Section 24B of the Income Tax Act

Understanding Section 24 of the Income Tax Act requires you to know what the meaning of income from house property is. There are three types of income taxable under the heading ‘Income from House Property.’

• Rental income earned by letting out a property.

• The annual value of a self-occupied property.

• The annual value of a property tagged as ‘deemed to be let out’ (in case you are the owner of more than two housing properties).

Section 24 has two key subsections - Section 24A and Section 24B. Each section encompasses different aspects of owning and renting out a residential property.

Let us learn about Section 24B in income tax, along with its eligibility criteria and deduction limits.

Section 24B permits deductions on the interest of a loan. There is no restriction on the type of loan, which means you can claim deductions on the interest of a personal or a housing loan.

The only condition is on the use of the loan. You must use the money to purchase or construct a new home or renovate or repair your existing home.

If you want to claim a deduction under Section 24B in income tax, you must fulfil the following eligibility criteria:

• You must have taken the loan on or after 1st April 1999.

• You should use the loan to construct or buy a new home.

• You must complete the purchase formalities or construction project within five years from the end of the financial year in which you took the loan.

• You must have an interest certificate validating the interest amount payable against the loan borrowed.

An individual is eligible for a maximum deduction of ₹2,00,000 as per Section 24B of the Income Tax Act limit. The limit applies to a self-occupied and rented house.

The above limit of ₹2,00,000 reduces to ₹30,000 in the following cases:

• If the loan was taken before 1st April 1999 for any use related to house property.

• If the loan was borrowed after 1st April 1999 for any use other than acquisition or construction.

• If the purchase or construction is not completed within five years, calculated from the end of the financial year in which funds were borrowed.

For instance, if you borrowed a loan to buy or construct a new home on 15th September 2017, but the construction or acquisition is not complete even after 31st March 2023, the deduction limit reduces to ₹30,000.

Claiming deductions under Section 24B of the income tax act does not affect deduction limits under Section 80C, Section 80CCC, Section 80D, and others. For instance, you can still claim health insurance tax benefits on medical insurance premiums.

Health insurance plans bought for oneself, a spouse, children, or parents qualify for a tax deduction of up to ₹1,00,000 under Section 80D per annum, depending on the age of the policyholder. Tata AIG offers health insurance plans to protect you against medical expenses and enjoy tax benefits on premiums paid for buying the medical insurance.

Section 24B of the Income Tax Act grants different kinds of tax benefits to individuals investing in real estate. You can claim municipal tax deduction, house property standard deduction, and deduction on interest on home loans.

The provisions of Section 24B apply to the interest on a home loan, regardless of whether you have taken the loan for buying or constructing a new home or renovating or repairing an old one. The maximum deduction limit on interest as per this section is ₹2,00,000.

What is the maximum Section 24B deduction limit?

You can claim a maximum deduction of ₹2,00,000 on the interest of a loan. This deduction is eligible for self-occupied and rented housing property. With effect from AY 2020-2021, taxpayers can avail benefits on two self-occupied housing properties.

Can I claim tax deductions under Section 24 and Section 80D in one financial year?

Yes, you can claim tax deductions under both sections in one financial year. Section 24 enables taxpayers to claim a deduction on the interest of a loan borrowed to buy, construct, or renovate an existing house. The maximum deduction limit is ₹2,00,000.

Section 80D allows individuals to claim health insurance tax benefits on the premium paid for a health insurance plan. The maximum deduction limit is ₹1,00,000, depending on the age of the policyholder. You can claim these deductions for policies bought for yourself, a spouse, children, or parents.