House Property = ₹2,90,000 – ₹87,000 – ₹1,80,000 = ₹23,000

Your gross income receives a ₹23,000 addition that falls under the Income from House Property category.

Section 24 vs Section 80C vs Section 80EE

Taxpayers frequently experience confusion regarding the deductions available through different sections that affect home loans. Here’s a quick comparison:

Section	Covers	Deduction Limit	Applies to
Section 24	Interest on home loan	₹2 lakh (self-occupied)	All individuals
Section 80C	Principal repayment of the home loan	₹1.5 lakh (overall cap)	All individuals
Section 80EE	Additional interest on home loan	₹50,000	First-time homebuyers only

The cases for Section 80EE and 80EEA (when applicable) surpass the Section 24 limits, yet they need to fulfil certain requirements for eligibility.

Special Scenarios

a) Joint Home Loans

Each co-owner possessing property ownership and participating in the joint home loan can claim deductions under Section 24(b) up to ₹2 lakh when the property is self-occupied.

• Legal ownership rights connect them as co-owner shareholders of the property.
• The two parties together support the loan payment process.

A family will receive double the deduction amount through this method.

b) Pre-construction Interest

Proper funding of construction projects enables taxpayers to receive five annual interest expense deductions starting from the completion year, regardless of when they secured the loan.

The ₹1.5 lakh building interest payment can become a ₹30,000 yearly deduction following construction completion year until it covers your traditional interest tax benefits.

Recent Amendments and Budget Highlights

As of the latest updates:

• The maximum amount of ₹2 lakh that allows loss set-off from house property against other income continues unchanged.
• Through the new tax regime, the Section 24(b) deduction remains unavailable except for properties being let out.
• Taxpayers need to select between utilising the deductions under the old regime and accepting more affordable tax slab rates under the new regime

Get Started with TaxDunia 

The tax reduction tool Section 24 proves useful for homeowners, together with investors who want to minimize their tax burdens. The deductions defined within this section deliver significant savings potential to those who bear home loan interest expenses or earn rental income.

Housing loan interest payments up to ₹2 lakh provide salaried professionals with an opportunity to minimise their taxable income. By using standard deduction with full interest benefit, landlords achieve higher tax efficiency in their rental earnings. You can obtain tax benefits of ₹30,000 per year during the following five years by demonstrating that you paid ₹1.5 lakh in interest during construction.