Section 24(b) – Home Loan Interest Deduction Explained

Section 24(b) of the Income Tax Act provides tax deduction on the interest component of a home loan. It is especially beneficial for salaried individuals and homebuyers taking a loan to purchase or build a property.

✅ What is Section 24(b)?

It allows deduction of up to ₹2,00,000 per year on home loan interest for self-occupied property, and full interest for let-out property (subject to ₹2 lakh set-off limit with other income).

✅ Eligibility Criteria

Condition	Criteria
Property type	Self-occupied or Let-out
Loan purpose	Purchase, construction, repair, renewal
Completion timeline	Within 5 years from end of FY of loan
Ownership	You must be the owner/co-owner

🧾 Deduction Limits under Section 24(b)

Property Type	Max Deduction
Self-occupied	₹2,00,000 per year
Let-out	No cap on interest deduction, but max ₹2 lakh can be set off against other income in the same year
Under-construction	Interest allowed in 5 equal parts after possession

🔁 Comparison: Old vs New Regime

Feature	Old Regime	New Regime
Section 24(b) allowed?	✅ Yes	❌ No
Max Deduction (self-occupied)	₹2,00,000	Nil
Let-out property interest	Allowed (with ₹2L set-off cap)	Not allowed
Pre-construction interest	Allowed	Not allowed
80C / HRA / other deductions	✅ Allowed	❌ Mostly removed

⚠️ Note: If you opt for the New Tax Regime (under Section 115BAC), you lose the benefit of both Section 24(b) and Section 80C (for principal repayment).

🏡 Example 1 – Self-Occupied Property

Mr. Raj has taken a home loan and pays ₹2,50,000 as annual interest:

Under Old Regime: He can claim deduction of ₹2,00,000
Under New Regime: No deduction allowed

🏢 Example 2 – Let-out Property

Ms. Priya owns a second flat that is let out on rent. She pays ₹4,00,000 as annual interest on the home loan for that property.

The entire ₹4,00,000 qualifies under Section 24(b) as interest on let-out property
However, as per Section 71(3A), only ₹2,00,000 can be set off against salary or business income in the same year
The remaining ₹2,00,000 can be carried forward for up to 8 years and adjusted only against future “Income from House Property”

💡 When Should You Choose Old Regime?

You pay high home loan interest
You claim deductions under 80C, 80D, HRA, etc.

📌 Summary

Aspect	Old Regime	New Regime
Section 24(b)	✅ Yes	❌ No
Interest Deduction	Up to ₹2,00,000 (self-occupied) No cap (let-out, with ₹2L set-off)	Not Allowed
Suitable for	Home Loan Holders	Individuals with fewer deductions

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