Tax Deduction on Home Loan Interest [Sec.80EE] (A.Y.2015-16)

The ‘Make in India’ Budget 2015 came with numerous benefits for the citizens. The Finance Minister of India added a new section to the Income Tax Act known by SEC 80EE. The section deals with offering additional deduction to the taxpayers by allowing them to make adjustments for interest of home loan or any other form of loan taken with an intent for owning residential house property. This section offers an opportunity for the Indian citizens to focus on house ownership and to boost industries such as cement, wood, steel, brick. Etc.

Cases where SEC 80EE is applicable?

The SEC 80EE is applicable in certain cases only. For an assessee, the benefit of SEC 80EE will be only available to him when the following criteria are met:

  • The assessee should be buying his first house. In other words, there should be any other previous purchase of a house by the assessee.
  • The set limit of the value of the house is INR 40, 00, 000 (40 lakhs)
  • The sanctioned amount of loan should be equal to or less than INR 25, 00, 000 (25 lakhs)
  • The day on which the loan has been sanctioned, the assessee should not own any other house.
  • Loan has to come from either a Housing Finance Company or a Financial Institute

Note: If an assessee has availed the benefit of deduction under SEC 80EE, he will not be able to take any further benefits in respect of ‘Interest on Loan’ under any other provision of the Income Tax Act for the same assessment year or any other.

Computation of Deduction 

Under the SEC 80EE, an assessee can claim deduction in respect of ‘Interest on Loan’ only upto Rs. 1, 00, 000 valid for 2 Financial Year. This means that a total of 1, 00, 000 can availed within a span of two immediate assessment years.

Now let us take an example to make things clear. Suppose an assessee has taken a loan for residential house property and the applicable amount of interest payable on loan is INR 80, 000 for the Assessment Year 2014- 2015. Under this situation, the assessee can show INR 80, 000 as a deduction under SEC 80EE for the current assessment year along with showing the balance INR 20, 000 as a deduction under SEC 80EE for the assessment year 2015- 2016. This means that an assessee can use only show a maximum of INR 1, 00, 000 as a deduction under SEC 80EE for two assessment years.

In simple words, If the amount of interest payable for A.Y.2014-15 is less than Rs. 1,00,000, the balance amount of deduction can be claimed in A.Y.2015-16.

The boon of SEC 80EE is NOT AVAILABLE to:

  • HUF or other people
  • In cases where deemed owner comes into the picture
  • Spouse

SEC 80EE includes the consideration for service fee or any other charge connected to loan. The assessee will not get an additional deduction advantage for charges related to loan approval or any other funding. The date of application for loan is not important under this section. However, the date of sanction is vital.

How to claim deduction under Section 80EE

A tax payer can enjoy the deduction under Section 80EE for two consecutive years. A total limit INR 1, 00, 000 (one lakh) is available for every tax payer. However, if the tax payer is unable to claim the complete amount as deduction in a particular AY, the balance shall be carried forward to the next year and used as a deduction.

Let us clear our doubts with the help of an example. Suppose Mr. Satish has taken a loan for the purchase of his first house property in 2014-15 and the interest payable on the loan for the same AY is INR 70, 000. So, what deduction can he have under Section 80EE?

Here, Mr. Satish can claim a deduction of INR 70, 000 under Sec 80EE for AY 2014-15. Since, the maximum limit is INR 1, 00, 000 we have an additional deduction of INR 30, 000 left with us. This amount can be used in the next AY (AY 2015-16).

It should be noted that the second deduction of INR 30, 000 will only be applicable if Mr. Satish has paid an interest on Loan for House Property amounting to INR 30, 000 or more in AY 2015-16.

Updated: 20/09/2015 — 12:23 pm

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  1. I am a first time buyer. My house loan got sanctioned in Jan 2016, for 20Lacs.
    I have let out that house for rent. And I am staying in a different rented house.
    Kindly let me know, under what all sections I can claim the house loan?

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