Section 24(b) of Income Tax: Home Loan Interest Deduction

Section 24(b) of the Income-tax Act, 1961 allows a deduction for interest on a loan to buy, build or repair a house. The deduction covers interest only, and principal repayment earns nothing under it.
 

• Self-occupied limit: Rs. 2,00,000 a year, or Rs. 30,000 for repairs or a late build
• Let-out property: full interest, with loss set-off against other income capped at Rs. 2,00,000
• Before possession: pre-construction interest in 5 equal yearly instalments
• Joint loans: each co-owner and co-borrower claims up to Rs. 2,00,000
• Regime: the old regime for a self-occupied home

• From 1 April 2026: Section 22 of the Income-tax Act, 2025

  
  

Get the annual interest certificate from your lender before you file. Then compare both regimes, because the deduction alone may not decide the choice.

Section 24(b) is the part of the Income-tax Act, 1961 that lets you deduct the interest on a home loan from your income from house property. A deduction lowers the income on which tax is calculated, and the saving equals the deduction multiplied by your tax rate.

The deduction works on the interest part of each instalment, which your lender reports in a yearly certificate. Section 22 of the Income-tax Act, 2025 replaces Section 24 from 1 April 2026. Returns for financial year (FY) 2025-26 still cite Section 24(b).

You can deduct up to Rs. 2,00,000 a year on a self-occupied home, and the full interest on a let-out home. A let-out home has a second limit on how much loss you can set off against other income.
 

The 5 financial years run from the end of the financial year in which you took the loan. An unused let-out loss carries forward for 8 years, and a later year's house property income absorbs it.

Four conditions apply to a Section 24(b) claim, and missing one defeats it.
 

You can treat up to 2 houses as self-occupied. A third house is deemed let-out, even when it is empty, so its notional rent enters your income.

Yes. Interest that you pay before the year of completion is pre-construction interest, and you claim it in 5 equal instalments starting in the year of completion.

For example, pre-construction interest of Rs. 3,60,000 gives Rs. 72,000 a year for 5 years. That amount adds to the current year's interest, and the combined claim for a self-occupied home stays within Rs. 2,00,000.

Keep the interest certificates of the pre-construction years. The lender issues them even though the flat is not yet yours, and the Income Tax Department can ask for them in the year of the claim.

Each co-owner who is also a co-borrower can claim up to Rs. 2,00,000 a year on a self-occupied home, in proportion to the share of the loan that they repay. A couple that owns a flat equally and repays the loan equally can claim Rs. 2,00,000 each, which is Rs. 4,00,000 in total.

Both names must appear on the title and on the loan. A co-borrower who is not a co-owner cannot claim, and the lender's certificate should show each person's share of interest.

No, not for a self-occupied home. The new regime disallows most deductions under Chapter VI-A and the interest deduction on a self-occupied property. Every source that I checked agrees on this point.

For a let-out property, sources disagree on whether the new regime allows the interest deduction and the loss set-off. Confirm that position with a tax professional before you rely on it.

Trade-off: the old regime lets you claim Section 24(b), but its slab rates are higher. Compare your total tax in both regimes, as the example below shows.

The interest deduction covers the interest on your loan, and Section 80C covers the principal that you repay. Both need the old regime, and each has its own limit.
 

Read the guide to Section 80C deductions for the list of items that share its limit.

Neha Iyer, 34, lives in Chennai and earns Rs. 2.2 lakh a month (Rs. 26,40,000 a year), with a CIBIL Score of 770. She borrowed Rs. 50,00,000 at 8.50% p.a. for 20 years (240 months) on 1 April 2025, and her equated monthly instalment (EMI) is Rs. 43,391. In FY 2025-26 she pays Rs. 4,21,182 of interest and Rs. 99,511 of principal.

Formula used: Tax saved = deduction × 30% × 1.04 for cess. She can deduct Rs. 2,00,000 of the Rs. 4,21,182, so the saving is Rs. 62,400.

Section 24(b) saves her Rs. 62,400, yet the old regime costs Rs. 1,40,400 more in total. She files in the new regime.

The let-out case shows the second limit. Suppose she let the flat for Rs. 3,00,000 a year. After the 30% standard deduction of Rs. 90,000, her house property loss is Rs. 2,11,182. She can set off Rs. 2,00,000 and carry forward Rs. 11,182.

Ask Bajaj Finance for the annual interest certificate before you file your return. The certificate splits your yearly payments into interest and principal, and Section 24(b) uses the interest only.

Bajaj Finance assesses income, existing obligations and credit record, and a deduction does not change your eligibility. In the Chennai example, the EMI of Rs. 43,391 is the amount that the lender counts, not the tax saving.

Approval timelines can extend where income or loan records need clarification, and minimum income thresholds can differ by city. Check your home loan eligibility before you apply.