Published 9 May 2026
Section 24(b) Rules in the New Tax Era
Home loan interest deduction under section 24(b) is one of the largest deduction levers in Indian salaried tax -- up to INR 2 lakh per year for self-occupied house, UNCAPPED for let-out. With Finance Act, 2017's INR 2 lakh inter-head set-off cap and the Finance Act, 2023 default new regime, the rules have evolved. Here is a complete guide for tax year 2025-26 / 2026-27.
The Statutory Framework -- Section 24
Section 24 allows two deductions from annual value of house property:
Section | Deduction | Notes |
|---|---|---|
Section 24(a) | 30% of annual value (standard) | No proof required; flat deduction |
Section 24(b) -- Self-occupied | Up to INR 2 lakh interest (Finance Act, 2014) | Loan acquired post 1 April 1999 plus construction completed within 5 years; INR 30,000 otherwise |
Section 24(b) -- Let-out | NO LIMIT on interest | Subject to section 71 INR 2 lakh inter-head set-off cap; balance carried forward 8 years under section 71B |
Pre-Construction Interest
Interest paid during pre-construction period (from borrowing till the previous year in which construction is completed) is deductible in 5 EQUAL INSTALMENTS starting from the previous year of completion. So if you borrowed in March 2022, completed in March 2025, total pre-construction interest is INR 6 lakh (say): you claim INR 1.2 lakh per year for financial year 2024-25 to financial year 2028-29. PLUS current-year interest (subject to overall INR 2 lakh cap for self-occupied).
Practitioner Tip Track pre-construction interest carefully; many taxpayers miss this claim; once 5 years lapse, the deduction is lost permanently. |
Finance Act, 2017 INR 2 Lakh Inter-Head Cap (Section 71)
Pre-Finance Act, 2017: house property loss could fully offset other heads (salary etc.). Post-Finance Act, 2017: house property loss capped at INR 2 lakh against other heads in same financial year. Excess equals carried forward as house property loss for 8 years under section 71B (only against future house property income).
So if house property loss equals INR 5 lakh: INR 2 lakh offset against current year other income; INR 3 lakh carried forward to next year against house property. House property loss equals (annual value minus 30% standard minus interest under section 24(b)). Self-occupied: annual value 0; loss equals entire interest. Let-out: loss only if interest exceeds (annual value minus 30%).
New Regime Impact -- Section 24(b) NOT Available for Self-Occupied
Finance Act, 2020 / Finance Act, 2023: in the new regime under section 115BAC, section 24(b) interest deduction for SELF-OCCUPIED house equals ZERO. Set-off of house property loss against other heads is ALSO denied. So a salaried taxpayer with home loan in the new regime: tax break completely lost.
Old regime: interest INR 2 lakh plus principal INR 1.5 lakh under section 80C equals INR 3.5 lakh total relief. New regime: only INR 75,000 standard deduction. For LET-OUT property: interest IS deductible against rental income in the new regime; but house property LOSS still cannot offset other heads.
Joint Owners / Joint Borrowers
Joint house ownership: each co-owner can claim section 24(b) interest UP TO INR 2 LAKH individually (proportionate to share). So husband-wife joint house with INR 4 lakh or more annual interest equals each claims INR 2 lakh; family relief INR 4 lakh.
Joint borrowers but SOLE owner: only owner can claim. Co-borrower not co-owner: cannot claim. Documentation: ensure registered share (50:50 / 60:40 etc.) in deed; bank loan should reflect both as borrowers; both should pay Equated Monthly Instalments from individual / joint account.
Common Mistake Spouse pays from joint account but only one claims -- inefficient. Both should claim proportionate to ownership. |
Strategic Planning for Home Loan Borrowers
- For INR 50 lakh or more home loan: old regime almost always wins. Compute annually.
- Pre-construction interest: track separately; claim 5-year amortisation.
- Joint ownership: maximise INR 4 lakh family relief through proportionate claims.
- Self-occupied 2 houses (post Finance Act, 2019): both qualify as self-occupied; combined interest INR 2 lakh cap (not INR 4 lakh).
- Let-out: full interest deductible versus rental; house property loss above INR 2 lakh carried forward.
- Top-up loan: deductible only if used for house-property-related purpose.
- Loan against property: NOT 24(b) eligible if proceeds for non-house-property use.
- Pre-payment / re-financing: continued deduction subject to nexus.
Key Takeaways
- Self-occupied: INR 2 lakh interest cap under section 24(b) (Finance Act, 2014).
- Let-out: NO LIMIT on interest deduction.
- Pre-construction interest: 5 equal instalments from previous year of completion.
- Finance Act, 2017 inter-head set-off cap: INR 2 lakh (section 71); excess carried forward 8 years (section 71B).
- New regime (Finance Act, 2020 / 2023): section 24(b) NOT available for self-occupied.
- Joint owners: each claims INR 2 lakh individually (proportionate to share).
- Companion: section 80C principal repayment INR 1.5 lakh (old regime).
Disclaimer: This article is for general information only. It does not constitute tax / legal advice. Please consult a qualified Chartered Accountant or tax practitioner for advice specific to your circumstances. The legal position is current as of FA 2024 (No. 2) / FA 2025; subsequent amendments and CBDT notifications may modify the position.