Section 24(b) Home Loan Interest Deduction: Complete Guide for FY 2025-26
Reviewed by CA Nikhil Gupta · Last reviewed 17 June 2026
If you have a home loan, the interest you pay is deductible under Section 24(b) of the Income Tax Act — separately from the principal repayment deduction under Section 80C. The rules differ sharply depending on whether the property is self-occupied or let out, and whether you're on the old or new tax regime. Here's exactly how much you can claim and how.
What Section 24(b) Covers
Section 24(b) allows a deduction for interest paid on a home loan taken to purchase, construct, repair, renew, or reconstruct a residential property. This is claimed under the head 'Income from House Property' and is entirely separate from the Section 80C deduction for principal repayment (which falls under Chapter VI-A).
Self-Occupied Property: ₹2 Lakh Limit
For a self-occupied house, the annual value is taken as nil, and the interest deduction is capped at ₹2 lakh per financial year — provided the loan was taken for purchase or construction and the construction is completed within 5 years from the end of the financial year in which the loan was taken. If construction takes longer than 5 years, the deduction limit drops to ₹30,000.
Let-Out Property: No Cap, But Loss Set-Off Is Capped
For a let-out (rented) property, there is no upper limit on the interest deduction under Section 24(b) itself. However, if the interest exceeds the rental income (creating a loss under 'Income from House Property'), the amount of loss that can be set off against other heads of income (like salary) in the same year is capped at ₹2 lakh. Any excess loss can be carried forward for up to 8 assessment years, but can only be set off against future house property income.
| Scenario | Interest Deduction | Set-Off Against Salary |
|---|---|---|
| Self-occupied, construction within 5 years | Up to ₹2 lakh | Full ₹2 lakh (if loss) |
| Self-occupied, construction beyond 5 years | Up to ₹30,000 | Full ₹30,000 (if loss) |
| Let-out property | No cap (actual interest) | Capped at ₹2 lakh; balance carried forward |
Pre-Construction Interest: The 5-Installment Rule
Interest paid before the property is acquired or construction is completed (called 'pre-construction interest') is not deductible in the year it's paid. Instead, it is aggregated and deducted in 5 equal annual installments starting from the financial year in which construction is completed or the property is acquired — subject to the overall ₹2 lakh (or ₹30,000) cap for self-occupied property.
Section 24(b) Under the New Tax Regime
Under the new tax regime (Section 115BAC), the Section 24(b) interest deduction for self-occupied property is NOT available. For a let-out property, the interest deduction continues to be available even under the new regime — because it is a deduction against rental income in computing the income from that source, not a 'Chapter VI-A' style deduction. However, the set-off of a resulting loss against other heads of income (like salary) is restricted under the new regime as well.
Joint Home Loans
If a property is jointly owned and the loan is jointly taken, each co-owner can claim the ₹2 lakh interest deduction (and ₹1.5 lakh under 80C for principal) individually, in proportion to their share in the loan — effectively doubling the household's deduction to ₹4 lakh in interest if both co-owners are in the old regime and have sufficient tax liability.
Frequently Asked Questions
Source and review trail
Use the current official instrument, portal or regulator publication before acting.
- Primary category
- Income Tax
- Official starting point
- www.incometax.gov.in
Primary sources & related provisions
Statutory provisions referenced in this guide: