Deductions from NAV under Section 24 — standard deduction and interest on borrowed capital (with regime-wise SOP limits)

## Deductions from Net Annual Value — Section 24

Only two deductions are allowed from NAV. No other expense (insurance, ground rent, collection charges, etc.) is deductible.

### (a) Standard Deduction — 30% of NAV [Section 24(a)]

• A flat 30% of NAV, allowed for repairs/maintenance irrespective of actual expenditure.
• If NAV = 0 (e.g. an SOP), the 30% deduction is also NIL.
• If part of the property is used for business/profession, the attributable actual expenses are claimed under PGBP instead.

### (b) Interest on Borrowed Capital [Section 24(b)]

• Loan may be borrowed from any person.
• Interest is allowed on an accrual basis for acquisition, construction, repairs, renewal or reconstruction.
• A fresh loan to repay an original loan (used for the above) — interest on it is also deductible.
• Interest on late payment of interest is NOT deductible.
• If the sale price is payable in installments with interest to the seller, the unpaid price is treated as capital borrowed, and that interest qualifies u/s 24.

Interest has two components:

```

Total Interest = Pre-Construction Period Interest (PCPI) + Current Year Interest (CYI)

```

Pre-Construction Period Interest (PCPI):

• Pre-Construction Period (PCP) = from the date the loan is borrowed up to the end of the FY immediately preceding the FY in which construction is completed.
• PCPI is allowed in 5 equal annual installments, beginning in the PY in which the property is acquired/construction completed.
• If the date of borrowing and date of completion fall in the same FY, PCPI = Nil.

Current Year Interest (CYI):

• Interest from the year the construction is completed / property acquired — fully deductible in that very year.

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## Interest Deduction Limits for SOP/UOP

### Under the Default (new) Tax Regime

• NO interest deduction for an SOP/UOP when the NAV = 0 benefit is claimed.
• No restriction on interest for LOP / DLOP.

### Under the Optional (old) Tax Regime — for SOP/UOP with NAV = 0

• These ceilings are per assessee, NOT per property.
• No limit applies to LOP / DLOP — full interest is deductible there.