# Interest on Borrowed Capital — Section 24(b)
This is the second deduction allowed from NAV. For self-occupied property, this is often the only item that produces a loss under the head 'House Property'.
## Conditions for Deduction
1. Loan must be taken for the house property — for purchase, construction, repairs, renovation, or reconstruction.
2. Loan can be from any person — bank, financial institution, employer, relative, or friend.
3. Deduction is on accrual/due basis (not payment basis). Interest accrued in the PY is deductible even if not yet paid.
4. If a fresh loan is taken to repay an earlier loan, interest on the fresh loan is also deductible.
5. Penal interest (interest on unpaid interest) is NOT deductible.
6. If the loan is taken from outside India, deduction is allowed only if TDS has been deducted on such interest.
## Pre-Acquisition / Pre-Construction Period Interest
This is the special rule that trips up most students.
| Concept | Detail |
|---|---|
| Pre-construction period | From the date of loan to 31 March of the year immediately preceding the year in which acquisition/construction is completed. |
| Treatment | Total such interest is allowed as deduction in 5 equal annual instalments, starting from the year in which acquisition/construction is completed. |
| Note | Interest for the year of completion itself is treated as 'current year interest', NOT as pre-construction interest. |
## Maximum Deduction Limits
### Let-out / Deemed Let-out Property
- Fully allowed — no monetary limit.
- Current year interest + 1/5th of pre-construction interest, all allowed.
### Self-Occupied / Unoccupied Property
| Condition | Maximum Deduction |
|---|---|
| Loan taken on or after 1.4.1999 for purchase or construction AND construction completed within 5 years from the end of the FY in which loan was taken | ₹2,00,000 |
| Any other case (e.g., loan for repair/renovation, OR loan taken before 1.4.1999, OR construction not completed in 5 years) | ₹30,000 |
### Aggregate Cap for Two Self-Occupied Properties
Up to two properties can be claimed as self-occupied. The ₹2,00,000 / ₹30,000 limit applies in aggregate across both — not per property.
## Section 115BAC Default Regime
Under the default new tax regime (Section 115BAC):
- No interest deduction is available for self-occupied / unoccupied property.
- Income from self-occupied / unoccupied property will therefore always be Nil (no loss can arise).
- For let-out property, interest deduction continues normally.