Deduction in respect of interest on loan taken for residential house property
[Section-130 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
Section 130(1) of Income Tax Act 2025
130(1) An assessee, being an individual, shall be allowed a deduction of interest payable on loan taken by him from any financial institution for the purpose of acquisition of a residential house property as per the provisions of this section.
Section 130(2) of Income Tax Act 2025
130(2) The deduction under sub-section (1) shall not exceed fifty thousand rupees and shall be allowed in computing the total income of the individual for the tax year beginning on the 1st April, 2016 and subsequent tax years.
Section 130(3) of Income Tax Act 2025
130(3) The deduction under sub-section (1) shall be subject to the following conditions:—
- (a) the loan has been sanctioned by the financial institution during the period beginning on the 1st April, 2016 and ending on the 31st March, 2017;
- (b) the amount of loan sanctioned for acquisition of the residential house property does not exceed thirty-five lakh rupees;
- (c) the value of residential house property does not exceed fifty lakh rupees; and
- (d) the assessee does not own any residential house property on the date of sanction of loan.
Section 130(4) of Income Tax Act 2025
130(4) Where a deduction under this section is allowed for any interest referred to in sub-section (1), deduction shall not be allowed in respect of such interest under any other provision of this Act for the same or any other tax year.
Section 130(5) of Income Tax Act 2025
130(5) In this section,—
- (a) “financial institution” means a banking company to which the Banking Regulation Act, 1949 applies, or any bank or banking institution referred to in section 51 of that Act or a housing finance company; and
- (b) “housing finance company” means a public company formed or registered in India with the main object of carrying on the business of providing long-term finance for construction or purchase of houses in India for residential purposes.
FAQs on Section 130 of Income Tax Act 2025
Who is eligible to claim the deduction under Section 130?
Only an individual assessee is eligible to claim the deduction under this section.
What is the purpose of the loan for which deduction is allowed under Section 130?
The loan must be taken for the purpose of acquisition of a residential house property.
What is the maximum amount of deduction allowed under Section 130?
The maximum deduction allowed is fifty thousand rupees.
From which tax year is the deduction under Section 130 applicable?
The deduction is applicable from the tax year beginning on 1st April, 2016 and subsequent tax years.
Is there any condition on the date of loan sanction to claim the deduction?
Yes, the loan must have been sanctioned between 1st April, 2016 and 31st March, 2017.
What is the maximum amount of loan sanctioned for which this deduction can be claimed?
The loan amount sanctioned must not exceed thirty-five lakh rupees.
Is there a cap on the value of the residential house property?
Yes, the value of the residential house property must not exceed fifty lakh rupees.
Can a person who already owns a residential house property claim deduction under Section 130?
No, the assessee must not own any residential house property on the date of sanction of the loan.
Can deduction be claimed under any other section for the same interest?
No, if deduction is claimed under Section 130, it cannot be claimed under any other provision for the same or any other tax year.
What does the term “financial institution” include under Section 130?
It includes banking companies covered under the Banking Regulation Act, 1949 and housing finance companies.
What is a housing finance company as per Section 130?
It is a public company formed or registered in India with the main object of providing long-term finance for construction or purchase of residential houses in India.
Is the deduction allowed for loans taken for construction of a house?
No, the deduction is specifically for acquisition (i.e., purchase) of a residential house property.
Is this deduction available to Hindu Undivided Families (HUFs) or other entities?
No, the deduction is available only to individual assessees.
Can this deduction be claimed every year?
Yes, subject to the limit of fifty thousand rupees and compliance with all conditions, it can be claimed in each subsequent tax year.
Will the deduction continue if the assessee later acquires another residential property?
Yes, once all initial conditions are met at the time of loan sanction, future acquisition of property does not disqualify the deduction.
Can the deduction be claimed if the property is jointly owned?
Only the individual who satisfies all the conditions and is the borrower can claim the deduction, proportionately if applicable.
Is there a requirement that the assessee must reside in the property?
No such condition is specified; the key criterion is that the loan is for acquisition of a residential house property.
Can the deduction be claimed on a loan taken from a relative or employer?
No, the loan must be taken from a financial institution as defined in the section.
What happens if the interest payable in a year is less than ₹50,000?
Only the actual interest payable will be allowed as deduction, up to the limit of ₹50,000.
Will pre-construction interest be allowed under Section 130?
No provision allows for pre-construction interest; only interest payable on loan for acquisition is covered.
Refresh Page