Attention homebuyers! Here’s everything you need to know about Section 24 of IT Act 1961

With the announcement of Union Budget just around the corner, real estate experts and developers have been expecting major amendments in policies and introduction of new ones. One of the areas where they have expressed their hope in is home loan interests. “The current limit of interest deduction under Section 24 of IT Act 1961 on a housing loan of Rs 2 lakh should be removed to incentivise home buyers and spurring overall demand,” said Rajeev Talwar, Chairman, NAREDCO.

Understanding Section 24 of IT Act 1961

Section 24 of the Income Tax offers a slew of tax benefits to property owners.

For let-out properties: Except for self-occupied properties, Section 24 offers a 30 per cent deduction on the net annual value of a property. Thus, if a person purchases a property entirely with his own resources without acquiring loans and has given it out for rent, he can claim a deduction of Rs 30 for every Rs 100 earned.

For properties bought with home loans:  If a property is self-occupied or vacant and you have bought it by acquiring home loans, you can claim a deduction of up to Rs 2 lakh. However, if you have rented out the entire property, the entire interest on the home loan will be deducted up to Rs 30,000 provided that you meet the following conditions:

  • Home loan should be taken on or after April 1, 1999
  • Loan should be acquired for buying or construction of a property
  • The purchase of construction of the property should be completed within five years from the end of the FY in which the loan was taken

Pre-construction interest: For loans taken for property purchase or construction, in addition to the deduction in entire interest, you can also claim a deduction on pre-construction interests of up to Rs 2 lakh per year on an instalment basis. This will be applicable from the end of the FY in which you completed your purchase or construction.

For more information and updates on Indian real estate sector, watch this space.

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