Can a salaried person claim home loan interest deduction under Section 24 of the IT act?

Income Tax (India)
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what to do..

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Yes, a salaried person can claim a deduction for home loan interest under Section 24 of the Income Tax Act. However, the amount and type of deduction depend upon the tax regime opted for by the individual.

Old Tax Regime

Self-Occupied Property

  • The individual can claim a deduction of up to Rs. 2 lakh on their home loan interest if they reside on the property
  • This deduction can be claimed only for the interest on a loan taken for construction, not on a loan taken for renovation and repairs. In such a case, the limit falls to Rs. 30,000
  • Moreover, the deduction cannot be claimed for the pre-construction period. Instead, it can be claimed in five equal annual installments post the construction or the possession of the property.

Let-Out Property

  • There is no limit to the amount a person can claim as a deduction for interest on a home loan against their rental income. However, they cannot make the rental income negative; the minimum is zero.
  • Once the rental income becomes zero, if there is still some residual interest on the home loan, it can be used to reduce the taxable income from salary, but only up to a limit of Rs. 2 lakh.

New Tax Regime

In the new tax regime, an individual cannot claim a deduction on the income from salary, so a deduction in the case of a self-occupied property goes out of the equation.

Let-Out Property

The interest on a home loan can be set off against the rental income, but the rental income cannot be converted into “loss from house property” by making it negative. Instead, the minimum value it can take is 0.

Note:

To claim benefits under Section 24(b) of the Income Tax Act, you must be the owner (or co-owner) of the house and borrower (or co-borrower) of the loan.

Additional Things to keep in mind

Section 80C: You can claim a tax deduction for principal repayment on the home loan under the old tax regime. The limit for the same is Rs. 1.5 lakh

Interest Certificate: To claim these benefits, you need to submit the interest certificate obtained from the respective bank and submit it to your employer/HR

Section 24(a): Before you reduce the interest payment, you must reduce 30% of your net asset value (rent - municipal taxes) as a standard deduction.