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Section 80EE Deduction on Interest on Home Loan

Section 80EE Deduction on Interest on Home Loan

In order to give a positive thrust to the already booming housing sector the Finance Minister had announced a new section 80EE in the Finance Act, 2013. This section provided deduction on the Home Loan Interest paid by you and is valid for financial years 2013-14 & 2014-15 (Assessment year 2014-15 and 2015-16) only.

Please note the deduction is only towards the INTEREST on your home loan.

Who can avail this Deduction?

The deduction under this section is available only to Individuals – if you are an HUF, AOP, Company or any other kind of tax payer you cannot claim the benefit under this section. The total deduction allowed under this section is Rs 1,00,000.

The Section does not specify if the house should be self occupied to claim this deduction. However, certain other conditions are laid down to claim this deduction.

Section 80EE Deduction on Interest on Home Loan

Other Conditions to claim this Deduction

Besides, being an Individual Tax Payer, there are a set of conditions that you must satisfy before you go on to claim the benefit under this section –

  •  This is your 1st house purchased
  • Value of this house is Rs 40lakhs or less
  • Loan taken for this house is Rs 25lakhs or less
  • Loan has been sanctioned by a Financial Institution or a Housing Finance Company
  • Loan has been sanctioned between 01.04.2013 to 31.03.2014
  • As on the date loan is sanctioned no other house is owned by the tax payer

Illustrations

Rs 1,00,000 is the maximum allowed deduction. This Rs 1,00,000 can be spread over the 2 financial years 2013-14 and 2014-15. Here are a set of examples –

Interest

in FY 2013-14

Interest

in FY 2014-15

Deduction in FY 2013-14

Deduction in FY 2014-15

Total Deduction Allowed u/s 80EE

Rs 1,00,000

0

Rs 1,00,000

0

Rs 1,00,000

Rs 90,000

Rs90,000

Rs 90,000

Rs 10,000

Rs 1,00,000

Rs 15,000

Rs 90,000

Rs 15,000

Rs 85,000

Rs 1,00,000

Rs 40,000

Rs 40,000

Rs 40,000

Rs 40,000

Rs 80,000

(Assuming no deduction claimed under section 24)

80EE-updated

Section 80EE Deduction on Interest on Home Loan

Section 80EE and Section 24

The Finance Minister in his speech said the following words “This deduction will be over and above the deduction of Rs 150,000 allowed for self-occupied properties under section 24 of the Income-tax Act”.

However when the Act was formulated the section 80EE(4) states “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 provisions of the Act for the same or any other assessment year”.

We already know what Section 80EE states, now let us look briefly at Section 24(b) and what does it say-

Tax payer shall be allowed deduction up to Rs 1,50,000 for interest on borrowed capital when these 3 conditions are fulfilled-

  • Capital is borrowed for acquiring or constructing a property after 01.04.1999
  • Acquisition or Construction is completed within 3 years from the end of the financial year in which capital is borrowed
  • The person extending the loan certifies that interest is payable towards loan for acquisition or construction

The pre- construction interest can also be allowed as deduction in five equal installments beginning the year in which the property is acquired or constructed (however this is subject to the overall limit of Rs 1,50,000).

The Finance Minister intended to give this benefit in Section 80EE to the lower income group who are purchasing their first house, if you are able to satisfy conditions of both Section 24 and Section 80EE, both the benefits shall apply to you. First exhaust your limit under section 24 and then go on to claim the additional benefit under section 80EE.

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Section 80EE Deduction on Interest on Home Loan

Section 80EE Deduction on Interest on Home Loan

Section 80EE Deduction on Interest on Home Loan

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