My client took his housing loan in 2014 and the interest has always been fully set off against salary. From AY 2018-19 the officer restricts the set-off to Rs 2,00,000. Can I argue the cap cannot apply to a loan taken before the amendment?
No. The Delhi High Court upheld the constitutional validity of s.71(3A), inserted by s.31 of the Finance Act 2017, and rejected the alternative plea that it applies only to loans taken on or after 1 April 2017. The cap operates for assessment year 2018-19 and every later year on the loss of that year, whatever the vintage of the loan.
Decided by the High Court (Yashwant Varma J and Purushaindra Kumar Kaurav J) on 2024-05-30, reported as W.P.(C) 10214/2017; Neutral citation 2024:DHC:4573-DB (Delhi High Court). It bears on section 71(3A), section 71, section 71B, section 24(b) of the Income Tax Act 1961, in House Property and How Tax Law Is Read matters.
This is the only High Court decision located that squarely tests the Rs 2,00,000 cap, and it closes off the two arguments practitioners reach for first — retrospectivity and Article 14. Two things about it are worth more than the result. First, the annual rent for the petitioner's property for FY 2016-17 was computed at Rs 1,20,000, so the cap was applied to a property that cannot have been self-occupied — a self-occupied house has a nil annual value — though the judgment does not say whether it was actually let out or deemed to be; the widespread belief that s.71(3A) bites only on a self-occupied house does not survive this record, and nothing in the text of s.71(3A) confines it to self-occupied property either. Second, the Court's own reasoning is that the amendment does not take the deduction away but only limits the amount that may be set off in the year — which is the ground on which the practitioner should be pointing the client to s.71B, not arguing about validity. The judgment does not itself discuss s.71B, so the carry-forward is the reader's own point to take.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
Read aloud by your device. Press again to stop.
The petitioner, a government employee, constructed a house in April 2014 at a cost of about Rs 1.35 crore, financed by a loan of Rs 85 lakh from IDBI Bank and Rs 50 lakh from his father. The annual rent for the property for financial year 2016-17 was computed at Rs 1,20,000. Until then the whole of the loss under the head income from house property, driven by the interest deduction, could be set off against his other income under s.71. Section 31 of the Finance Act 2017 inserted sub-section (3A) into s.71 with effect from 1 April 2018, restricting the set-off of such a loss against income under any other head to Rs 2,00,000 for the assessment year, so from assessment year 2018-19 onwards. By writ petition he sought a writ of certiorari quashing s.31 of the Finance Act 2017 as violative of Articles 14 and 19(1)(g), and in the alternative a writ of mandamus declaring that sub-section (3A) operates only prospectively, that is, only in relation to housing loans taken on or after 1 April 2017 and not to his pre-existing loan. He also invoked promissory estoppel and the impairment of a pre-existing right.
The writ petition was dismissed and both issues were answered in favour of the respondents and against the petitioner. Section 71(3A) is constitutionally valid; it does not offend Article 14, and the plea that it cannot operate in relation to housing loans taken before the amendment was rejected. The provision takes effect from 1 April 2018 and therefore governs assessment year 2018-19 and subsequent assessment years (paragraphs 4, 25 and 34).
The Court began from the position that before the Finance Act 2017 there was no ceiling on the amount of a loss under the head income from house property that could be set off against other heads, and that the Act of 2017 restricted that set-off to Rs 2,00,000 for an assessment year with effect from 1 April 2018, that is, for assessment year 2018-19 onwards (paragraph 4). It reproduced sub-section (3A), under which the assessee is not entitled to set off such loss to the extent it exceeds two lakh rupees against income under the other head (paragraph 18), and observed that instead of an indefinite amount an assessee can now set off a maximum of Rs 2 lakh (paragraph 19). On retrospectivity the Court proceeded on the footing that a statute is retrospective in the offending sense only where it impairs a vested right, and held that neither the unamended nor the amended provision created or disturbed any indefeasible right in the petitioner's favour (paragraph 24). Building on the absence of a crystallised right, it rejected the Article 14 challenge: the insertion of sub-section (3A) does not remove the benefit of the deduction altogether but circumscribes the previously indefinite set-off; the change reflects a larger legislative policy, has an equalising effect across taxpayers claiming under that head, creates no separate class, and the class in which the petitioner claims is a pre-existing one of which he forms part; the Legislature had merely altered the criterion as a reasoned policy decision, and the petitioner had not attacked the stated object as ill-founded (paragraph 25).
Additionally, the insertion of sub-section (3A) does not take away the benefits of deduction provided to the petitioner in toto, rather it only attempts to circumscribe the indefinite amount of set off to a certain amount.
Upload it and we will read it, work out your deadline and draft the reply. A CA reviews before anything is filed.
Handle my notice → Ask a CA on WhatsAppNo. The Delhi High Court upheld the constitutional validity of s.71(3A), inserted by s.31 of the Finance Act 2017, and rejected the alternative plea that it applies only to loans taken on or after 1 April 2017. The cap operates for assessment year 2018-19 and every later year on the loss of that year, whatever the vintage of the loan. This was decided by the High Court (Yashwant Varma J and Purushaindra Kumar Kaurav J) and bears on section 71(3A), section 71, section 71B, section 24(b) of the Income Tax Act 1961. It is reported as W.P.(C) 10214/2017; Neutral citation 2024:DHC:4573-DB (Delhi High Court). This is the only High Court decision located that squarely tests the Rs 2,00,000 cap, and it closes off the two arguments practitioners reach for first — retrospectivity and Article 14. Two things about it are worth more than the result. First, the annual rent for the petitioner's property for FY 2016-17 was computed at Rs 1,20,000, so the cap was applied to a property that cannot have been self-occupied — a self-occupied house has a nil annual value — though the judgment does not say whether it was actually let out or deemed to be; the widespread belief that s.71(3A) bites only on a self-occupied house does not survive this record, and nothing in the text of s.71(3A) confines it to self-occupied property either. Second, the Court's own reasoning is that the amendment does not take the deduction away but only limits the amount that may be set off in the year — which is the ground on which the practitioner should be pointing the client to s.71B, not arguing about validity. The judgment does not itself discuss s.71B, so the carry-forward is the reader's own point to take. If it applies to you, the first step is this: Stop arguing that the cap does not reach pre-2017 loans. This judgment answers that squarely against the assessee and is the only High Court authority found on the provision.
The petitioner, a government employee, constructed a house in April 2014 at a cost of about Rs 1.35 crore, financed by a loan of Rs 85 lakh from IDBI Bank and Rs 50 lakh from his father. The annual rent for the property for financial year 2016-17 was computed at Rs 1,20,000. Until then the whole of the loss under the head income from house property, driven by the interest deduction, could be set off against his other income under s.71. Section 31 of the Finance Act 2017 inserted sub-section (3A) into s.71 with effect from 1 April 2018, restricting the set-off of such a loss against income under any other head to Rs 2,00,000 for the assessment year, so from assessment year 2018-19 onwards. By writ petition he sought a writ of certiorari quashing s.31 of the Finance Act 2017 as violative of Articles 14 and 19(1)(g), and in the alternative a writ of mandamus declaring that sub-section (3A) operates only prospectively, that is, only in relation to housing loans taken on or after 1 April 2017 and not to his pre-existing loan. He also invoked promissory estoppel and the impairment of a pre-existing right. The matter was decided on 2024-05-30 by the High Court (Yashwant Varma J and Purushaindra Kumar Kaurav J). On those facts the High Court held as follows. The writ petition was dismissed and both issues were answered in favour of the respondents and against the petitioner. Section 71(3A) is constitutionally valid; it does not offend Article 14, and the plea that it cannot operate in relation to housing loans taken before the amendment was rejected. The provision takes effect from 1 April 2018 and therefore governs assessment year 2018-19 and subsequent assessment years (paragraphs 4, 25 and 34).
The Court began from the position that before the Finance Act 2017 there was no ceiling on the amount of a loss under the head income from house property that could be set off against other heads, and that the Act of 2017 restricted that set-off to Rs 2,00,000 for an assessment year with effect from 1 April 2018, that is, for assessment year 2018-19 onwards (paragraph 4). It reproduced sub-section (3A), under which the assessee is not entitled to set off such loss to the extent it exceeds two lakh rupees against income under the other head (paragraph 18), and observed that instead of an indefinite amount an assessee can now set off a maximum of Rs 2 lakh (paragraph 19). On retrospectivity the Court proceeded on the footing that a statute is retrospective in the offending sense only where it impairs a vested right, and held that neither the unamended nor the amended provision created or disturbed any indefeasible right in the petitioner's favour (paragraph 24). Building on the absence of a crystallised right, it rejected the Article 14 challenge: the insertion of sub-section (3A) does not remove the benefit of the deduction altogether but circumscribes the previously indefinite set-off; the change reflects a larger legislative policy, has an equalising effect across taxpayers claiming under that head, creates no separate class, and the class in which the petitioner claims is a pre-existing one of which he forms part; the Legislature had merely altered the criterion as a reasoned policy decision, and the petitioner had not attacked the stated object as ill-founded (paragraph 25). In the words reproduced by the source cited on this page: "Additionally, the insertion of sub-section (3A) does not take away the benefits of deduction provided to the petitioner in toto, rather it only attempts to circumscribe the indefinite amount of set off to a certain amount."
It was decided by the High Court on 2024-05-30 and is reported as W.P.(C) 10214/2017; Neutral citation 2024:DHC:4573-DB (Delhi High Court). Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 71(3A), section 71, section 71B, section 24(b), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the department, and it appears in this library for that reason — you need to know what the Assessing Officer will cite against you. The writ petition was dismissed and both issues were answered in favour of the respondents and against the petitioner. Section 71(3A) is constitutionally valid; it does not offend Article 14, and the plea that it cannot operate in relation to housing loans taken before the amendment was rejected. The provision takes effect from 1 April 2018 and therefore governs assessment year 2018-19 and subsequent assessment years (paragraphs 4, 25 and 34). It arises in House Property and How Tax Law Is Read matters, on section 71(3A), section 71, section 71B, section 24(b) of the Income Tax Act 1961, and was decided by Yashwant Varma J and Purushaindra Kumar Kaurav J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Compute the house property loss for the year in the ordinary way under s.24, including the whole s.24(b) interest, and only then apply the Rs 2,00,000 ceiling at the inter-head set-off stage under s.71(3A). The cap restricts set-off, not the deduction. Carry the balance forward under s.71B and claim it in the following eight assessment years against income under the head income from house property only. Check that the return actually reports the carried-forward figure in the loss schedule, because the set-off year officer will work off what the loss year assessment records. Do not assume the cap is disapplied because the property is let out. On this record it was applied to a property yielding rent, and the section is not worded to distinguish. Where the client has more than one property, model the effect before the return is filed: the interest deduction on a let-out property is uncapped under s.24(b), but the loss it produces still runs into the same Rs 2,00,000 inter-head ceiling.
Searched for later treatment; none was found. That is not the same as a source affirming it. A citator search on citedby:174585127 returns nothing. A second search for "Sanjeev Goyal" with "71(3A)" returns only this judgment. Nothing applies, doubts or distinguishes the Division Bench's upholding of the Rs.2 lakh cap on set-off of house-property loss, and no special leave petition surfaced. For a constitutional challenge to a charging-side restriction this silence is worth noting: the point has not been taken to the Supreme Court, so far as the database shows. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The judgment was read through indiankanoon's print view, which passes the text through a summarising layer; paragraphs 25 and 34 were obtained as full transcriptions and the sentence 'has an equalizing effect on all the taxpayers claiming any deduction under the abovementioned head' was independently confirmed by exact-phrase retrieval on indiankanoon, which returned this judgment as the only match. The Court's reasoning on retrospectivity at paragraph 24 could only be read in an abridged form, so it is described here rather than quoted. The judgment does not state in terms whether the petitioner's property was let out or deemed let out; what it records is that the annual rent for FY 2016-17 was computed to be Rs 1,20,000, which is the basis for the statement above that the property cannot have been self-occupied. The neutral citation is taken from a secondary listing and was not seen on the copy read. Nothing was found in the judgment on s.71B. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The writ petition was dismissed and both issues were answered in favour of the respondents and against the petitioner. Section 71(3A) is constitutionally valid; it does not offend Article 14, and the plea that it cannot operate in relation to housing loans taken before the amendment was rejected. The provision takes effect from 1 April 2018 and therefore governs assessment year 2018-19 and subsequent assessment years (paragraphs 4, 25 and 34).
TaxSphere, “Sanjeev Goyal v Union of India”, https://taxnotice.vittsphere.com/caselaw/case/sanjeev-goyal-v-uoi-71-3a-two-lakh-cap-upheld/ (validity last checked 2026-09-07)
The judgment itself is a government work and may be quoted freely. The summary, the validity note and the reasoning on this page are this library's own writing: quote them with attribution, and please do not present either as the words of the court — this page keeps the two apart and so should a quotation of it.
Every entry in this library links to where it was found, so you can check it yourself rather than take our word for it.
My client set off the whole house property loss against salary for AY 2018-19, not knowing about the new Rs 2,00,000 cap. The officer restricted it and has levied a s.270A penalty for under-reporting. Can the penalty be resisted?
The CPC has restricted my s.24(b) interest to Rs 2,00,000 by treating my only property as self-occupied. It is a commercial unit that I cannot live in. Can the cap apply?
A non-resident had no contract in India for several years but kept trying for one. Had its business ceased, so that expenditure and unabsorbed depreciation fall away?
I surrendered unexplained cash payments as income at a survey and I also have a business loss for the same year. Can the officer refuse to set the loss off against the surrendered income?
