Taxation · Income from House Property

Deductions from Income from House Property under Section 24

Updated 4 October 2026 · Fact-checked

Income from house property is net annual value less two deductions: a standard deduction of 30% of net annual value, and interest on borrowed capital. Pre-construction interest is claimed in five equal yearly instalments. For a self-occupied house, total interest is capped at ₹2,00,000, or ₹30,000 in some cases.

Understand Deductions from Income from House Property

Under the Income-tax Act, 2025, only two deductions are allowed from the net annual value (NAV) of a house property. No others are allowed, however much you spent on repairs, insurance, collection or ground rent.

The first is the standard deduction. It is a flat 30% of NAV. It is given whether or not you actually spent anything on repairs. Because it is based on NAV, it applies only when NAV is positive. A self-occupied house has NAV of nil, so there is no standard deduction on it.

The second is interest on borrowed capital. If you borrowed to buy, construct, repair, renew or reconstruct the house, the interest is deductible. You claim it on an accrual basis, so it does not matter whether you paid it in the year. For a let-out property, the full interest is deductible with no cap.

Interest for the period before the house is ready is called pre-construction interest. It runs from the date of borrowing up to 31 March before the date of acquisition or completion. You cannot claim it in that period. You claim it in five equal instalments, starting from the tax year in which the house is acquired or completed.

For a self-occupied house, interest is capped. The cap is ₹2,00,000 if the loan was for acquisition or construction and the work was completed within 5 years from the end of the tax year in which the loan was taken. The cap is ₹30,000 for repairs, renewal or reconstruction, or if the 5-year condition is not met. The cap covers current interest and the pre-construction instalment together.

Key rules to remember

Income from house property (let-out): Income = NAV − Standard deduction − Interest on borrowed capital; NAV = Gross annual value − Municipal taxes paid by the owner during the year.
Standard deduction: 30% × NAV; Only when NAV is positive. Nil for self-occupied property, because its NAV is nil.
Pre-construction interest instalment: Interest from date of borrowing to 31 March before completion ÷ 5; Claimed each year for 5 years, starting from the tax year of acquisition or completion.
Interest cap, self-occupied (acquisition or construction): Current interest + Pre-construction instalment ≤ ₹2,00,000; Needs completion within 5 years from the end of the tax year of borrowing, and the lender's interest certificate.
Interest cap, self-occupied (other cases): Current interest + Pre-construction instalment ≤ ₹30,000; Applies to repairs, renewal or reconstruction, and to acquisition or construction loans where the 5-year condition fails.
Let-out property interest: Full interest accrued in the tax year + 1/5 of pre-construction interest; The interest deduction itself has no ₹2,00,000 cap. But a resulting house property loss can be set off against other heads of income only up to ₹2,00,000 in a year. The balance loss is carried forward for 8 years.

How to solve Deductions from Income from House Property questions

Use this order for any house property question that asks for deductions.

1Identify the use of each property: self-occupied, let-out or deemed let-out. This decides whether NAV exists and which interest rule applies.
2For let-out or deemed let-out property, find NAV: annual value less municipal taxes actually paid by the owner in the year. For self-occupied property, NAV is nil.
3Calculate the standard deduction at 30% of NAV. Do not take it on a nil NAV.
4Find the interest on borrowed capital for the tax year on an accrual basis. Ignore principal repayment.
5Work out pre-construction interest. Count months from the date of borrowing to 31 March before completion. Divide the total by 5 for the yearly instalment.
6Add current-year interest and the instalment. For self-occupied property, apply the ₹2,00,000 or ₹30,000 cap to this total.
7Deduct standard deduction and interest from NAV. A negative answer is a loss under this head.
8Write a short note on the cap condition you applied, for example completion within 5 years and the lender's certificate.

Quickest way: Three-line method for MCQs and written answers

When to use it: Use it when you have little time. It works for both 1-mark and 2-mark MCQs and for the 70-mark written section.

Check the property type first. Self-occupied means NAV is nil, so only the interest line matters, and it is capped.
For MCQs, compute only what changes the answer. Eliminate options that take a standard deduction on a self-occupied house, or that exceed ₹2,00,000 on self-occupied interest.
Compute the pre-construction instalment as total ÷ 5 and add it before applying the cap.
In written answers, use a fixed layout: NAV, less standard deduction, less interest (current and instalment), income or loss. Show the month count for pre-construction interest so you earn step marks even if one figure goes wrong.

Common mistakes in Deductions from Income from House Property

Claiming the 30% standard deduction on a self-occupied house.
Students treat it as a general deduction instead of one based on NAV.
Fix: Check NAV first. Self-occupied NAV is nil, so 30% of nil is nil.
Claiming all pre-construction interest in the year the house is completed.
Students forget the five-instalment rule.
Fix: Divide by 5 and claim one instalment each year, starting from the year of completion or acquisition.
Applying the ₹2,00,000 cap to current interest only and adding the instalment on top.
The pre-construction instalment looks like a separate item.
Fix: Add current interest and the instalment, then apply the cap to the combined figure.
Counting pre-construction months up to the completion date instead of 31 March before it.
Students count the whole period of the loan before the house is ready.
Fix: Stop at 31 March immediately before the date of completion. Interest after that falls in the current-year interest.
Using the ₹2,00,000 cap when the 5-year completion condition is not met.
Students see 'acquisition loan' and skip the time limit.
Fix: Check the gap between the end of the tax year of borrowing and completion. If it exceeds 5 years, the cap is ₹30,000.
Deducting principal repayment or other costs such as repairs and insurance.
Students carry habits from business income.
Fix: Only the standard deduction and interest are allowed. Principal is never deductible under this head.

Worked examples

Example 1

Mr. Rao owns a house let out for the full tax year 2026-27. The annual value is ₹6,00,000. He paid municipal taxes of ₹40,000 during the year. Interest accrued on his housing loan for the year is ₹2,50,000. Compute income from house property.

Show the solution

NAV = ₹6,00,000 − ₹40,000 = ₹5,60,000.
Standard deduction = 30% × ₹5,60,000 = ₹1,68,000.
Interest on borrowed capital = ₹2,50,000. A let-out property has no cap.
Income = ₹5,60,000 − ₹1,68,000 − ₹2,50,000 = ₹1,42,000.

Answer: Income from house property is ₹1,42,000.

Example 2

Ms. Rekha borrowed ₹20,00,000 at 9% per year on 1 July 2023 to construct a house. Construction was completed on 10 December 2025, and she occupies it herself. Interest for the tax year 2026-27 is ₹1,80,000. She holds the lender's certificate. Compute income from house property for tax year 2026-27.

Show the solution

Pre-construction period = 1 July 2023 to 31 March 2025 = 9 months (to 31 March 2024) + 12 months = 21 months.
Yearly interest = 9% × ₹20,00,000 = ₹1,80,000, so monthly interest = ₹15,000.
Pre-construction interest = 21 × ₹15,000 = ₹3,15,000.
Instalment = ₹3,15,000 ÷ 5 = ₹63,000 a year, claimed from tax year 2025-26 to 2029-30.
Completion is within 5 years of the end of the tax year of borrowing, so the cap is ₹2,00,000.
Total interest = ₹1,80,000 + ₹63,000 = ₹2,43,000. This exceeds the cap, so allowed interest is ₹2,00,000.
The house is self-occupied, so NAV is nil and there is no standard deduction.
Income = Nil − ₹2,00,000 = (−) ₹2,00,000.

Answer: Loss from house property is ₹2,00,000. The excess ₹43,000 of interest is not allowed.

Exam tips

Always write the property type first. Examiners give marks for identifying self-occupied or let-out status.
Show the month count and the ÷ 5 step for pre-construction interest. This is where step marks sit.
In MCQs, test the cap first. Many options are traps that ignore the cap or skip the instalment.
Read the dates carefully. Borrowing date, completion date and tax year decide the pre-construction period and the cap.
State the lender's certificate and the 5-year completion condition in one line when you apply the ₹2,00,000 cap.

Practice questions from Income from House Property

Deductions from Income from House Property in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Deductions from Income from House Property: frequently asked questions

Is the standard deduction of 30% allowed on gross annual value or net annual value?

It is allowed on net annual value, that is, after deducting municipal taxes paid by the owner. It is not allowed on a self-occupied house because its NAV is nil.

Is the full interest deductible on a let-out house?

Yes, interest accrued for the tax year is deductible in full on a let-out property, with no ₹2,00,000 cap on the deduction. Pre-construction interest is claimed in five instalments. If the result is a loss, only up to ₹2,00,000 a year can be set off against other heads of income. The balance is carried forward for 8 years, so read the set-off topic too.

When is the interest cap ₹30,000 instead of ₹2,00,000?

The cap is ₹30,000 when the loan is for repairs, renewal or reconstruction, or when an acquisition or construction loan does not meet the 5-year completion condition. Otherwise, for a self-occupied house the cap is ₹2,00,000.

Do I claim pre-construction interest if the house is let out?

Yes. It is claimed in five equal instalments from the year of completion, along with current-year interest. For a let-out house, the ₹2,00,000 cap on interest does not apply.