How to Claim Home Loan Tax Benefits Under Section 24(b) in 2025
Section 24(b) of India’s Income-tax Act allows eligible taxpayers to deduct interest paid on a home loan from income earned from a house property. For the 2025 tax year, the benefit depends on whether the property is self-occupied or rented, which tax regime you choose, and whether the loan funded purchase, construction, repair, or reconstruction.
This rule is especially relevant to Indians living in Australia who own property in India or continue to earn Indian rental income. A Melbourne or Sydney resident may have Australian salary income, PAYG withholding, and an Indian home loan at the same time, but Section 24(b) remains an Indian tax provision. It does not automatically reduce Australian tax payable to the ATO.
Before applying, separate home-loan interest from principal repayment. Interest may qualify under Section 24(b), while principal repayment is generally considered under Section 80C in the old tax regime. Processing fees, insurance, and other borrowing costs should be checked separately rather than added to the interest figure.
The calculation is easier when you keep the loan certificate, possession details, rental statements, and tax-regime choice together. Indian lenders, including banks and housing finance companies, usually issue an annual interest certificate that shows the figures needed for the income-tax return.
Understand What Section 24(b) Covers
For a self-occupied house, the maximum annual deduction for interest on borrowed capital is generally ₹2 lakh when the loan was taken for purchase or construction and the required conditions are met. Construction must normally be completed within five years from the end of the financial year in which the borrowing occurred. A lower limit may apply for loans used for repairs or reconstruction.
For a let-out property, actual eligible interest is generally deductible against rental income. The rental calculation also normally includes the 30% standard deduction under Section 24(a), after municipal taxes and other permitted adjustments. The interest deduction is not the same as the standard rental deduction, so both should be recorded separately.
If you are comparing borrowing options, the distinction between secured housing finance and other credit matters. A useful explanation of LIC policy loan options can help clarify why the tax treatment of a home loan should not be assumed for an unsecured personal loan.
Choose The Correct Tax Regime
The old tax regime generally provides access to common deductions, including the self-occupied home-loan interest deduction under Section 24(b), subject to the statutory limits. It may be suitable where you claim sizeable housing interest, Section 80C investments, health insurance deductions, or education-related relief.
The new tax regime has different treatment. For a self-occupied property, the Section 24(b) interest deduction is generally unavailable when income is computed under the concessional regime. For a let-out property, interest may be considered in the rental-income calculation, but a house-property loss generally cannot be set off against other income under the new regime.
Compare both regimes using actual figures rather than choosing based only on the headline tax rates. An Indian resident working in Brisbane, Perth, or Adelaide may have changing salary, rent, and investment income, while an Australian tax resident with Indian income also needs to consider foreign-income reporting and treaty rules separately.
Gather Evidence Before Filing
Obtain the lender’s provisional or final home-loan interest certificate for the relevant financial year. It should identify the borrower, property, loan account, total interest, principal repayment, and, where available, the date of disbursement. Keep bank statements showing repayments in case the figures need to be reconciled.
You should also retain the sale deed, construction completion or possession documents, municipal tax receipts, rent agreements, rental bank entries, and ownership records. For a property under construction, preserve certificates showing the completion date because the timing affects the deduction.
Digital records can be useful for storage, but a technology label does not replace a tax document. Concepts such as digital ownership records should not be treated as substitutes for a lender certificate, registered deed, or official possession evidence.
| Property and loan position | Section 24(b) treatment | Important condition |
|---|---|---|
| Self-occupied, purchase or construction | Up to ₹2 lakh interest deduction under the old regime | Construction and eligibility conditions must be satisfied |
| Self-occupied, repair or reconstruction | Lower statutory limit may apply | Check the purpose and date of borrowing |
| Let-out property | Actual eligible interest considered against house-property income | Loss set-off rules vary by regime |
| Under construction | Pre-construction interest claimed in five equal instalments | Claim starts after completion or possession |
| Joint ownership and joint loan | Each eligible co-borrower may claim a proportionate share | Ownership, repayment, and loan records should align |
Calculate Pre-Construction Interest
Interest paid before completion or possession is known as pre-construction interest. It is not normally claimed all at once. Instead, the eligible amount is generally divided into five equal instalments and claimed from the year in which construction is completed or the property is acquired.
For example, if eligible pre-construction interest is ₹5 lakh, the usual annual instalment is ₹1 lakh for five years, subject to the overall limits and the property’s tax treatment. Current-year interest is added separately, so the annual claim should not accidentally include the entire historical amount.
The five-year period begins only when the relevant construction or acquisition condition is met. If a project in India has been delayed beyond the permitted period, the available deduction may be restricted. Keep builder correspondence and possession evidence where construction timelines are disputed.
Handle Joint Loans And Rental Income
In a joint home loan, each co-owner may generally claim a proportionate share of interest when both are liable for the loan and actually contribute to repayment. The ownership ratio, loan agreement, repayment records, and income-tax return should tell a consistent story. A joint application alone does not guarantee a full deduction for both borrowers.
For a rented property, calculate gross rent, subtract eligible municipal taxes, apply the 30% standard deduction, and then account for eligible interest. If the result is a loss, the old regime generally permits set-off against other heads of income up to ₹2 lakh in a year, with eligible balance losses carried forward for up to eight assessment years.
An Australian-based owner should also track rent received in Indian rupees and the corresponding Australian-dollar conversion used for Australian reporting. Indian deductions and Australian foreign-income rules are separate calculations, so one country’s tax worksheet should not simply be copied into the other.
Avoid Common Filing Errors
A frequent mistake is claiming the full interest shown on a certificate for a self-occupied property without checking the ₹2 lakh ceiling or the chosen tax regime. Another is treating principal repayment as Section 24(b) interest. Principal may fall under Section 80C in the old regime, subject to the combined annual limit and other conditions.
Do not claim a deduction for a property that is not legally owned by the taxpayer, or for loan interest that relates to a different asset. Joint borrowers should divide the claim using defensible ownership and repayment proportions. If the property is rented, maintain evidence of rent, vacancy, municipal payments, and the date on which it became available for letting.
State-based Australian expenses, such as New South Wales or Victoria stamp duty, do not become Indian Section 24(b) deductions merely because the owner lives in Australia. They belong to a separate Australian property-tax analysis, if relevant, and should not be inserted into the Indian home-loan schedule.
Complete The 2025 Tax Return Carefully
Enter the property under the house-property section of the Indian income-tax return and select self-occupied or let-out status accurately. Report the annual value or rent, municipal taxes where applicable, the Section 24(a) standard deduction, and eligible interest under Section 24(b). Use the lender’s certificate as the primary figure and retain supporting documents after filing.
Check whether the old or new regime has been selected before final submission, since the choice can change the value of the housing deduction. Taxpayers with Indian rental income and Australian tax residency should also review foreign-income disclosure, tax-residency status, and any foreign tax credit position with a qualified adviser.
The immediate practical step is to download the lender’s 2024–25 interest certificate, mark the property as self-occupied or let-out, and compare the old-regime and new-regime calculations before submitting the Indian return.