A Simplified Guide to Section 24 of Income Tax Act

Section 24 of the Income Tax Act provides specifics regarding key deductions that tax payers can avail under the Income Tax Act, 1961 if they have income from house property. So, those who do not own house property cannot save tax using the benefits provided by this section of the Income Tax Act.

Section 24 further consists of two subsections – Section 24 (a) and Section 24 (b), which covers different aspects of owning and renting out a residential property.

You can claim Section 24 tax benefits in the following manner:

• Self-occupied property is not eligible only let-out property is considered
• For multiple house properties, Section 24(a) can be claimed for all properties other than 1 self-occupied property. For tax purposes all properties other than self-occupied property are considered to be source of rental income whether let-out or vacant

To receive the tax deduction of up to ₹2 lakh annually under Section 24(b) of the Income Tax Act, the taxpayer must meet the below-given eligibility criteria:

• You should have taken a home loan on or after 1 April 1999. This loan will only get you tax benefits under Section 24 if it has been taken to construct or purchase a house.
• The property over which the loan was taken should have been built or owned within five years from the financial year it was borrowed.
• You should possess an interest certificate showing the interest amount that is payable against the borrowed amount.

As per current Section 24 rules, there is no maximum amount specified for annual deduction u/s 24(a). It is a flat deduction of 30% on the rental income received during the financial year.

On the other hand, a maximum tax benefit of up to ₹2 lakh annually is available for tax deductions under Section 24 (b) of the Income Tax Act. The actual amount that can be claimed however depends on the annual home loan interest repaid by the property owner.

In addition to Section 24 of the Income Tax Act, home loan benefits of up to ₹150,000 annually can be claimed for interest repayments under Section 80EEA. If you meet the conditions of both sections, you can claim tax benefits of up to ₹3.5 lakh.

Let us look at the conditions one needs to meet for 80EEA to apply:

• The housing property should be your first home for interest on home loan deduction to apply.
• The property shouldn't cost more than ₹45 lakh i.e. qualifies for affordable housing.
• Loan should be sanctioned between 1st April 2019 to 31st Mar 2022
• Income tax rebate on home loans only applies to interest accrued.