Section 24 of the Income-tax Act, 1961 sets out two important deductions when calculating taxable income from house property: a standard deduction of 30% of annual value and, subject to applicable conditions, interest payable on borrowed capital used for the property. The amount that can be claimed depends on whether the property is let out or self-occupied, the borrowing purpose and the applicable tax regime.
Meaning of Section 24: deductions from house property
Income from house property is chargeable under Section 22, generally based on the annual value of a building or land appurtenant to it owned by the taxpayer. Section 23 determines the annual value, including rules for let-out and self-occupied houses. Section 24 then permits specified deductions in arriving at income chargeable under this head.
Section 24(a): standard deduction of 30%
Clause (a) allows a deduction equal to 30% of the annual value. For a let-out property, the relevant net annual value is generally arrived at after deducting qualifying municipal taxes actually paid by the owner from the gross annual value under Section 23. The deduction is statutory: the owner does not have to prove actual expenditure on ordinary repairs and maintenance to claim it.
Important: The 30% deduction is not an additional deduction for every repair bill. If the annual value is nil for a qualifying self-occupied house, 30% of nil is also nil. Special treatment may apply to different kinds of receipts and properties.
Section 24(b): interest on borrowed capital
Clause (b) generally permits deduction of interest payable on capital borrowed for the acquisition, construction, repair, renewal or reconstruction of the property. Principal repayment is not deductible under Section 24(b); it is a separate issue under other provisions, where eligible. The loan must have a sufficient nexus to the property, and documentary evidence should be retained.
Self-occupied house: Rs. 2,00,000 or Rs. 30,000 limit
For a property whose annual value is nil under Section 23(2), the aggregate interest deduction under the old-regime rules of the 1961 Act is generally limited to Rs. 2,00,000 where the house was acquired or constructed with capital borrowed on or after 1 April 1999, construction or acquisition was completed within five years from the end of the financial year of borrowing, and the prescribed lender certificate is available. Otherwise, the lower Rs. 30,000 ceiling generally applies. These are aggregate limits where the taxpayer claims the nil-annual-value treatment for up to two eligible houses; they are not separate Rs. 2 lakh allowances for each house.
Let-out or deemed let-out property
Under the 1961 Act's general computation rules, interest on qualifying borrowed capital for a let-out property is not subject to the same Rs. 2 lakh / Rs. 30,000 property-level cap. However, the amount of a house-property loss that can be set off against income under other heads is separately restricted by Section 71(3A), and carry-forward of eligible losses is governed by Section 71B. The concessional regime under Section 115BAC can impose additional restrictions, so do not assume that a deduction or inter-head set-off is available in every regime.
Old versus new tax regime
| Issue | Old regime (1961 Act) | Concessional regime under Section 115BAC (1961 Act) |
|---|---|---|
| 30% deduction for let-out property | Generally available on qualifying annual value | Generally available in computing qualifying let-out house-property income |
| Interest for qualifying self-occupied property | Generally up to Rs. 2 lakh or Rs. 30,000, subject to conditions | Deduction under Section 24(b) for Section 23(2) property not available |
| Interest for let-out property | Generally considered in computing property income, subject to loss rules | Generally considered in property computation; house-property loss cannot be set off against other heads under the regime's restrictions |
These distinctions describe the 1961 Act framework and should be checked against the tax year and statutory amendments relevant to the return being filed.
Pre-construction interest: five equal instalments
For acquisition or construction, qualifying interest relating to the period before the previous year in which the property is acquired or constructed is generally deductible in five equal annual instalments, starting with that previous year, subject to the applicable overall limit for a self-occupied property. Interest already allowed under another provision cannot be claimed again. Interest on borrowing solely for repairs, renewal or reconstruction does not automatically qualify for this five-instalment treatment.
Interest certificate and refinancing
To claim the higher self-occupied property ceiling, the statute requires a certificate from the lender stating the interest payable on the borrowed capital for acquisition or construction, or on an eligible replacement loan used to repay the original borrowing. A refinancing arrangement should be documented to establish the connection with the original qualifying borrowing.
Example: computing taxable house-property income
Assume a let-out house has gross annual value of Rs. 4,80,000, eligible municipal taxes actually paid by the owner of Rs. 30,000, and qualifying loan interest of Rs. 1,60,000.
| Computation | Amount |
|---|---|
| Gross annual value | Rs. 4,80,000 |
| Less: qualifying municipal taxes paid | Rs. 30,000 |
| Net annual value | Rs. 4,50,000 |
| Less: Section 24(a), 30% of Rs. 4,50,000 | Rs. 1,35,000 |
| Less: qualifying Section 24(b) interest | Rs. 1,60,000 |
| Income from house property | Rs. 1,55,000 |
This is an illustration only. Actual annual value may require adjustments for vacancy, unrealised rent and other Section 23 rules; tax-regime restrictions must also be considered.
Related provisions and common mistakes
- Section 22 identifies the income chargeable under the house-property head.
- Section 23 determines annual value, including nil value for qualifying self-occupied property.
- Section 25 deals with certain amounts not deductible.
- Do not confuse interest with loan principal, or the 30% standard deduction with actual repair expenses.
- Check the applicable regime, ownership, lender documentation and completion timeline before claiming interest.
Original statutory extract and amendment notes
The original webpage contains the historical wording of Section 24, including the 30% deduction, Rs. 30,000 and Rs. 2 lakh limits, five-year completion requirement, lender certificate and pre-construction interest instalments. The complete original extract and its legislative notes are preserved in the expandable section below for reference.
Official legislation and tax resources
- Income Tax Department: Income-tax Act, 1961 - statutory text and amendments.
- Income Tax Department e-Filing Portal - official tax filing and guidance.
- India Code - central statutes, including the Income-tax Act, 2025.
Frequently asked questions
What is the deduction under Section 24(a)?
It is a statutory deduction of 30% of the relevant annual value of house property. For a qualifying self-occupied house with nil annual value, the 30% deduction is nil.
Is the maximum home loan interest deduction always Rs. 2 lakh?
No. The Rs. 2 lakh ceiling is conditional and generally concerns qualifying self-occupied properties under the old regime. A lower Rs. 30,000 ceiling may apply, and different rules apply to let-out properties and the concessional regime.
Can pre-construction interest be claimed?
Qualifying interest for acquisition or construction may be deducted in five equal annual instalments beginning with the year of acquisition or completion, subject to the statutory conditions and limits.
Is principal repayment deductible under Section 24?
No. Section 24(b) concerns interest on borrowed capital, not principal repayment. Any separate principal-related tax benefit depends on other applicable provisions and the tax regime.
Original Section 24 text and legislative amendment notes (historical)
Archived original webpage: statutory extract preserved as supplied; verify the applicable consolidated law for the tax year.
1Income chargeable under the head "Income from house property" shall be computed after making the following deductions, namely:-
(a) a sum equal to thirty per cent. of the annual value;
(b) where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital:
Provided that in respect of property referred to in sub-section (2) of section 23, the amount of deduction 2 or, as the case may be, the aggregate of the amount of deduction shall not exceed thirty thousand rupees:
Provided further that where the property referred to in the first proviso is acquired or constructed with capital borrowed on or after the 1st day of April, 1999 and such acquisition or construction is completed 3 within 4 five years from the end of the financial year in which capital was borrowed, the amount of deduction 2 or, as the case may be, the aggregate of the amounts of deduction under this clause shall not exceed 5 two lakh rupees.
Explanation.-Where the property has been acquired or constructed with borrowed capital, the interest, if any, payable on such capital borrowed for the period prior to the previous year in which the property has been acquired or constructed, as reduced by any part thereof allowed as deduction under any other provision of this Act, shall be deducted under this clause in equal instalments for the said previous year and for each of the four immediately succeeding previous years:
6 Provided also that no deduction shall be made under the second proviso unless the assessee furnishes a certificate, from the person to whom any interest is payable on the capital borrowed, specifying the amount of interest payable by the assessee for the purpose of such acquisition or construction of the property, or, conversion of the whole or any part of the capital borrowed which remains to be repaid as a new loan.
Explanation.- For the purposes of this proviso, the expression "new loan" means the whole or any part of a loan taken by the assessee subsequent to the capital borrowed, for the purpose of repayment of such capital.
2 Provided also that the aggregate of the amounts of deduction under the first and second provisos shall not exceed two lakh rupees.
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1. Subs. by Act 14 of 2001, s. 15, for section 24 (w.e.f. 1-4-2002).
2. Ins. by Act 7 of 2019, s. 5 (w.e.f. 1-4-2020).
3. Subs. by Act 20 of 2002, s. 12, for "before the 1st day of April, 2003" (w.e.f. 1-4-2003).
4. Subs. by Act 28 of 2016, s. 10, for "three years" (w.e.f. 1-4-2017).
5. Subs. by Act 25 of 2014, s. 10, for "one lakh fifty thousand rupees" (w.e.f. 1-4-2015).
6. Ins. by Act 20 of 2002, s. 12 (w.e.f. 1-4-2003)