Section 24: Deductions from income from house property

Section 24 of the Income Tax Act 1961 (Deductions from income from house property):

Income chargeable under the head “Income from house property” shall be computed after making the following deductions, namely:—

(a) a sum equal to 30% of the annual value;

(b) where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital:

Provided that in respect of property referred to in sub-section (2) of section 23, the amount of deduction ⁵⁸[or, as the case may be, the aggregate of the amount of deduction] shall not exceed thirty thousand rupees :

Simplify: In case of Self occupied property:The maximum deduction of interest payable on loan is Rs. 30000/-. 

Provided further that where the property referred to in the first proviso is acquired or constructed with capital borrowed on or after the 1st day of April, 1999 and such acquisition or construction is completed within five years from the end of the financial year in which capital was borrowed, the amount of deduction ⁵⁸[or, as the case may be, the aggregate of the amounts of deduction] under this clause shall not exceed two lakh rupees.

Simplify:In case of Self occupied property acquired or constructed on or after 01-04-1999 and such   acquisition or construction is completed within 5 years from the end of the financial year in which loan taken:The maximum deduction of interest payable on loan is Rs.200000/-.

Note: In case of Let out or Rented property: There is no limit to claim deduction u/s 24 of interest payable on loan. Hence, entire home loan interest is allowed as a deduction.

Explanation.—Where the property has been acquired or constructed with borrowed capital, the interest, if any, payable on such capital borrowed for the period prior to the previous year in which the property has been acquired or constructed, as reduced by any part thereof allowed as deduction under any other provision of this Act, shall be deducted under this clause in equal instalments for the said previous year and for each of the four immediately succeeding previous years:

Provided also that no deduction shall be made under the second proviso unless the assessee furnishes a certificate, from the person to whom any interest is payable on the capital borrowed, specifying the amount of interest payable by the assessee for the purpose of such acquisition or construction of the property, or, conversion of the whole or any part of the capital borrowed which remains to be repaid as a new loan.

Explanation.—For the purposes of this proviso, the expression “new loan” means the whole or any part of a loan taken by the assessee subsequent to the capital borrowed, for the purpose of repayment of such capital:

⁵⁹[Provided also that the aggregate of the amounts of deduction under the first and second provisos shall not exceed two lakh rupees.]