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Section 24 - Income Tax Deductions from Property House

Updated: July 11, 2022
Section 24 - Income Tax Deductions from Property House

A home of ownership is one of the biggest dreams we all share. We can decorate it with love and enjoy every moment of possessing it. The benefits are life-long like financial security for life and experiencing the rise in the value over years. If the house has been purchased with a home loan, then there are many financial advantages. The government of India recognizes the importance of owning a home and hence offers several tax deductions to avail. These tax benefits work as a motivation and a way of rewarding anyone who is purchasing a house. Some are towards repayment of the principal amount, whereas some are towards repayment of the interest component. Here, we shall look at the tax deductions under Section 24 of the income Tax Act.

Section 24 of income tax is titled “Deductions from income from house property”. It allows home loan borrowers to enjoy tax deductions on the interest paid towards that home loan. It is in your benefit to make the most of these sections in order to facilitate savings while you also enjoy the peace and security of being a homeowner.

Let us understand what Section 24 of the Income Tax Act is

Home purchase in India is a great investment that also facilitates tax savings. These tax benefits are offered as a reward. Section 24 income tax act refers to the income that is accrued from your property.

Section 24 specifically gives you exemptions on the interest component of the home loan you are repaying through EMIs. This section is related to the deductions from income from home or residential property only. Section 24 enlightens the kinds of deductions that are permitted from the income earned by an individual through his or her residential property. The residential property should be rented by the homeowner and the rent earned should be considered as income. However, in a scenario wherein the person owns more than one property, apart from the one in which he is residing, the remaining properties will be considered as income from residential properties. But if a person has just one house and lives there, then the income from that property is considered nil and if a person is renting their home, then the rental income is considered income.

Must Read : Know How to Calculate Income from House Property

What are the deductions under Section 24 of the Income tax act?

Let us understand the deductions under section 24 of income tax act Assessment Year 2020-21.

1. Standard deduction:

As per the standard deduction, the taxpayer is allowed a deduction that amounts to 30% of the net property value. This deduction is applicable even if the tax payer’s actual expenditure on the property is higher or lower. The deduction does not depend on the expenses incurred on repairs, insurance, electricity, etc. The standard deduction for self-occupied properties is not applicable as there is no annual income.

2. Deductions on the interest component of home loans:

If you have taken a home loan for your home purchase, you can enjoy deductions on the interest component of the home loan.

As a taxpayer, you can claim a maximum deduction of Rs. 200,000 annually on the interest component of your home loan under Section 24 of the income tax act. This is applicable only if you are residing in the residential property or your property is rented and you are living in a rented home in a different city. This deduction is also valid if your property is unoccupied. There are certain terms to be met, else this deduction on interest is reduced to just Rs.30,000. The terms are the home loan should be taken for purchasing or constructing a property and the purchase or construction of the property is completed within 5 years from the end of the financial year in which the home loan was taken.

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