Section 24(b) in ITR 2026: Claiming Home Loan Interest Deduction

Published 13 July 2026 · Tax & Salary

Kavya has a ₹52L home loan at 8.75% and paid ₹4,55,000 in interest during FY 2025-26. Every year her CA tells her to switch to the new tax regime. Every year she stays on the old regime. The reason: Section 24(b) saves her ₹60,000 in tax — more than the new regime's advantage at her salary level. She gets the deduction. Most people with identical loans don't, because they fill in the wrong field in their ITR.

Here is exactly how Section 24(b) works, when the ₹2 lakh cap changes, and the step-by-step path to claiming it correctly in AY 2026-27.

What Section 24(b) Covers — and What It Does Not

Section 24(b) of the Income Tax Act, 1961 allows a deduction for interest paid on a loan taken to buy, build, or renovate a house property. Interest only. Principal repayment is a separate deduction under Section 80C, capped at ₹1.5L per year and available only under the old regime.

The deduction limit under Section 24(b) depends on two things: whether the property is self-occupied or let out, and whether construction was completed within the timeline.

Self-occupied property: Maximum deduction of ₹2,00,000 per year, regardless of actual interest paid. Kavya paid ₹4,55,000 in interest. She claims ₹2,00,000.

Let-out property: No cap. You can claim the entire interest paid as a deduction from rental income. If rental income after other deductions is negative (rental property runs at a "loss"), you can set off up to ₹2L of that loss against other income (salary, interest) in the same year. The rest carries forward for 8 years.

Critical condition: Section 24(b) is available only under the old tax regime. If you have opted for the new regime (the default since April 2023), you cannot claim this deduction. The ₹75,000 standard deduction under the new regime does not compensate for the ₹2L Section 24(b) deduction for home loan holders with outstanding balances above ₹22–25L.

The Rules Nobody Explains at the Time of Loan Disbursement

The 5-Year Completion Rule

If you took a home loan for an under-construction property, the construction must be completed within 5 years from the end of the financial year in which the loan was first disbursed. If you took the loan in FY 2019-20, construction must complete by March 31, 2025.

Miss that deadline, and your maximum deduction drops from ₹2,00,000 to ₹30,000 per year — permanently, for as long as you hold the loan. No exceptions, no extension.

This catches buyers of delayed housing projects. If your builder missed the completion date and you took possession in FY 2025-26 instead of FY 2022-23, check when your loan was first disbursed and calculate whether the 5-year window was breached.

Pre-Construction Interest (The Instalment Deduction)

Interest paid before you took possession — during the construction phase — cannot be claimed in the year it was paid. It accumulates. Once you receive possession, you can claim it in 5 equal annual instalments starting from the year of possession, subject to the overall ₹2L cap.

Example: you paid ₹3,20,000 in interest during construction (FY 2021-22 to FY 2023-24). Possession in FY 2024-25. Annual instalment = ₹3,20,000 ÷ 5 = ₹64,000. In FY 2025-26, your total Section 24(b) claim = current year interest + ₹64,000 instalment, capped at ₹2L.

Kavya's Tax Saving: The Actual Numbers

Kavya's gross salary: ₹18.4L. Under the old regime, after standard deduction (₹50,000 under old regime), her taxable income before deductions is ₹17.9L. She claims Section 24(b) for home loan interest: ₹2,00,000. And Section 80C (PPF + insurance): ₹1,50,000.

At ₹18.4L salary, the old regime saves Kavya ₹61,750 annually. That's why she ignores the advice to switch. The new regime's extra ₹25,000 standard deduction does not come close to offsetting the combined ₹3.5L she claims under 24(b) and 80C.

How to Claim Section 24(b) in Your ITR AY 2026-27

You need one document before you start: the Annual Interest Certificate from your bank or housing finance company. This shows the exact interest component paid during FY 2025-26, broken down by principal and interest. Most banks email this in April or make it downloadable from net banking. HDFC, SBI, and ICICI all have it under Loan Certificates or Tax Statements in their app.

In the ITR portal, after selecting the old tax regime:

Step 1: Navigate to Schedule "Income from House Property." Select property type — Self-Occupied or Let Out.

Step 2: Enter the annual interest paid (from your bank certificate) in the "Interest payable on borrowed capital" field. For self-occupied, the system automatically caps the deduction at ₹2,00,000.

Step 3: If you have pre-construction interest instalments, add them in the "Pre-construction interest" sub-field. The total (current interest + pre-construction instalment) is then capped at ₹2L for self-occupied.

Step 4: Separately, in Schedule VI-A (Deductions), claim principal repayment under Section 80C if you are on the old regime and haven't exhausted the ₹1.5L limit with other investments.

What Most Home Loan Borrowers Get Wrong

Claiming Section 24(b) under the new regime. The ITR portal will reject it or silently disallow it. The new regime does not permit Section 24(b) deduction for a self-occupied property — and since the new regime is now the default, taxpayers who switch to new regime mid-year (because their employer TDS was calculated on old regime) lose the deduction without realising it. If you are claiming Section 24(b), you must be on the old regime. Verify your regime selection on the first page of the ITR before entering house property details.

Entering the EMI amount instead of the interest component. The Section 24(b) deduction is for interest only — not the full EMI. A ₹40,000/month EMI at 8.75% on ₹52L has roughly ₹3,790 principal and ₹36,210 interest in the early years. Your annual interest deduction is approximately ₹4,34,500 for the year — capped at ₹2L. Entering ₹4,80,000 (the annual EMI total) in the interest field inflates your deduction claim and creates an AIS mismatch risk.

The Let-Out Property Carry Forward Nobody Mentions

For a let-out property, there is no ₹2L cap on the interest deduction. But there is a ₹2L cap on how much house property loss can be set off against other income (salary, FD interest) in a single year. The excess loss is not wasted — it carries forward for 8 assessment years and can be set off against future house property income.

Example: you have a let-out property earning ₹2,40,000 in annual rent and paying ₹4,80,000 in annual interest. After 30% standard deduction on rent, your rental income is ₹1,68,000. Interest deduction: ₹4,80,000. Net loss: ₹3,12,000. You can set off ₹2,00,000 against your salary income this year. The remaining ₹1,12,000 loss is carried forward.

Banks and loan advisors never explain this because it doesn't affect whether you take the loan. The ITR filing guides rarely mention it because they focus on the current year claim. But for anyone holding a let-out property with a large outstanding loan, the carry-forward loss from the first 8–10 years of a home loan is a significant but invisible tax asset.

Frequently Asked Questions

Is Section 24(b) available under the new tax regime for AY 2026-27?

No — with one exception. The ₹2L Section 24(b) deduction for a self-occupied property is not available under the new tax regime. However, for a let-out property, the interest on a home loan can still be claimed as a deduction from rental income under the new regime (because rental income is computed separately). The net result still cannot be set off against salary income under the new regime. If your primary goal is the Section 24(b) deduction on a self-occupied property, you must choose the old regime.

Can both co-borrowers claim Section 24(b) on a joint home loan?

Yes — each co-borrower who is also a co-owner can claim Section 24(b) up to ₹2L independently, proportionate to their ownership share, as long as they are both on the old regime and both repaying the loan. A joint loan between spouses where both are co-owners can generate up to ₹4L in combined Section 24(b) deductions, plus up to ₹3L in combined Section 80C deductions on principal. Each person claims in their own ITR based on their ownership percentage.

What document do I need to claim Section 24(b)?

The primary document is the Annual Interest Certificate (also called Provisional Interest Certificate or Home Loan Tax Certificate) from your bank or HFC for FY 2025-26. It should show total interest paid, total principal repaid, and outstanding balance as of March 31, 2026. Keep it — you don't attach it to your ITR, but you need it if the department asks for proof during scrutiny. Most major lenders (SBI, HDFC, ICICI, Kotak, LIC Housing) provide this in April via email or on their portal.

What if I have two home loans?

You can hold multiple properties under the old regime, but only one can be treated as self-occupied. The other is deemed let-out (even if vacant) and rental income is computed at market rates. The ₹2L cap on Section 24(b) applies per self-occupied property. For the deemed let-out property, the full interest is deductible without cap — subject to the ₹2L set-off limit against other income, with the rest carried forward.

My construction was delayed and I missed the 5-year window — what is my actual deduction?

₹30,000 per year — permanently, for as long as you hold the loan on that property. The 5-year limit runs from the end of the FY in which the first tranche of the loan was disbursed. If possession happened after the window closed, there is no way to restore the ₹2L limit, even with a builder delay certificate. The ₹30,000 cap is the only option. In most high-value loan cases, this still makes the old regime worth it — but verify with both regimes before deciding.

When you chose between old and new regime this year, did you actually calculate your Section 24(b) savings against the new regime's benefit — or did your HR's default assumption make the choice for you?