Section 24 — Home Loan Interest
Rs2 Lakh or Unlimited?
The Section 24(b) interest limit for a self-occupied home, the unlimited interest on let-out property, the 30% standard deduction u/s 24(a), pre-construction interest and why this deduction is gone in the new regime.
Section 24(b) lets you deduct home loan interest from house property income. For a self-occupied house the cap is Rs2,00,000 a year; for a let-out (rented) house the interest is unlimited. Section 24(a) also gives a flat 30% standard deduction on the Net Annual Value of a let-out property. The self-occupied Rs2L deduction is available only in the old regime; in the new (default) regime it is not allowed, though a let-out property's interest is still deducted against its rent.
Section 24(a) and 24(b) — the Limits
Income from house property is computed after two deductions under Section 24. First the flat 30% standard deduction, then the actual interest on borrowed capital.
- Section 24(a) — Standard deduction: a flat 30% of the Net Annual Value (NAV), allowed automatically with no bills or proof. NAV = Gross Annual Value − municipal taxes paid by the owner. It notionally covers repairs, insurance and maintenance. (A self-occupied house has NAV nil, so 24(a) gives nothing there.)
- Section 24(b) — Interest on borrowed capital: actual interest paid or accrued on a loan taken to buy, construct, repair, renew or reconstruct the property. The cap depends on whether the house is self-occupied or let out.
| Parameter | Self-Occupied | Let-Out (Rented) |
|---|---|---|
| Annual Value | Nil | Actual / expected rent |
| 24(a) — 30% std. deduction | N/A (AV nil) | 30% of NAV |
| 24(b) — interest deduction | Up to Rs2,00,000 | Unlimited |
| Pre-construction interest | 5 instalments (within Rs2L) | 5 instalments (no cap) |
| Set-off of HP loss vs other heads | Max Rs2L / yr | Max Rs2L / yr |
| Carry-forward of balance loss | 8 years (HP head) | 8 years (HP head) |
| Available in NEW regime? | No | Yes (vs its rent) |
The self-occupied cap drops to Rs30,000 if construction is not completed within 5 years from the end of the FY in which the loan was taken. Limits under the Income-tax Act 1961 are unchanged by Budget 2025.
Even on a let-out property with unlimited interest, any resulting loss from house property can be set off against salary or other income only up to Rs2 lakh a year (Section 71(3A)). The unadjusted loss is carried forward for up to 8 assessment years to be set off against future house-property income only.
Section 24 in the Old vs New Regime
For FY 2025-26 (AY 2026-27) the new regime is the default. Whether you get the Section 24 benefit depends entirely on the regime you pick.
Old regime — full Section 24
- Self-occupied interest deductible up to Rs2,00,000
- Let-out interest fully deductible
- 30% standard deduction on let-out NAV
- Also 80C principal, 80EEA (older loans)
- Best when interest + other deductions are high
New regime — self-occupied denied
- No Rs2L deduction on a self-occupied house
- Let-out interest still set off against that property's rent
- But house-property loss cannot be set off against salary
- Standard deduction Rs75,000 on salary instead
- 87A rebate makes income up to Rs12L tax-free
Finance Act 2025 amended Section 23(2) so the annual value of up to two self-occupied houses can be taken as nil from AY 2025-26, with no earlier employment/business condition. You still get the Rs2 lakh combined 24(b) interest cap across both self-occupied houses — only in the old regime.
Not sure whether the old or new regime saves you more with your home loan?
Compare with TaxClue →Computing Income from a Let-Out House
A rented flat with Rs3,60,000 annual rent, Rs12,000 municipal tax and Rs2,80,000 home loan interest, under the old regime:
Let-out property — house property income
Set-off of the loss
Here the Rs36,400 loss is within the Rs2 lakh ceiling and is fully set off against salary. Had the loss been Rs2.5 lakh, only Rs2 lakh would set off this year and Rs50,000 would carry forward for 8 years against future house-property income.
Own a rented property? We calculate NAV, interest and loss set-off correctly in your return.
File My ITR →Pre-Construction Interest — Split Over 5 Years
Interest paid before the year of completion — from first loan disbursement up to 31 March of the FY preceding possession — is not lost. It is aggregated and claimed in five equal annual instalments starting from the year construction is completed, on top of that year's regular interest.
Example: loan disbursed April 2021, possession October 2024. Pre-construction interest of Rs6,00,000 is deducted at Rs1,20,000 a year for FY 2024-25 to FY 2028-29, added to current-year interest. For a self-occupied house the combined figure still cannot exceed the Rs2 lakh cap.
Section 24 vs Other Home-Loan Deductions
| Section | What it covers | Limit | Regime |
|---|---|---|---|
| 24(b) | Home loan interest (self-occupied) | Rs2,00,000 | Old only |
| 80C | Home loan principal repayment | Within Rs1,50,000 | Old only |
| 80EEA | Extra interest, affordable housing | Rs1,50,000 | Old · loans sanctioned by 31 Mar 2022 |
| 24(b) let-out | Interest on rented property | No limit | Both (loss set-off differs) |
Section 80EEA is closed to loans sanctioned after 31 March 2022. See our guides below for each.
From AY 2026-27 the Income-tax Act, 2025 re-codifies house-property provisions (the old Sections 22-27 map to the new Sections 20-25). The substance is unchanged — the Rs2 lakh self-occupied cap, 30% standard deduction and pre-construction rule all continue. "Section 24" remains the familiar reference for the interest deduction.
Section 24 — Frequently Asked Questions
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