Section 22 of the Income-tax Act, 2025 — 30% Standard Deduction & Home-Loan Interest on House Property

In plain language

What Section 22 actually says

Section 22 of the Income-tax Act, 2025 tells you the deductions you subtract while computing "Income from House Property". It is the direct successor to the old Section 24 of the Income-tax Act, 1961 — the language has been re-organised into clean sub-sections, but the benefits are broadly the same. Once you have arrived at the Net Annual Value (NAV) under Sections 20–21 (Gross Annual Value minus municipal taxes actually paid), Section 22 allows only two categories of deduction from it.

• Clause (a) — 30% Standard Deduction: A flat 30% of the annual value is allowed to cover repairs, maintenance, collection charges and management. You get it even if you spent nothing — no bills or proof required. You cannot claim more than 30% even if your actual repair spend was higher.
• Clause (b) — Interest on borrowed capital: Interest payable on money borrowed to acquire, construct, repair, renew or reconstruct the property is deductible.
• Clause (c) — Pre-construction interest: Interest for the period before the property is complete is allowed in five equal instalments starting from the year construction is completed.

Who it applies to

Anyone taxable under the head "Income from House Property" — owners of let-out flats, deemed let-out second homes, and self-occupied houses funded by a home loan. It covers individuals, HUFs, firms and companies alike, though the ₹2,00,000 self-occupied benefit is most relevant to individuals and HUFs on the old regime.

The two interest ceilings for a self-occupied home

For a self-occupied property (annual value treated as nil), interest is capped:

• ₹2,00,000 is the maximum if the loan was taken to buy or build the house, construction/acquisition is completed within 5 years from the end of the tax year in which the loan was taken, and you hold a lender's interest certificate.
• ₹30,000 applies in every other case — e.g. the loan was only for repair/renovation, or the 5-year completion deadline was missed.

Section 22 also fixes an aggregate ceiling of ₹2,00,000 across all your self-occupied houses put together — you cannot multiply the limit by owning two self-occupied homes.

Let-out property: no cap on interest

For a let-out (rented) house there is no upper limit on the interest deduction — the full interest paid is allowed. However, the loss that this creates and can be set off against salary/business income is separately capped at ₹2,00,000 per year (set-off rules). The unabsorbed loss carries forward for 8 years, set off only against future house-property income.

Old regime vs new regime — the crucial catch

• Let-out property interest is deductible under both the old and the new tax regimes.
• The self-occupied ₹2,00,000 / ₹30,000 interest deduction and the ability to set off house-property loss against other income are effectively available only under the old regime. Under the default new regime a self-occupied house benefit is not allowed and loss cannot be set off against other heads.

Other conditions

• Interest certificate (Sec 22(4)): The lender must certify the total interest and any interest on a fresh loan taken to repay the original loan (a genuine re-financed loan qualifies).
• Foreign interest (Sec 22(6)): Interest payable outside India is disallowed unless tax was deducted at source on it or there is a person in India who can be treated as an agent.
• Only interest is deductible here — the principal repayment of a home loan is claimed separately under Section 123 (the successor to Section 80C) and only under the old regime.

Practical takeaways

• Pay municipal tax before 31 March so it reduces the annual value in the same year.
• Keep every year's lender interest certificate — it is the single most audited document for this deduction.
• If you are choosing between regimes and have a big home-loan interest and rent income, the old regime often wins because of the uncapped let-out interest and loss set-off.