Section 24 house property: 30% standard deduction plus up to Rs 2 lakh interest on a self-occupied home loan

Owning the roof over your head is the single largest financial decision most Indian households ever make, and the Income-tax Act, 1961 recognises this through Section 24. For a self-occupied home bought or built with a loan taken on or after 1 April 1999, this one section lets you knock up to Rs 2,00,000 of home-loan interest off your taxable income every year, and for a let-out property it hands you a flat 30% standard deduction on top. Understanding exactly how the two limbs of Section 24 work, and which tax regime lets you use them, is worth tens of thousands of rupees at filing time for AY 2026-27.

What the Section Says

Section 24 sits under the head "Income from house property" and provides exactly two deductions from the annual value of a property. The statutory text of Section 24 is compact, but each limb carries conditions that decide how much you actually save.

Limb (a): the 30% standard deduction. After you compute the Net Annual Value (Gross Annual Value less municipal taxes actually paid), Section 24(a) allows a flat deduction of 30% of that Net Annual Value. This is a statutory allowance towards repairs, collection and maintenance. Crucially, it does not depend on what you actually spent. Even if your real repair bill was zero, the 30% still applies; and even if you spent 50% of the rent on repairs, you are still capped at 30%.

Limb (b): interest on borrowed capital. Section 24(b) allows a deduction for interest payable on capital borrowed to acquire, construct, repair or reconstruct the property. For a self-occupied house, the deduction is capped at up to Rs 2,00,000 where the property is acquired or constructed with capital borrowed on or after 1 April 1999, subject to completion and interest-certificate conditions. In all other cases, including loans taken for repair or reconstruction, the self-occupied cap falls to Rs 30,000. For a let-out property there is no ceiling on the interest limb at all: the entire interest is deductible.

Two conditions govern the Rs 2,00,000 figure. First, the acquisition or construction must be completed within five years from the end of the financial year in which the capital was borrowed; miss that window and the cap reverts to Rs 30,000. Second, you must furnish an interest certificate from the lender specifying the interest payable. Both requirements are set out in the provisos to Section 24 and are the first things an assessing officer checks.

One point that trips up thousands of filers: from AY 2024-25 onwards the new tax regime under Section 115BAC is the default. Under the new regime, the Section 24(b) interest deduction on a self-occupied property is not available at all, and any loss from house property cannot be set off against other income. The Rs 2,00,000 self-occupied benefit survives only if you opt out into the old regime. For a let-out property, interest under Section 24(b) remains deductible even in the new regime, but the resulting house-property loss still cannot be set off against salary or other heads under Section 115BAC. Our old vs new regime calculator is the fastest way to see whether the deduction is worth more than the new regime's lower slabs.

Worked Example

Consider Rohan, a salaried professional in the 30% old-regime slab for FY 2025-26, who has taken a home loan of Rs 40,00,000 at 8.5% to buy the flat he lives in. In the current financial year his lender's interest certificate shows Rs 3,32,000 of interest payable. Because the flat is self-occupied and the loan was taken well after 1 April 1999, his Gross Annual Value is nil, so limb (a) has nothing to bite on, and limb (b) caps his interest deduction at Rs 2,00,000.

That Rs 2,00,000 loss is set off against Rohan's salary. Under Section 71(3A) the set-off of house-property loss against other heads is itself capped at Rs 2,00,000 a year, with any balance carried forward for up to eight assessment years. In the 30% slab, plus 4% health and education cess, the Rs 2,00,000 deduction cuts his tax by Rs 62,400 (Rs 60,000 tax saved plus Rs 2,400 cess). You can reproduce this in the income from house property calculator, and pair it with the home loan EMI calculator to see how much of each year's EMI is interest versus principal.

Now suppose Rohan instead lets the flat out for Rs 3,00,000 a year and pays Rs 20,000 in municipal taxes. His Net Annual Value becomes Rs 2,80,000. Limb (a) grants a 30% standard deduction of Rs 84,000, and limb (b) allows the full Rs 3,32,000 of interest with no ceiling.

The Rs 1,36,000 let-out loss falls within the Rs 2,00,000 set-off ceiling, so under the old regime it reduces Rohan's other taxable income in full this year. Notice how the let-out treatment unlocks the entire interest figure, whereas the self-occupied route freezes it at Rs 2,00,000. If Rohan is servicing the loan jointly with his spouse, both co-owners who are also co-borrowers can each claim their share of interest up to their own Rs 2,00,000 cap, a split you can model in the joint home loan calculator.

Common Mistakes

Claiming the deduction in the new regime by default. Because Section 115BAC is now the default regime, filers who simply accept the pre-filled ITR lose the self-occupied Rs 2,00,000 interest deduction entirely. To claim it you must actively choose the old regime, and salaried taxpayers without business income can switch each year. Run the numbers on the income tax calculator before you decide.

Confusing gross interest with the capped figure. The Rs 2,00,000 ceiling is a limit, not an entitlement. If your interest certificate shows Rs 1,40,000, you deduct Rs 1,40,000, not Rs 2,00,000. Assessing officers routinely disallow the difference where filers round up to the cap.

Ignoring the five-year completion test. If construction of a property funded by a post-1999 loan is not completed within five years from the end of the financial year in which the loan was taken, the self-occupied cap silently drops from Rs 2,00,000 to Rs 30,000. Delayed under-construction projects are a frequent scrutiny trigger.

Forgetting pre-construction interest. Interest paid during the construction period is not lost. It is aggregated and allowed in five equal annual instalments beginning in the year construction is completed, but it must still fit within the overall Rs 2,00,000 self-occupied ceiling for each of those years.

Deducting municipal taxes on a self-occupied home. Municipal taxes are deductible from Gross Annual Value only for a let-out property, and only when actually paid during the year. For a self-occupied house where GAV is nil, there is nothing to deduct them against.

Double-counting the 30% with actual repairs. The 30% standard deduction under limb (a) is in lieu of actual repair expenditure. You cannot claim the 30% and separately deduct paint, plumbing or brokerage bills; the flat allowance is the whole of it.

FAQ

Is the Rs 2,00,000 home-loan interest deduction available in the new tax regime?

No. Under the default new regime in Section 115BAC, the Section 24(b) interest deduction for a self-occupied property is not allowed, and the loss cannot be set off against other income. You must opt for the old regime to claim the up-to Rs 2,00,000 self-occupied benefit. Interest on a let-out property remains deductible under the new regime, but the resulting loss cannot be set off against salary.

Can I claim both the 30% standard deduction and the interest deduction together?

Yes, for a let-out property both limbs apply simultaneously: 30% of Net Annual Value under Section 24(a) plus the full interest under Section 24(b). For a self-occupied house the Net Annual Value is nil, so the 30% has nothing to apply to and only the interest limb, capped at Rs 2,00,000, is useful.

What is the interest limit if my loan was taken before 1 April 1999?

For loans taken before 1 April 1999, or for loans taken for repair or reconstruction regardless of date, the self-occupied interest deduction is capped at Rs 30,000, not Rs 2,00,000. The higher Rs 2,00,000 ceiling is reserved for acquisition or construction financed by capital borrowed on or after 1 April 1999.

How is pre-construction period interest treated under Section 24?

Interest paid before the year of completion is accumulated and deducted in five equal instalments starting from the financial year in which construction is completed. Each instalment still has to fit inside the applicable annual ceiling (Rs 2,00,000 for an eligible self-occupied home).

Can two co-owners each claim Rs 2,00,000 on the same house?

Yes. Where a property is genuinely co-owned and both parties are co-borrowers actually servicing the loan, each co-owner can claim interest up to their own separate Rs 2,00,000 ceiling on a self-occupied property, based on their share of the interest. Both must be on the loan and the title.

Does the 30% standard deduction require me to submit repair bills?

No. The 30% deduction under Section 24(a) is a flat statutory allowance on Net Annual Value and does not depend on actual expenditure. You do not need to prove or itemise any repair spending to claim it, and you cannot claim more than 30% even if you spent more.

What happens to a house-property loss I cannot use this year?

Under Section 71(3A) the set-off of house-property loss against other income heads is capped at Rs 2,00,000 in any year. Any unabsorbed loss beyond that is carried forward and can be set off against income from house property for up to eight subsequent assessment years, provided you file your return on time.

For the exact statutory wording, always cross-check the Income-tax Act text on the government portal and the consolidated bare act at indiacode.nic.in. Reading Section 24 alongside Section 23 (annual value) and Section 71 (set-off) gives you the complete picture of how a home loan reshapes your taxable income, and pairing that with the section 80EE calculator shows where additional first-time-buyer interest relief may layer on top.