Home Loan Interest Deduction Under Section 24 – Complete Rules for FY 2025-26

Section 24 is arguably the single most financially significant tax provision for home loan borrowers under the old regime, but its benefits shift meaningfully depending on property status, construction timeline, and — critically — whether you've chosen the old or new tax regime. Understanding exactly how pre-construction interest, the five-year completion deadline, and the self-occupied versus let-out distinction interact helps you claim every rupee you're entitled to.

This page covers:

• What Section 24 covers and the Rs. 2 lakh deduction explained
• Income from house property — how it's calculated
• Complete list of available deductions beyond interest
• Pre-construction interest and the five-instalment claim rule
• Conditions you must satisfy to claim this deduction
• Old regime vs. new regime — where Section 24 stands
• How to claim Section 24(b) in your ITR

Section 24 of the Income Tax Act, 1961 deals with the deduction of interest on home loans. Under this section, an individual or Hindu Undivided Family (HUF) can claim a deduction of up to Rs. 2 lakh on the interest paid on a home loan in a financial year, for a self-occupied property. If construction is not completed within five years from the end of the financial year when the loan was disbursed, this deduction drops to just Rs. 30,000.

For a rented-out property, you can claim the entire interest repaid as a deduction — there is no upper cap. It's important to note the deduction applies only to the interest component, not the principal (which is claimed separately under Section 80C). For loans taken specifically for repairs or renovation, the maximum claimable deduction is capped at Rs. 30,000 regardless of construction timeline.

Income from house property refers to earnings arising from owning residential or commercial property — taxed separately even if the property isn't actually rented out.

• Rental income from a let-out property is fully taxable
• If you own more than two properties, the additional ones are treated as "deemed to be let out," with notional rent calculated for taxation, even if genuinely vacant
• For self-occupied properties, annual value is generally taken as zero — and can even become negative once you claim home loan interest deductions
• Gross Annual Value (GAV) for a rented property is the actual rent received; for deemed let-out properties, it's the reasonable rental value of comparable properties in the area

1. Municipal tax: Deducted from Gross Annual Value to calculate Net Annual Value — but only if you (the owner), not the tenant, actually paid it during the financial year.
2. Standard deduction: A flat 30% of Net Annual Value, regardless of your actual maintenance or repair expenses — no proof of expenditure required.
3. Interest on home loan: Up to Rs. 2 lakh for self-occupied property (applies even if vacant); no upper limit for let-out property, capped at Rs. 30,000 if the loan was for repairs/ renovation or construction exceeded five years.
4. Pre-construction interest: Interest paid during the construction phase, claimable in five equal instalments starting from the year construction completes (see below).
5. Section 80EE/80EEA: Additional deductions of Rs. 50,000 (loans taken 2016-17) or Rs. 1.5 lakh (loans taken 2019-2022) for eligible first-time buyers, over and above the Section 24 limit.
6. Principal repayment (Section 80C): Separate from Section 24, covering principal, stamp duty, and registration charges — up to Rs. 1.5 lakh, unavailable for repair/ renovation loans.

Interest paid during your property's construction phase cannot be claimed immediately — it accumulates and becomes claimable only after construction completes, spread across five equal instalments.

Worked example: If construction completes on 25 June 2025 (within FY 2025-26), you can claim your accumulated pre-construction interest in five equal instalments from FY 2025-26 through FY 2030-31 — alongside your regular annual interest deduction, though the combined total for self-occupied property still cannot exceed Rs. 2 lakh in any given year.

This benefit applies only to new construction, not repairs or renovation.

• The loan must be for purchase, construction, repair, or renovation of a house property
• The loan must be from a bank, financial institution, or housing finance company
• The loan must be taken on or after 1 April 1999
• You must have the interest certificate for interest payable on the loan
• Construction must complete within five years from the end of the financial year in which the loan was taken

Meeting all these conditions is necessary before you can claim the applicable Rs. 2 lakh (or Rs. 30,000) deduction.

This is the single most important distinction to understand: under the new tax regime, interest deduction is not allowed for self-occupied properties at all. If you want to avail Section 24 benefits for a self-occupied home, you must specifically opt for the old tax regime — this benefit was excluded from the new regime effective 1 April 2023.

The one exception: For let-out properties, full interest deduction remains available without any limit, irrespective of which tax regime you choose — this is one of the few home loan-related benefits that survives under the new regime.

Individuals who own a residential property — whether it generates rental income or is self-occupied — are eligible to claim deductions under Section 24, including a standard 30% deduction on the gross annual value of a let-out property regardless of actual expenses incurred.

1. Select the appropriate ITR form (ITR-1 or ITR-2 for most salaried individuals with house property income)
2. Navigate to the "Income from House Property" section
3. Enter the total interest paid during the financial year
4. Attach supporting documents — loan statements and interest certificates from your lender
5. Ensure the property is registered in your name and EMI payments are properly documented

Understanding Section 24's rules helps you plan your property purchase timeline strategically — particularly the five-year construction deadline, which directly affects your deduction amount. A home loan from Bajaj Finance, combined with careful regime selection, can meaningfully reduce your effective cost of homeownership. Bajaj Finance offers home loans from 7.25% p.a.* with amounts up to Rs. 15 Crore* and tenures up to 32 years. Check eligibility today.
 

Section 24 remains one of the most valuable tax provisions available to home loan borrowers under the old regime — understanding the construction timeline, the self-occupied versus let-out distinction, and exactly how pre-construction interest accumulates ensures you claim the maximum benefit you're entitled to.