What is Section 24(b)?
Section 24(b) of the Income Tax Act, 1961 allows a deduction from “income from house property” for interest paid on a home loan:
| Property type | 24(b) cap per year |
|---|---|
| Self-occupied | ₹2,00,000 |
| Let-out / deemed-let-out | No cap |
The deduction is available only under the old tax regime. Borrowers who opt for the new regime lose it entirely.
The ₹2 lakh cap: when it bites and when it doesn’t
For a standard ₹50 lakh loan at 8.5% over 20 years, the annual interest trajectory is:
| Loan year | Annual interest (approx.) | 24(b) deduction | Cap binding? |
|---|---|---|---|
| Year 1 | ₹4,21,000 | ₹2,00,000 | Yes — ₹2.21L forfeited |
| Year 5 | ₹3,93,000 | ₹2,00,000 | Yes |
| Year 10 | ₹3,44,000 | ₹2,00,000 | Yes |
| Year 15 | ₹2,61,000 | ₹2,00,000 | Yes |
| Year 18 | ₹1,60,000 | ₹1,60,000 | No — full interest deducted |
| Year 20 | ₹52,000 | ₹52,000 | No |
For loans above ~₹25L at current rates, the ₹2L cap remains binding for most of the tenure.
How the deduction is calculated
For loan year N (old regime, self-occupied):
annual_interest = Σ interest portion, months 12(N-1)+1 to 12N
annual_principal = Σ principal portion, same months
section_24b = min(annual_interest, ₹2,00,000) ← cap for self-occupied
section_80c = min(annual_principal, ₹1,50,000) ← shared 80C cap
section_80EEA = min(annual_interest − section_24b, ₹1,50,000) ← only if eligible
= 0 if not first-time buyer or not eligible window
total_deduction = section_24b + section_80c + section_80EEA
tax_saved = total_deduction × marginal_slab_%
Source: Income Tax Act, 1961 — Section 24(b), Section 80C, Section 80EEA.
Worked example — Year 1, ₹50L, 8.5%, 20-year, 30% slab, self-occupied
- Year-1 interest paid ≈ ₹4,21,000 → 24(b) deduction capped at ₹2,00,000
- Year-1 principal paid ≈ ₹99,511 → 80C deduction = ₹99,511 (under ₹1.5L cap)
- Total deduction = ₹2,99,511
- Tax saved at 30% + 4% cess ≈ ₹93,410
At year 15, annual interest drops to ~₹2.61L — still cap-binding. At year 18 it falls to ~₹1.6L — below the cap, deduction = actual interest.
Bridge to the loans-cluster view
This page focuses on the tax angle: how much of your interest is deductible and how much tax does that save year by year.
For the loan mechanics angle — full amortisation table, EMI breakdown, prepayment impact, and a year-by-year deduction curve across the entire 20-year tenure — see the Home Loan Tax Benefit Calculator.
The two pages share the same underlying formula (calculateHomeLoanTaxBenefit). The difference is framing:
- This page → “What is my IT-Act deduction?”
- Loans page → “What is my EMI tax advantage over time?”
Regime decision rule for home-loan borrowers
Stay on the old regime if:
old-regime tax (post all deductions including 24b, 80C, 80D, 80E)
<
new-regime tax (post standard deduction of ₹75,000, lower slab rates)
For most borrowers in the 20% or 30% slab with a ₹25L+ loan, the old regime wins by a significant margin. Verify with the Old vs New Regime Calculator.
Related tools
- Home Loan Tax Benefit Calculator — full year-by-year 24(b) + 80C + 80EEA curve
- Home Loan EMI Calculator — EMI and amortisation
- Income Tax Calculator — full ITR computation after plugging in 24(b)
- Old vs New Regime Calculator — side-by-side comparison