Home Loan Interest Deduction —
Section 24(b), Rs 2 Lakh Cap
How much home-loan interest you can deduct under Section 24(b), why the Rs 2 lakh self-occupied cap is old-regime only, how let-out property, pre-EMI interest and joint loans work, and how to claim it.
Section 24(b) lets you deduct the interest on a home loan. For a self-occupied house the cap is Rs 2,00,000 a year — and only under the old tax regime; the default new regime does not allow it. For a let-out (rented) property the entire interest is deductible with no upper limit, in both regimes, but the loss you can set off against other income is capped at Rs 2 lakh a year. Separately, the principal repayment is deductible up to Rs 1.5 lakh under Section 80C (old regime only).
Section 24(b) — Deduction by Property Type & Regime
Rental income is taxed under the head "Income from House Property", after a flat 30% standard deduction under Section 24(a) and the home-loan interest under Section 24(b). How much interest you can deduct depends on how the property is used and which regime you pick.
| Property type | Old regime | New regime (default) | Condition |
|---|---|---|---|
| Self-occupied house | Rs 2,00,000/yr | Not available | Purchase/construction completed within 5 years |
| Let-out (rented) property | No limit | No limit | Full interest against rental income |
| Deemed let-out (extra property) | No limit | No limit | Notional rent computed on the property |
| Pre-construction (pre-EMI) interest | 1/5th per year | Let-out only | 5 equal installments from year of possession |
| Construction not done in 5 years | Rs 30,000 | Not available | Self-occupied cap drops from Rs 2L to Rs 30k |
The Rs 2 lakh figure is the interest cap for a self-occupied house. For let-out property the interest is uncapped, but the house-property LOSS you can set off against other income is limited to Rs 2 lakh a year.
You can deduct the full interest on a let-out property, but if that produces a loss under "Income from House Property", only Rs 2 lakh of it can be set off against your salary or other income in a year; the rest is carried forward for up to 8 years. Under the new regime, this house-property loss cannot be set off against other heads at all.
Self-Occupied Interest Works Only in the Old Regime
The new tax regime is now the default. It has lower slab rates but disallows the Section 24(b) interest deduction on a self-occupied house. To claim the Rs 2 lakh you must actively opt for the old regime. For a let-out property the interest stays deductible in both regimes (against rental income).
Old regime — full 24(b)
- Rs 2 lakh interest on self-occupied house
- Rs 1.5 lakh principal under 80C
- Extra Rs 1.5 lakh under 80EEA (if eligible)
- Let-out loss set-off up to Rs 2 lakh/yr
- Best when the loan and deductions are large
New regime (default) — limited
- No 24(b) interest on self-occupied house
- No 80C principal, no 80EEA
- Let-out interest still fully deductible
- House-property loss not set off vs other heads
- Rebate u/s 87A up to Rs 12L taxable income
A big self-occupied home loan can make the old regime worth up to Rs 2L × 30% = Rs 60,000 in tax saved on interest alone (plus 80C and 80EEA). But the new regime's lower slab rates and Rs 75,000 standard deduction may still win if your overall deductions are modest. Run both numbers with our old vs new regime calculator.
Not sure which regime saves you more on your home loan?
Compare with an expert →How Much Tax Does Section 24(b) Save?
Section 24(b) is a deduction from income, so the tax saved equals the interest deducted times your marginal slab rate (plus 4% cess). Here is a full Rs 2 lakh self-occupied claim at the top two old-regime slabs.
30% slab taxpayer
20% slab taxpayer
Add Rs 1.5 lakh principal under Section 80C and, if eligible, Rs 1.5 lakh more under Section 80EEA, and a 30%-slab buyer can deduct up to Rs 5 lakh in the old regime. See our income-tax slabs for the exact rate that applies to you.
Pre-EMI (pre-construction) interest
Interest you pay before the year of possession is not deductible in the year paid. It is accumulated and deducted in 5 equal annual installments from the year construction is completed — still within the Rs 2 lakh cap for a self-occupied house, and uncapped for a let-out one. If construction is not completed within 5 years of the end of the financial year of borrowing, the self-occupied cap falls to Rs 30,000.
If both spouses are co-owners of the property AND co-borrowers on the loan, each can separately claim up to Rs 2 lakh interest under 24(b) and Rs 1.5 lakh principal under 80C — up to Rs 4 lakh interest and Rs 3 lakh principal for the couple. Claims should follow the ownership ratio; a spouse who is only a co-borrower (not co-owner) cannot claim.
How to Claim Home Loan Interest in Your ITR
- Lender's home-loan interest certificate
- Principal repayment figure for 80C
- Possession / completion certificate
- Co-owner & co-borrower details (joint loan)
- Pre-EMI interest worked out in 5 installments
- Rent received & municipal taxes (let-out)
- 80EEA sanction proof (Apr 2019–Mar 2022)
- Form 12BB submitted to employer
- Old regime selected before filing
Old regime is worth it if
- You have a large self-occupied home loan
- You also use 80C, 80D and 80EEA
- Total deductions clearly beat the new-regime rates
Reconsider if
- Your loan interest is well below Rs 2 lakh
- You have few other deductions
- The new regime's lower rates save more overall
Want us to claim every home-loan deduction and file your return?
Get ITR Filing Help →Home Loan Interest Deduction — Frequently Asked Questions
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