Claims Under Section 24 of the Income Tax Act

Under the Income Tax Act, Section 24 is one of the important provisions concerning home loans that enables an individual to claim deductions for the interest paid. 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 their family members occupy that property. However, for rented properties, the full interest amount can generally be claimed as a deduction against rental income.

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

What is Section 24?

Section 24 of the Income Tax Act primarily addresses deductions for interest paid by an individual on a property or home loan. This section is titled ‘Deductions from Income from House Property’. The deductions primarily apply to interest paid on housing loans.

There are a multitude of sections under the Income Tax Act that allow for tax deductions or exemptions on specific expenditures and investments. One such investment emphasized 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 may qualify for tax benefits.

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 computed are listed below.

• If the house is being rented, the rent received will be considered as income.
• If the individual has more than one property, then the Net Annual Value of houses, other than the one 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 Net Annual Value (NAV) of the house property will be considered NIL as per the Act rules. Rental income received and the Net Annual Value of additional houses will be taken as income and will be liable to tax after 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 must be taken on or after April 1^st, 1999, for the purchase or construction of the house.
• The individual must possess an interest certificate for the interest payable on the loan.
• The house must be acquired or constructed within five years from the end of the financial year in which the loan was taken.