Deductions under Section 24 of the Income Tax Act, 1961 provide tax relief for expenses incurred on acquiring, constructing, repairing, or reconstructing a house property. These deductions are available for both self-occupied and let-out properties.

Standard Deduction (Section 24(a))

For self-occupied properties, a standard deduction of 30% of the gross annual value (GAV) is allowed. The GAV is the rent the property would fetch if it were let out unfurnished.

Interest on Borrowed Capital (Section 24(b))

Interest paid on a loan taken for the purpose of acquiring, constructing, repairing, or reconstructing a house property is also allowed as a deduction. The maximum deduction for interest paid on a loan for a self-occupied property is Rs. 2 lakhs per annum. For a let-out property, the entire interest paid is deductible.

Additional Deductions

In addition to the standard deduction and interest on borrowed capital, the following deductions are also allowed under Section 24:

• Municipal taxes paid on the property
• Insurance premium paid for securing the property against fire, theft, or other risks
• Expenses incurred on repairing, renovating, or altering the property

Conditions for Availing Deductions

To avail deductions under Section 24, the following conditions must be met:

• The property must be owned by the taxpayer
• The property must be used for residential purposes
• The deductions must be claimed in the year in which the expenses were incurred

Benefits of Deductions under Section 24

Deductions under Section 24 can significantly reduce the taxable income from house property, thereby lowering the taxpayer’s tax liability. These deductions encourage individuals to invest in real estate and promote homeownership.

 EXAMPLE

 Who is eligible to claim a deduction under Section 24?

Any individual taxpayer who has taken a loan for the purpose of purchase, construction, repair, renewal, or reconstruction of a house property is eligible to claim a deduction under Section 24. The taxpayer must be the owner of the property and must have paid the interest on the loan.

. What is the maximum amount of deduction that can be claimed under Section 24?

The maximum amount of deduction that can be claimed under Section 24 is Rs. 2 lakhs per financial year. However, there are some exceptions to this limit. For example, taxpayers who have taken a loan for the purchase of an affordable housing property can claim a deduction of up to Rs. 1.5 lakhs per financial year.

 What are the conditions for claiming a deduction under Section 24?

The conditions for claiming a deduction under Section 24 are as follows:

• The loan must be taken from a financial institution or an approved housing society.
• The loan must be used for the specified purposes, i.e., purchase, construction, repair, renewal, or reconstruction of a house property.
• The interest on the loan must be paid by the taxpayer.
• The taxpayer must be the owner of the property.

 How is the deduction calculated under Section 24?

The deduction under Section 24 is calculated as follows:

• For self-occupied properties: The deduction is allowed on the lesser of the following:
  • The actual interest paid on the loan
  • The gross annual value of the property reduced by 30%
• For let-out properties: The deduction is allowed on the actual interest paid on the loan without any limit.
• What are the documents required to claim a deduction under Section 24?

The following documents are required to claim a deduction under Section 24:

• Sanction letter of the loan
• Interest payment certificate
• Proof of ownership of the property
• Rental agreement (for let-out properties)

 How can I claim a deduction under Section 24?

A deduction under Section 24 can be claimed by filing an income tax return with Form 16 or Form 2. The deduction should be claimed under the head “Income from House Property.”

What if I have repaid my loan in full?

If you have repaid your loan in full, you can still claim a deduction under Section 24 for the interest paid on the loan in the year of repayment. However, you cannot claim a deduction for any interest paid after the loan has been repaid.

 What are the penalties for claiming an incorrect deduction under Section 24?

If you claim an incorrect deduction under Section 24, you may be liable to pay a penalty of up to 100% of the incorrect deduction.

CASE LAWS

What is deduction under section 24?

Section 24 of the Income Tax Act allows taxpayers to claim deductions on account of interest paid on loans taken for the purpose of purchase, construction, repair, renewal, or reconstruction of a house property. The deduction can be claimed for both self-occupied and let-out properties.

Who can claim deduction under section 24?

Individuals, Hindu undivided families (HUFs), partnerships, and companies can claim deduction under section 24.

What is the maximum amount of deduction that can be claimed under section 24?

For self-occupied properties, the maximum deduction that can be claimed under section 24 is Rs. 2,00,000 or Rs. 30,000 (as the case may be). For let-out properties, there is no limit on the amount of deduction that can be claimed.

How is the deduction calculated?

The deduction is calculated as follows:

• Self-occupied properties:
  • Gross Annual Value (GAV): The GAV is the estimated annual rent that the property would fetch if it were let out.
  • Net Annual Value (NAV): The NAV is the GAV minus the municipal taxes paid on the property.
  • Deduction: The deduction is the lower of 30% of NAV or RS. 2,00,000 or Rs. 30,000 (as the case may be).
• Let-out properties:
  • NAV: The NAV is the actual rent received from the property minus the municipal taxes paid on the property and the repairs carried out on the property.
  • Deduction: The deduction is the interest paid on the loan taken for the purpose of purchase, construction, repair, renewal, or reconstruction of the property.

What are the conditions for claiming deduction under section 24?

The following conditions must be satisfied to claim deduction under section 24:

• The loan must have been taken from a financial institution or an approved housing society.
• The loan must have been used for the specified purposes (purchase, construction, repair, renewal, or reconstruction of a house property).
• The taxpayer must be the owner of the property or must have an interest in the property.

What are the documents required to claim deduction under section 24?

The following documents are required to claim deduction under section 24:

• Loan statement from the financial institution or approved housing society
• Proof of payment of interest on the loan
• Property tax receipt