Section 24 of Income Tax Act – Save upto Rs. 2 lacs

Section 24 of Income Tax Act, 1961 has long been a key provision for taxpayers earning income from house property. It outlines the specific deductions that can be claimed to reduce the taxable value of such income, offering significant relief specifically to assessees with housing loans. Under the new Income Tax Act, the provisions will be covered under section 22. Let us understand the deductions available under section 24 of Income Tax Act, the maximum allowable deduction and the conditions to be fulfilled for availing such deductions –

Section 22 (erstwhile Section 24 of Income Tax Act, 1961)

As per Section 22 of the Income Tax Act, 2025 (erstwhile section 24 of Income Tax Act, 1961), the computation of income from house property includes the following deductions –

• Standard deduction of 30% of the annual value determined u/s 21 i.e. after considering municipal taxes;
• Deduction of interest payable on the capital borrowed for the acquisition, construction, repair, renewal or reconstruction of the house property;
• If the capital as mentioned in clause (b) above has been borrowed prior to the tax year in which the property has been acquired or constructed, the interest payable for the prior period will be allowed as deduction in 5 equal installments i.e. in the tax year and the 4 immediately succeeding tax years.

However, if such prior period interest has already been deducted under any other provisions of this Act, then the same will not be considered to that extent under Section 24 of Income Tax Act.

Maximum deduction under Section 24 of Income Tax Act

In cases where the annual value of the house property is nil u/s 21(6) of the Income Tax Act, 2025 i.e. either the house is used for own residence or due to some reason it could not be occupied, there is a cap on the maximum deduction for the interest component allowable under section 22(1)(b) of the Income Tax Act, 2025 (erstwhile section 24 of Income Tax Act, 1961).

Therefore, the aggregate deduction under section 22(1)(b) in these cases shall not exceed –

Maximum deduction allowed	Conditions to be fulfilled for availing deduction
Rs. 2,00,000	The acquisition or construction of the property has been completed within 5 years from the end of the tax year in which the capital was borrowed for such acquisition or construction And The assessee furnishes a certificate from the person to whom the interest is payable on the capital borrowed.
Rs. 30,000	In any other case.

Therefore, for house properties covered u/s 21(6) i.e. where either the house is used for own residence or due to some reason it could not be occupied, the maximum deduction allowable u/s 22 of the Income Tax Act, 2025 (erstwhile section 24 of Income Tax Act, 1961) is Rs. 2 lacs.

Certificate for availing deduction of Rs. 2 lacs

As mentioned above, the assessee must furnish a certificate from the person to whom the interest is payable on the capital borrowed for availing the maximum benefit of Rs. 2 lacs under section 24 of Income Tax Act, 1961. The contents of the certificate must include –

• The amount of interest payable on the capital borrowed,
• The interest payable on any new loan, where subsequent to the capital borrowed, the assessee has taken any such loan for repayment of part or whole of the capital borrowed.

Treatment for interest payable outside India

Under section 22(6) of the new Income Tax Act, 2025, the interest chargeable on such borrowed capital payable outside India shall not be allowed as a deduction if –

• Tax has not been paid or deducted on such interest in compliance with the provisions of Chapter XIX-B (TDS/TCS), and
• In respect of such interest, there is no agent in India as per section 306.

This exception was earlier covered under a separate section 25 of the Income Tax Act, 1961 – ‘amounts not deductible from income from house property’.

Set off and carry forward of losses from house property

As per Section 109 of the new Income Tax Act, 2025 (erstwhile section 71 of the Income Tax Act, 1961), the loss computed under the head ‘income from house property’ shall be set off against any other head of income to the extent of Rs. 2 lacs.

As per Section 110 of the new Income Tax Act, 2025 (erstwhile section 71B of the Income Tax Act, 1961), if in any tax year, the loss computed under the head ‘income from house property’ cannot be wholly set off u/s 109 against any other head of income, the loss not so set off will be carried forward to the following tax year and will be –

• Set off ONLY against the income from house property, if any, assessable for that tax year; and
• If the loss is still not wholly set off, it will be carried forward to the following tax year and so on.

However, the loss from income from house property cannot be carried forward under this section for more than 8 tax years immediately succeeding the tax year for which the loss was first computed.

Difference between the provisions as per 1961 and 2025

While there are no major changes introduced in deductions under section 22 of the new law as compared to section 24 of Income Tax Act, however, there are two primary distinctions between the two –

• In the erstwhile section 24 of Income Tax Act, 1961, it was mentioned that the date of the capital borrowed should be after 1^st April, 1999, however, the same was not relevant and therefore has been omitted in the new Income Tax Act, 2025.
• The treatment of interest payable outside India was earlier covered under a separate section 25 of the Income Tax Act, 1961 – ‘amounts not deductible from income from house property’ which has now been incorporated in the primary section 22 – ‘deductions from income from house property’ of the New Income Tax, 2025.

FAQs on Section 24 of Income Tax Act

Q1. Will interest payable on outstanding interest be allowed as deduction for income from house property?

A1. No. As held in the case of Shew Kissen Bhatter v/s CIT (1973) 89 ITR 61 (SC), any interest paid on the outstanding amount of interest will not be allowed as a deduction for income from house property computation.

Q2. Will interest payable on second loan obtained for repayment of interest of the original loan be allowed as deduction for income from house property?

A2. Yes. As held in the case of K.S. Kamalakannan v/s Asst CIT (2010) 126 ITD 231 (Chennai), any interest payable on second loan obtained for repayment of interest of the original loan will be allowed as deduction for income from house property.

About the Author This article is written by FCA Eshita Krishna , an experienced Chartered Accountant with advanced ICAI certifications in DISA, Anti-Money Laundering, Real Estate Laws, and Forex & Treasury Management. With strong expertise in direct and indirect tax, audit, risk advisory, financial planning, and financial management, she delivers accurate, experience-backed financial insights to readers.