Tax
Section 24(b): Home Loan Interest Deduction
The biggest home loan tax benefit there is — and, if you are on the new tax regime, one you cannot claim at all.
The short answer
Section 24(b) lets you deduct home loan INTEREST — up to ₹2 lakh a year for a self-occupied house.
But only under the OLD tax regime.
The new regime is the default, and under it a self-occupied house gets no interest deduction at all. Check which regime you are on before you plan around this.
Since AY 2024-25 the NEW TAX REGIME IS THE DEFAULT. You have to actively opt out of it to be on the old one.
Under the new regime, for a SELF-OCCUPIED house:
• Section 24(b) interest deduction — NOT AVAILABLE
• Section 80C principal deduction — NOT AVAILABLE
• Section 80EE / 80EEA — NOT AVAILABLE
Zero. Nothing. Your home loan gives you no deduction at all.
A great deal of 'home loan tax benefit' content on the internet quietly ignores this, and describes benefits most readers can no longer claim. Check which regime you are on before you read any further.
The regime question, first
Everything below assumes you are on the old tax regime. If you are on the new one — and by default, you are — none of it applies to a self-occupied house.
You may still be better off on the new regime. Lower slab rates and a ₹75,000 standard deduction can outweigh the deductions you give up. The only way to know is to compute both. Do it every year; the answer can change.
What Section 24(b) allows — under the old regime
| Self-occupied | Let out | |
|---|---|---|
| Interest deduction | Up to ₹2,00,000 a year | The full interest. No cap. |
| Loss set-off | Up to ₹2 lakh against other income | Up to ₹2 lakh against other income; the balance carried forward 8 years |
| Standard deduction on rent | — | 30% of net annual value, under Section 24(a) |
| Municipal taxes paid | Not deductible | Deductible — but only what you actually paid |
| If construction takes over 5 years | Deduction drops to ₹30,000 | No such restriction |
What ₹2 lakh is actually worth
Old regime. 30% slab.
- Interest deduction under 24(b)
- ₹2,00,000
- Your marginal rate
- 30% + 4% cess
- Tax saved
- ≈ ₹62,400
Let-out property — the important asymmetry
For a let-out property there is no ₹2 lakh cap. You may deduct the entire interest against the rental income.
But the loss you can carry out of the house property head is capped:
Old regime: if your interest exceeds your rental income, the resulting loss from house property can be set off against your salary and other income — up to ₹2 lakh a year. The balance is carried forward for 8 years, to be set off against future house property income.
New regime: the loss cannot be set off against salary or any other head at all, in the current year or any future year. It can only be carried forward against future house property income.
That is a significant difference for anyone with a large loan on a let-out property, and it is very easy to miss.
Pre-construction interest — the deduction people forget to claim
You bought under construction. You paid interest for three years before possession. You could not claim it at the time.
It is not lost. After possession, you may claim it in five equal annual instalments.
Pre-construction interest
- Interest paid during construction (3 years)
- ₹9,00,000
- Claimable after possession
- 1/5th a year, for 5 years
- Per year
- ₹1,80,000
- But — within the same ₹2 lakh cap
- Not on top of it
Your current-year interest is ₹2.5 lakh. Your 1/5th of pre-construction interest is ₹1.8 lakh. Total: ₹4.3 lakh.
You can still only claim ₹2 lakh for a self-occupied house.
Which means, in practice, a great deal of pre-construction interest is never effectively claimed at all — because the current-year interest already fills the cap.
It is one of the quieter costs of buying under construction, and almost nobody counts it.
Joint loans double the benefit
If a husband and wife are both co-owners AND co-borrowers, each may independently claim:
- ₹2 lakh each under Section 24(b) — ₹4 lakh combined
- ₹1.5 lakh each under Section 80C — ₹3 lakh combined
Both conditions must be met. Being a co-borrower without being a co-owner does not work. Nor does being a co-owner who does not service the loan.
Under the old regime, that is up to ₹7 lakh of deductions for a couple. Under the new regime, on a self-occupied house, it is zero.
Old regime vs new regime
| OLD regime | NEW regime (the default) | |
|---|---|---|
| Section 24(b) — interest, self-occupied | Up to ₹2 lakh a year | NOT AVAILABLE |
| Section 24(b) — interest, let out | Full interest, no cap. Loss set off against other income up to ₹2 lakh; balance carried forward 8 years. | Full interest against rental income — but any resulting LOSS cannot be set off against salary or any other head, and cannot be carried forward. |
| Section 80C — principal, stamp duty, registration | Up to ₹1.5 lakh (shared with PF, ELSS, insurance) | NOT AVAILABLE |
| Section 80EE / 80EEA — additional interest | Available, if you meet the strict sanction-date conditions | NOT AVAILABLE |
| Standard deduction (salaried) | ₹50,000 | ₹75,000 |
| Slab rates | Higher | Lower |
This is the whole decision. The new regime gives you lower rates and a bigger standard deduction, and takes away every home loan deduction on a self-occupied house. Whether that is a good trade depends entirely on your numbers — run both, every year.
We have written this against the current position and checked it carefully. But tax turns entirely on your specific facts: your residential status, when you bought, when you sell, which regime you are on, and what else is in your return.
Note also that the Income Tax Act, 2025 now replaces the 1961 Act, and section numbering is changing even where the substance is not. We use the familiar numbers — 54, 54F, 24(b), 80C — because those are what people search for and what CAs still say. Confirm the current section references with your accountant.
Before you sell a property, pay a CA. On a transaction this size it is the best-value fee you will ever pay, and the cost of getting it wrong runs to lakhs.
Frequently asked questions
Is Section 24(b) available under the new tax regime?
Not for a self-occupied house. Under the new regime — which is the DEFAULT since AY 2024-25 — you cannot claim any interest deduction on a self-occupied property. For a let-out property, the interest is still fully deductible against rental income, but any resulting loss cannot be set off against salary or any other head, and cannot be carried forward.
How much home loan interest can I deduct?
Under the OLD regime: up to Rs 2 lakh a year for a self-occupied house, or the full interest with no cap for a let-out property. Under the NEW regime: nothing for a self-occupied house.
What is pre-construction interest?
Interest paid on a home loan before possession of an under-construction property. It cannot be claimed at the time, but after possession you may claim it in five equal annual instalments. The catch: it counts INSIDE the Rs 2 lakh cap, not on top of it — so if your current-year interest already fills the cap, a great deal of pre-construction interest is never effectively claimed at all.
Can both husband and wife claim Section 24(b)?
Yes, if both are co-owners AND co-borrowers. Each can claim up to Rs 2 lakh independently — Rs 4 lakh combined — under the old regime. Both conditions must be met: being a co-borrower without being a co-owner does not work, and nor does being a co-owner who does not service the loan.
What happens if construction takes more than 5 years?
The interest deduction for a self-occupied property drops from Rs 2 lakh to Rs 30,000 a year. It is one more reason that a delayed project costs you more than the delay itself.