The 30% standard deduction on rental income under Section 24
Section 24 has two limbs. Section 24(a) allows a flat 30% of net annual value for repairs and maintenance, requires no proof, and is available under both tax regimes. Section 24(b) allows interest on borrowed capital, unlimited for a let-out property, but capped at ₹2,00,000 for a self-occupied property and only under the old regime. The ability to set a house property loss against other income is also an old-regime feature.
The 30% is notional, and that is the point
Section 24(a) gives you thirty per cent of net annual value as a deduction for repairs and maintenance. It is not a reimbursement of what you spent. You receive it in full in a year when you spent nothing on the property, and you receive exactly the same in a year when you replaced the plumbing.
Because it is notional, there are no bills to keep and nothing to substantiate. That is unusually generous for a deduction of this size, and it is why rental income is taxed more lightly than the gross figures suggest.
The trade-off is that it is exhaustive for what it covers. You cannot claim the 30% and also deduct actual painting, repairs, society maintenance or insurance. If your real expenditure exceeded 30% of net annual value in a bad year, that excess is simply not deductible.
Section 24(b): interest, and where the regime matters
The second limb allows a deduction for interest on capital borrowed to acquire, construct, repair or reconstruct the property. Unlike the first limb, how much you get depends on what the property is used for and which tax regime you are on.
For a let-out property, the interest is deductible in full, with no ceiling, and that holds under both the old and the new regime. For a property you occupy yourself, the deduction is capped at ₹2,00,000, and it is available only under the old regime, having been withdrawn for self-occupied property under Section 115BAC.
There is a second, less obvious regime difference. Deductions can push income from house property into a loss, and under the old regime that loss can be set against your other income up to ₹2,00,000 in a year, with the balance carried forward. The new regime does not permit that set-off against other heads. For a leveraged landlord whose interest substantially exceeds rent, this is often a larger consideration than the slab rates.
Section 24 across the two regimes
| Benefit | Old regime | New regime (115BAC) |
|---|---|---|
| 30% standard deduction, Section 24(a) | Available | Available |
| Interest on a let-out property, Section 24(b) | Full, no cap | Full, no cap |
| Interest on a self-occupied property | Up to ₹2,00,000 | Not available |
| House property loss set off against other income | Up to ₹2,00,000 a year | Not permitted |
Treat this as the shape of the rules rather than the last word: regime provisions have been amended repeatedly and are worth re-checking for the assessment year you are filing.
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Section 24 FAQ
What is the 30% standard deduction under Section 24?
A flat deduction of 30% of net annual value, allowed for repairs and maintenance of a let-out property. It needs no bills or proof, is given regardless of what you actually spent, and is computed on net annual value rather than on gross rent.
Can I claim actual repair costs in addition to the 30%?
No. The 30% is a notional allowance that stands in place of actual repair, maintenance, painting, insurance and society charges. You take the statutory figure instead of your real expenditure, not as well as it.
Is the 30% deduction available under the new tax regime?
Yes. The Section 24(a) standard deduction continues under the new regime of Section 115BAC. What the new regime removes is the interest deduction for a self-occupied property and the ability to set a house property loss against other income.
Is home loan interest on a rented-out property capped?
No. For a let-out property, interest under Section 24(b) is deductible in full with no ceiling, under both regimes. The ₹2,00,000 cap applies to a self-occupied property, and that deduction is available only under the old regime.
What happens if my interest exceeds the rental income?
The computation produces a loss from house property. Under the old regime that loss can be set against your other income up to ₹2,00,000 in the year, with the unabsorbed balance carried forward against house property income in later years. The new regime does not allow the set-off against other heads.
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Provisions referred to
- The Income-tax Act, 1961 — Section 24(a) (standard deduction) and Section 24(b) (interest on borrowed capital)
- The Income-tax Act, 1961 — Section 71 (set-off of loss from one head against another)
- The Income-tax Act, 1961 — Section 115BAC (new tax regime)
This is general information about Indian tax law, not tax advice. Regime rules and caps have been amended repeatedly and your own position depends on facts this page cannot know. Confirm the current position on incometax.gov.in or with a qualified chartered accountant.