What are the home loan tax benefits under Section 24(b)?

Section 24(b) of the Income Tax Act allows borrowers to claim a deduction on the interest paid on a home loan. This is separate from the principal deduction under Section 80C and provides significant tax relief, especially in the early years of a loan when interest outgo is highest.

Deduction Limits Under Section 24(b)

• Self-Occupied Property: Up to ₹2 lakh per year on home loan interest.
• Let-Out Property: No upper limit the entire interest amount can be deducted from rental income.
• Under-Construction Property: Interest during construction period is deductible in 5 equal instalments from the year of possession.

Key Conditions

• Loan must have been taken for purchase, construction, repair, renewal, or reconstruction.
• For the ₹2 lakh limit to apply, construction/purchase must be completed within 5 years from end of the financial year of loan disbursement.
• Deduction is available only under the Old Tax Regime.

Important Distinction for Let-Out Properties

• For a let-out property, the full interest is deductible, but the resulting loss can be set off only up to ₹2 lakh in the same year under 'Income from House Property.'
• The balance loss (beyond ₹2 lakh) can be carried forward for 8 years.

Section 24(b) is one of the most generous tax benefits for home loan borrowers, particularly those with let-out properties. Maximising this deduction requires careful documentation of interest certificates from the lender and proper filing under the relevant head of income.