Section 24(b)
Section 24(b) of the Income Tax Act allows a deduction on interest paid on a home loan against income from house property — up to ₹2 lakh per year for self-occupied property and unlimited for let-out property (capped against rental income).
Understanding Section 24(b)
Section 24(b) is one of the largest single deductions available to Indian taxpayers. The ₹2 lakh self-occupied cap was set in 2014 and has remained unchanged. Combined with Section 80C principal repayment (within the ₹1.5 lakh ceiling), home loan tax benefits typically save ₹50,000–1 lakh per year for old-regime borrowers in the 20–30% slab.
For let-out property, no monetary cap applies on interest — but only if the entire interest is set off against rental income. If interest exceeds rental income, the resulting "loss from house property" can be set off against other heads (salary, business) only up to ₹2 lakh per year; excess is carried forward for 8 years.
Why it matters
For salaried homeowners, Section 24(b) often justifies staying in the old tax regime. Combined with HRA, 80C, and 80D, total deductions easily cross ₹4 lakh — beyond which old regime decisively wins. A homeowner should always run both regimes through a calculator before choosing.
Example
A homeowner pays ₹2.5 lakh interest on a self-occupied home loan in FY 2026-27. Section 24(b) allows ₹2 lakh deduction. Tax saving at 30% slab = ₹62,400. The ₹50,000 of interest beyond the cap is not deductible.
A homeowner pays ₹2.5 lakh interest on a self-occupied home loan in FY 2026-27. Section 24(b) allows ₹2 lakh deduction. Tax saving at 30% slab = ₹62,400. The ₹50,000 of interest beyond the cap is not deductible.