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Deductions under Section 24 – Standard Deduction & Interest

From NAV to final income - Section 24 provides 2 crucial deductions! 30% flat (no proof) + home loan interest (unlimited for let-out!). Let's maximize your tax savings.

Section 24 - Two Key Deductions

From Net Annual Value (NAV), deduct:

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Result: Income from House Property

Section 24(a) - Standard Deduction (30%)

Flat 30% of Net Annual Value

No proof required!

Covers: Repairs, maintenance, collection charges

Applicable to:

  • Let-out property: Yes
  • Self-occupied: Yes (but NAV is Nil, so 30% of Nil = Nil)
  • Deemed let-out: Yes

Calculation: 30% × NAV

Example:

NAV = ₹4,00,000

  • Standard deduction: ₹4,00,000 × 30% = ₹1,20,000

No ceiling! If NAV is ₹50 lakh, deduction is ₹15 lakh (30%)

Section 24(b) - Interest on Home Loan

Interest paid on loan taken for:

  1. Purchase of house property
  2. Construction of house property
  3. Repair/Renovation/Reconstruction

Conditions:

  • Loan from bank/housing finance company (or any source)
  • Interest actually paid (not accrued)

Limits:

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Self-Occupied: ₹2 Lakh Limit

Maximum deduction: ₹2,00,000 per year

Even if actual interest paid is ₹5 lakh → Deduct only ₹2L

Exception - ₹30,000 limit:

If loan taken for repair/renovation (not purchase/construction):

  • Limit: ₹30,000 only

Example 1 (Purchase loan):

  • Home loan interest: ₹2,80,000
  • Deduction allowed: ₹2,00,000 (limit)
  • Balance ₹80,000: Not deductible

Example 2 (Renovation loan):

  • Renovation loan interest: ₹50,000
  • Deduction allowed: ₹30,000 (limit for repair)

Let-Out: No Limit!

Full interest deductible (no ₹2L cap)

Example:

  • NAV: ₹6,00,000
  • Interest paid: ₹8,00,000
  • Full ₹8L deductible!
  • Income from HP: Negative (loss!)

Loss: Can be set off/carried forward (covered later)

Pre-Construction Interest

Interest paid before construction completes

Treatment:

  • Accumulated over pre-construction period
  • 1/5th deductible each year for 5 years (starting from year of completion)

Added to: Post-construction interest (subject to ₹2L limit for self-occupied)

Example:

House construction (Apr 2020 - March 2023):

  • Interest paid during construction: ₹5,00,000
  • House completed: March 2023
  • Post-completion interest (FY 2023-24): ₹1,50,000

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FY 2024-25: Again ₹1L (1/5) + new year's interest (subject to ₹2L)

Continues for 5 years!

Complete Computation Format

For Let-Out Property:

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For Self-Occupied:

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Practical Examples

Example 1: Let-Out Property (High Interest)

Property details:

  • GAV: ₹8,00,000
  • Municipal taxes: ₹40,000
  • Interest on loan: ₹6,50,000

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Loss can be set off against other income (salary, business)!

Example 2: Self-Occupied (Interest > ₹2L)

Property details:

  • NAV: Nil (self-occupied)
  • Municipal taxes: ₹15,000
  • Interest: ₹3,20,000

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Balance ₹1.2L not deductible!

Example 3: 2 Self-Occupied Properties

Mr. Verma owns 2 flats (both self-occupied):

  • Flat 1: Interest ₹1,80,000
  • Flat 2: Interest ₹1,50,000

₹2L limit is COMBINED for all self-occupied properties!

Deduction: ₹2,00,000 total (not ₹2L each)

Lost: ₹1.3L interest not deductible

Housing Loan Certificate

Form required: Interest certificate from bank/lender

Contains:

  • Principal repaid
  • Interest paid
  • Outstanding balance

Submit to employer: For TDS adjustment

Keep for return filing: Evidence for deduction claim

Interest vs Principal

Section 24(b): Only interest deductible

Principal repayment: NOT deductible under house property

But: Principal eligible under Section 80C (max ₹1.5L) - different chapter!

Example:

EMI: ₹50,000/month (₹6,00,000/year)

  • Interest: ₹3,50,000
  • Principal: ₹2,50,000

Section 24(b): ₹3,50,000 (interest, subject to ₹2L limit if self-occupied)

Section 80C: ₹1,50,000 (principal, max limit)

Summary Table

AspectSelf-OccupiedLet-Out
NAVNil (max 2 properties)Actual (rent-based)
30% DeductionNil (30% of Nil)Yes (30% of NAV)
Interest Limit₹2,00,000No limit
Loss Created?Yes (interest deduction)Possible (if high interest)
Pre-construction1/5th for 5 years1/5th for 5 years
Repair loan limit₹30,000No separate limit

Key Points

✅ Section 24(a): Flat 30% of NAV (no proof, no limit)

✅ Section 24(b): Interest on home loan deductible

✅ Self-occupied: ₹2L max interest (₹30k for repair loans)

✅ Let-out: No limit on interest deduction!

✅ Pre-construction: 1/5th deductible for 5 years

✅ ₹2L limit: Combined for all self-occupied properties

✅ Principal: Not deductible (use 80C instead)

Summary

  • Section 24: Two deductions from NAV - (a) 30% standard, (b) home loan interest
  • 30% standard: Flat rate, no proof, applies to NAV (let-out/deemed let-out only, self-occupied NAV is Nil)
  • Interest - Self-occupied: Max ₹2L/year for purchase/construction, ₹30k for repair/renovation
  • Interest - Let-out: No limit, full interest deductible
  • Pre-construction interest: Accumulated, then 1/5th/year for 5 years from completion year
  • ₹2L limit: Combined for ALL self-occupied properties (not per property)
  • Loss: Self-occupied creates loss (Nil NAV - interest), let-out may create loss if high interest
  • Principal vs Interest: Only interest u/s 24(b), principal u/s 80C (different)

Quiz Time! 🎯

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Next Chapter: Set-off and Carry Forward of Losses! 📊

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