Deduction for interest on home loan (Sec 80EE)
In the financial year 2013-14, Section 80EE was introduced for allowing a deduction for interest on the home loan for a period of two years. Later on, the section 80EE was again introduced with certain changes for the financial year 2016-17. With the view to promote/achieve the goal “HOUSING for ALL” Government has announced additional deduction for interest on loan taken for affordable housing. This deduction is specifically being introduced for the middle-class home-buyers to buy affordable houses upto Rs. 50 lakhs.
Section 80EE is effective for the loans sanctioned in the financial year 2016-17. The deduction can be claimed for the loan taken in the financial year 2016-17 (i.e the Assessment year 2017-18 )and subsequent years.
Details of Section 80EE
|Section 80EEA||Deduction in respect of interest on loan taken for residential house property.|
|Eligible Assessee||Only Individuals|
|Maximum deduction||Rs. 50,000/-|
|Conditions to avail deduction||
Note: If assessee claims the deduction of interest u/s 80EE then will not be allowed to take the deduction of such interest under any other provision of this Act for the same or any other assessment year. This means interest paid cannot be claimed as an expenditure from PGBP or any other head.
Note: This deduction will be allowed in addition to the deduction allowed for interest paid on loans to the extent of Rs. 2 lakhs for self-occupied property under section 24 of House Property.
Note: To claim the benefit of deduction u/s 80EE it is not necessary that the property is a self-occupied property only. Assessee may be living in a rented property.
Some clarifications for claiming the deduction
Can the loan be taken from any financial institution?
The loan for the above purpose can be taken from the financial Institution referred in section 80EE(5)(a).
Financial institution means any banking company to which the Banking Regulation Act, 1949 applies or any bank or any banking institution referred in section 51 or housing finance company.
Explain stamp duty value to be considered for availing the deduction?
Stamp duty value will be the value adopted or assessed or assessable by any authority of the CG or SG for the purpose of payment of stamp duty in respect of the immovable property.
Can the deduction be claimed for commercial property?
No. The deduction u/s 80EE in respect of interest on the loan can be claimed only for residential house property only and not for a commercial property.
Can principal repayment of the loan be claimed u/s 80EE?
NO. The principal repayment can be claimed deduction under Sec. 80C (2) (xviii) subject to the limit and conditions mentioned therein. (Click here to read more about this)
Can interest paid on the loan for affordable housing be claimed under any other section?
YES. Interest paid on loans for affordable houses can be claimed under two sections if the property is not on rent.
Section 24, Interest paid on the loan will be allowed as a deduction to the extent of Rs. 2 lakhs for self-occupied property.
Section 80EE, Interest paid on the loan will be allowed as an additional deduction to the extent of Rs. 50 thousand for the loan taken to purchase an affordable house valued up to Rs. 50 lakhs.
Under these two sections, Interest totaling to Rs. 2.5 lakhs will be allowed as a deduction while computing the total income of the assessee.
Can the deduction be claimed for 2nd residential house property?
NO. The deduction u/s 80EE can be claimed by an assessee who does not own any other residential house property (or should be a first time home buyer). The deduction is specially provided to promote “housing for all”. If an assessee is already an owner or co-owner of a house property then will not be allowed deduction under section 80EEA.
This section was inserted then with an aim to help and fulfill the “GHAR KA SAPNA” for every individual of the nation. Government is doing its bit to encourage by providing deduction from the total income and thereby reducing the tax liability.
The article is compiled by CA Ankita Khetan. If you have any queries concerning the above article. Please write to us either in the comments section below or email us on firstname.lastname@example.org.