Section 24 of Income Tax Act

Buying a new house by availing a home loan in India comes with a multitude of benefits - a borrower gets to be a proud homeowner and enjoy a multitude of home loan tax benefits.

Section 24 of the Income-Tax Act or ITA allows a home loan borrower in India to claim tax exemptions on the amount levied as interest on the home loan. A borrower may claim the same amount of tax benefit on their loan even if their purchased property is vacant as part of deduction under section 24.

The tax deductions allowed on the home loan rate of interest under Section 24 of the Income-Tax Act are as follows:

• The standard deduction under Section 24 is 30% of the NAV. When a property is self-occupied, the deduction is not be granted. For self-occupied houses, the annual value is taken to be zero. So, the standard deduction is nil.
• Deduction on the housing loan interest rate: Tax deduction on the housing loan interest rate is acceptable for acquired, reconstructed, repaired, renewed, or constructed properties. A housing loan borrower can enjoy a tax deduction of up to Rs.2 lakh.
• Municipal tax is the amount that is paid to the area’s municipal corporation. Municipal taxes are to be subtracted from the Gross Annual value to calculate the Net annual value of the property. Deduction of municipal tax is permitted if it was borne by the owner and paid in that year.

The tax deductions allowed on the home loan rate of interest under Section 24 of the Income-Tax Act are as follows:

• To claim tax deductions per sec 24 of income tax, a home loan borrower needs to have availed of the loan after 1 April 1999.
• It is mandatory to have done the acquisition/construction within five years from the end of the financial year when the borrower had purchased the property.

A housing loan borrower must keep interest certificates handy. These reflect the interest paid on the home loan. If any of the mentioned terms and conditions are not met, the deduction per section 24 of the income tax act on the interest is then limited to Rs.30,000.

The following income is expected to be taxable under the head ‘Income from house property of the Income-tax Act, 1961.

• Rental income on a property that has been let out
• Annual Value of a property which is ‘deemed’ to be let out for income tax-specific purposes
• The value of a self-occupied property is nil