A home loan is made up of two components: Principal and Interest. The principal is the amount borrowed. Whereas, the interest amount is the cost or borrowing the principal.
You can claim a deduction of up to INR 2 Lakh in case you have taken a home loan on your self-occupied house property.
In case of a let out house property, you can claim the entire home loan interest as your deduction.
To claim the deduction u/s 24 for interest on a home loan, all the following conditions should be satisfied:
- The loan must have been taken on or after 1st April 1999.
- The Home Loan must have been taken for the purpose of purchase or construction of a new property.
- Acquisition or Construction must be completed within 3 years from the end of the financial year in which loan was taken.
The allowable deduction is INR 30,000 if any of the above-mentioned conditions are not met.