Claims Under Section 24 of the Income Tax Act

Under the Income Tax Act, one of the important sections with respect to home loans that enable an individual to claim exemptions on the interest being paid is Section 24. This section states that homeowners can make a claim for up to INR 2 lakhs on home loan interest if the owner or any of his family members occupy that property. However, the total interest amount can be waived off as a type of deduction if the house is on rent.

This article talks in detail about Section 24 of Income Tax Act and what are the associated claim conditions. 

What is Section 24?

Section 24 of the Income Tax Act is concerned with interest paid by an individual on a property or home loan. This section is titled ‘deductions’ from on the house property. The deductions are available as loan interest and are categorised as standard deductions.

There are a multitude of sections under the Income Tax Act that enable one to be eligible for tax exemptions on specific expenditures and investments. One such investment repeatedly stressed in the Act is residential property. The government recognises that housing is an important necessity and is also considered to be an asset. Thus, a number of investments towards the first home are exempt from tax payments.

Section 24 of the Income Tax Act has been titled ‘’Deductions from income from house property’’. The conditions under which income from house property is applicable have been listed.

• If the house is being rented, then the rent being received will be considered as income.
• If the individual has more than one property, then the Net Value of the houses except the house being currently occupied by the individual will be considered income.

It can be gathered that if the individual owns only one house and it is currently being occupied for residential purposes, then the income obtained from the house property will be NIL as per the Act rules. Money received from rent and the annual value of additional houses will be taken as income and will be liable to tax post deductions made under Section 24.

Also Read: Income Tax Act 1961

Tax Deduction Under Section 24 on Interest of Home Loan: Income Claim Conditions

An individual needs to meet three conditions in order to claim an income tax deduction under Section 24:

• The loan needs to be taken on or after April 1^st, 1999, for the purchase or construction of the house.
• The individual needs to have an interest certificate for interest payable on the loan that has been taken.
• The house needs to be acquired or constructed within five years of the end date of the financial year during which period the loan was taken.