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Deduction of Interest on Housing Loan – Sec 24b

Applicable for financial year 2015-16 and 2016-17
U.C Date : 10 Mar 2015

Section 24 of the income tax act provides deduction in respect of home loan interest.

Important points

1) Interest on housing loan is allowable as deduction on accrual basis not on paid basis (even if account books are kept on cash basis) if capital is borrowed for the purpose of purchase, construction, repair, renewal or reconstruction of the house property. Deduction can be claimed for two or more housing loans.

2)Interest includes service fees, brokerage, commission, prepayment charges etc.

3)Interest/penalty on unpaid interest shall not be allowed as deduction.

4)Deduction shall be allowed irrespective of the nature of loan whether it is housing loan or personal loan from any person/institution.

5) If a person instead of raising a loan from a third party pays sale price to the seller in instalments along with interest than such interest is also allowable.

6) Interest on borrowed money which is payable outside India shall not be allowed as deduction under section 24(b), unless the tax on the same has been paid or deducted at source and in respect of which there is no person in India, who may be treated as an agent of the recipient for such purpose.

7) For claiming deduction under this section, assessee must be the owner or deemed owner of the house property and loan shall be in the assessee name.

Maximum Limit of deduction under section 24b

These limits of deduction is applicable assessee wise and not property wise. Therefore if an assessee owns two or more house property then the total deduction for that assessee remain same.

1) In Let Out Property/Deemed to be Let Out – No maximum limit

2) Self Occupied House (SOP) – Rs. 2,00,000. (1,50,000 for A.y 2014-15 and before)

In the following cases the above limit of Rs 2,00,000 for SOP shall be reduced to Rs. 30,000

– Loan borrowed before 01-04-1999 for any purpose related to house property.
– Loan borrowed after 01-04-1999 for any purpose other than construction or acquisition.
– If construction/acquisition is not completed within 5 years from the end of the financial year (3 years till financial year 2015-16) in which capital was borrowed. For example, a loan is obtained for construction/acquisition on 28 Oct 2011 then the deduction limit should reduced to Rs 30,000 if the construction/acquisition completes after 31 March 2017.

Also Read – Extra Deduction of Rs. 50,000 on Home Loan Interest under Section 80EE

Interest for pre construction/acquisition period

Interest for pre construction/acquisition period is allowable in 5 equal instalment beginning from the year of completion of house property. This deduction is not allowable if the loan is utilized for repairs, renewal or reconstruction.

Pre Construction/Acquisition period starts from the date of borrowing and ends on the last day of preceding Financial Year in which the construction is completed. For example, if house property is completed on 21st March 2012 then the deduction is allowed from Financial Year 2011-2012 to 2015-16.

Example
Loan Taken on 01-05-2006 of Rs. 5,00,000

Construction End on 07-09-2012.

Pre Construction/Acquisition Period = 01-05-2006 to 31-03-2012

Pre Construction/Acquisition Interest = Rs 3,55,000 ( Rs 5,00,000*71 Months*1%)

Pre Construction/Acquisition Interest Deduction for Financial Year 2012-13 to 2016-17 assuming let out property or deemed to be let out = Rs 71,000 per year ( 3,55,000/5 )

Pre Construction/Acquisition Interest Deduction for Financial Year 2012-13 to 2016-17 assuming SOP = Rs 71,000 per year ( 355000/5 ) (as the construction is completed within 5 years from the end of the financial year in which capital was borrowed)

Interest from 01-04-2012 to 31-03-2013 shall be allowed as deduction in 2012-13 as current year’s interest. Interest from 01-04-2012 to 07-09-2012 shall not be considered as Pre Acquisition/Construction Period.

Note: – If a property is partly SOP and partly let out then also the limit of Rs 2,00,000/30,000 shall be available for SOP portion and there is no limit of deduction for let out portion even if the construction is completed after 3 years.

Deduction in case of Co-borrower

If the home loan is taken on joint names then the deduction is allowed to each co-borrower in proportion to his share in the loan. For taking such deduction it is necessary that such co-borrower must also be co-owner of that property. If the assessee is a co-owner but is repaying the full loan himself, then he can claim the deduction of full interest paid by him.
The limit of deduction in case of Self occupied property applies individually to each co-borrower . In other words, each co-borrower can claim deduction upto Rs. 2 lakh/Rs. 30,000. No limit is  applicable to let out property.

Difference between Section 24b and Section 80C

Interest on home loan is allowed under section 24b while principal on home loan is allowed under section 80C. A comparison between section 24 and 80C is given here under:-

 Particulars Section 24b Section 80C
Tax Deduction allowed only for  Interest Principal
Basis of Tax Deduction Accrual Basis Cash Basis
Amount of Deduction Self occupied property : Rs. 2,00,000 (From assessment year 2015-16)
Other than Self occupied property : No limit
Rs. 1,50,000  (From assessment year 2015-16)
Purpose of loan  Purchase/ Construction/ Repair/ Renewal/ Reconstruction of a Residential House Property.  Purchase / Construction of a new House Property
 Eligibility for claiming Tax deduction  Purchase/ Construction should be completed within 3 years NIL
Restriction on Sale of Property  NIL Tax Deduction claimed would be reversed if Property sold within 5 years from the end of financial year in which such property is acquired by him.
Deduction during construction period Interest paid during the construction/acquisition period shall be allowed in 5 equal installment from the last day of preceding Financial Year in which the construction is completed No deduction is available for the principal repayment during the construction/acquisition period.

Interest Deduction with HRA

HRA  under section 10(13A) and interest deduction can be availed simultaneously even if house property is in same city in which you resides on rented property.

Form 12BB is to be filed with employer if you want your employer to take deduction under this section into consideration and thus deduct lower TDS

Case Laws

Prepayment charges are also allowed as deduction as interest under section 24b. (M/s.Windermere Properties Pvt.Ltd. 2013) Read full case law at indiankanoon.com

Bare Act for Sec 24b

Bare Act for Sec 24b

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 shall not exceed thirty thousand rupees :

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 three years (five years from the assessment year 2017-18) from the end of the financial year in which capital was borrowed], the amount of deduction under this clause shall not exceed two lakh rupees.( one lakh fifty thousand for A.Y 2014-15 and before)

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.

interest on housing loan

339 comments

  1. Dr. Mukesh Chander

    Dear Sir,
    I have paid Rs/-1,63,000 as interest on home loan during AY 2016-17. My employer has shown it in form 16 also. While filing online return on ITR-1, there is no colomn where I can show this interest paid. kinldy guide me that how and where in the e-filing form, I can show this deduction.
    Thanking you in advance for your help
    Dr Mukesh Chander

    • Prateek Agarwal

      In ITR-1, you can enter net income (after deduction of interest u/s 24b) in B2 -> Income from One House Property.
      It is to be entered as negative amount in “Income from House Property”

      • Dr Mukesh Chander

        Thanks a lot for your help,Prateekji. Your site is helping a lot to the tax – payers.
        Regards
        Dr Mukesh Chander

  2. Hi Rohit,

    I have uploaded ITR-1 and received the acknowledgment for the current assessment year – 2016-17. I have claimed House loan (Principal+Interset). but i didnt received any notification for the submission of interset certificate and principal document. Can you please suggest, where Do i need to send the document or i can upload on income tax website?

    • Prateek Agarwal

      There is no need to send or upload the documents.
      You should keep theme with you if assessing officer calls for them.

  3. Dr G. C. Nayak

    HI Amit,

    I have two queries.
    1. what is the exemption limit on TA for Disabled persons for AY16-17?
    2. I have taken a home loan and while filling the ITR1, where I should mention the interest and principal?

    • Rohit Pithisaria

      Answer are as follows:-

      1) TA deduction is Rs. 1600 p.m for normal person and Rs. 3200 p.m in case of blind or orthopaedically handicapped employees.
      2) In ITR1, you can enter net income (after deduction of interest u/s 24b) in B2 -> Income from One House Property. For principal deduction enter the amount in C1 -> 80C.

  4. I HAVE TWO HOME AND BOTH INTEREST PAID AS BELOW DETAILS AND I AM IN JOB IN SURAT AND CLAIMING HRA .
    1.1ST HOME NOIDA Interest PAID 245000
    2. 2ND HOME GHAZIABAD Interest PAID 275000
    LET ME CLAIMING BOTH INTEREST IF SHOWING ONE SELF OCCUPIED AND ONE RENTED
    PL SEND ME WITH CALCULATION.
    REGARDS
    RAVI

    • Rohit Pithisaria

      There is no requirement to show any house property as SOP. The rule is only one house can be shown as SOP. So you can show both house as let out and claim all the interest deduction. Also you can claim deduction of HRA as the interest deduction u/s 24b is not related to HRA.

      • Dear Mr Rohit

        Thanks for reply , but my consultant not agree for both houses interest claiming in ITR for interest Rs.475000/- and suggest only claiming for 2 Lac max only for one house.

        Pl advise.

        • Prateek Agarwal

          Ask your consultant by which provision he is asking you to claim only rs. 2 lakhs as interest deduction.

  5. Hi Amit,

    I have taken a home loan in Dec 2012 for a flat I registered the flat on July 2016 ie more than 3 yrs. How the section 24b will be dealt in this case for tax benefit on interest portion. Will this property be treated as let out or self occupied? How much tax benefit I will get , Is it 200000 Rs. I just confused it is more thn 3 years in completion whether I will get tax benefit 200000 Rs or not.

    Please help us sort out this issue

    • Rohit Pithisaria

      If the property is let out then it will be treated as let out otherwise it will be a SOP (if you don’t have any other SOP). Now if it is let out then there is no limit on the deduction limit but if it is let out then the maximum amount is RS 2,00,000 when the construction complete within 5 years from the date of loan (applicable from FY16-17).

  6. CAN THE INTEREST PAID ON HOUSING LOAN BE CARRIED FORWARD AND CLAIMED IN SUBSEQUENT YEARS EG – IN FY 2014-15 I PAID 250000 AS INTEREST BUT COULD CLAIM ONLY 200000 DEDUCTION SO THE BALANCE INTEREST IE 50000 CAN I CLAIM IN 2015-16 ALONGWITH 2015-16 INTEREST

  7. Hi
    I have purchased flat jointly in the name of myself and my wife who is a housewife. Can i show income or loss from house property in my IT Return as wife not earning and not assessed to income tax?

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