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Section 80EE Income Tax Benefit on Home Loan Interest

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Income Tax Benefit on Home LoanInterest under Section 80EE OfIncome Tax Act .For the A.Y.
20!"#.
Introduction" Finance Minister inserted a new section relating to the additional deduction in respect
of interest on loantaken for residential house propert! Assessee can a"ail the #enefits of this section in
two A!$! %&'()'* + %&'*)'6!Purpose of this section is to promote house ownership + gi"e a fillip to
anum#er of industries like steel, cement, #rick, wood etc! #esides -o#s to thousands of construction
workers!
A$$%ica&i%it'" .enefit of this section can a"ail # Indi"idual assessee! /eduction under this section is not
a"aila#le for an other assessee 0like 12F, firm etc!3! Indi"idual can claim #enefit under this section onl
when all the following conditions are satisfied, these are)
o Purchaser should #e first time #uer! i!e! he has ne"er purchased an house and now he is going
to purchase a house!
o 4alue of the house should not more than (& lakh!
o 5oan taken # Indi"idual for the purpose of #u a house should not #e more than %* lakh!
o 6n the date of sanction of loan indi"idual does not ha"e an own residential house propert!
o 5oan for this purpose taken # indi"idual should #e from the Financial Institution or 1ousing
Finance Compan!
o For this purpose, loan should #e sanctioned #etween &'!&(!'7 to 7'!&7!'(!
()s 80EE *!+ " Pro"ides that where a deduction under this section is allowed for an interest paa#le on
loan onl when deduction shall not #e allowed in respect of such interest under an other pro"isions of
the Act for the same or an other assessment ear!
,uantum of -eduction" Assessee can take deduction u8s 9&:: on interest paa#le on home loanupto '
5akh in A!$!%&'()'*! It can claim deduction in two assessments ear! Means if whole amount of interest
paa#le upto ' lakh is not claim as deduction in A!$!%&'()'* then remaining #alance amount upto ' lakh
can claim in A!$!%&'*)'6!Total deduction under this section shall not #e more than ' lakh!
:xample) Assessee has taken a loan for the purpose of residential house propert + interest paa#le on
loan ;s! <&&&&8) for the A!$!%&'()'*!In this case assessee can claim deduction <&&&&8) in A!$!%&'()'*
and other remaining #alance i!e! ;s! '&,&&&8) ,can claim in A!$!%&'*)'6
.%arification of Section 2! and 80EE"
=here the propert has #een ac>uired, constructed, repaired, renewed or reconstruction with
#orrowed capital, the amount of an interest paa#le on such capital is deducti#le under section %(0#3,
su#-ect to the prescri#ed conditions!
As per ?u# ?ection ( section 9&::, assessee can a"ail deduction in respect of interest paa#le on
loan onl when assessee does not claim an deduction in respect of such interest in an other pro"isions
of the Act!
1owe"er Finance .ill , %&'7 contain an announcement of additional deduction of interest on housing
loan for first time #uer state that)
I propose to allow such home #uers an additional deduction of interest of ;s!'&&&&&8) to #e claimed
in A!$!%&'()'*! If the limit is not exhausted, the #alance ma #e claimed in A!$!%&'*)'6! This deduction
will #e o"er and a#o"e the deduction of ;s!'*&&&&8)allowed for self occupied properties under section %(
of the income tax Act!
?o as per a#o"e explanation there is clash #etween ?u# section ( of section 9&:: and as per
announcement under para '7%!?o according to me assessee ma also claim additional deduction 28s
9&:: apart from deduction 28s %(!
/e' 0otes
'3 /eduction a"aila#le to indi"idual onl not to other persons!
%3 /eemed owner concept does not appl in respect of such deduction!
73 ?pouse would not dis>ualif for relief 28s 9&:: in case of residential house purchased in -oint
names!
(3 Assessee can purchase house for #oth purpose !i!e! it can #e for self occupied or can #e @on self
occupied!
*3 Interest includes Aan ser"ice fee or other charges in respect of mone #orrowed or processing
feesB!
63 /ate of make application to loan irrele"ant #ut date of sanction of loan is rele"ant!
Section 80EE 1 -eduction for interest on %oan for residentia% house $ro$ert'
Posted In Income Tax | Articles | '' Comments
-eduction in res$ect of interest on%oan ta2en for residentia% house $ro$ert'*Section 80EE+1
4ide Finance Act %&'7, an indi"idual is allowed a deduction upto a limit of 3s 4004000 #eing paid as
interest on a loantaken from a Financia% Institution, sanctioned during the period &')&()%&'7 to 7')&7)
%&'( 0loan not to exceed ;s %* lakhs3 for ac>uisition of a residential house whose "alue does not exceed
;s (& lakhs! 1owe"er the deduction is a"aila#le if the assessee does not own an residential house
propert on the date of sanction of the loan!
Please @ote C)
'! The /eduction is a"aila#le for two ears i!e! for A!$! %&'()'* + A!$! %&'*)'6!
%! Total /eduction which can #e claimed in .oth ears in aggregate is ;s! ',&&,&&&8)!
7! /eduction 28s! 9&:: is in addition to deduction 2nder ?ection %(! ?o if an assessee is paing interest
on ?elf 6ccupied Propert Purchased during A!$! %&'()'* of ;s! %!(& 5akh , he can claim interest up to
'!*& 5akh under section %( and #alance &!<& lakh 28s! 9&::! Assessee can claim the #alance deduction
of &!'& 5akh in Assessment $ear %&'*)'6!
DDDDDDDD
Extract of Section 80EE as $er finance Act4205 1"
-eduction in res$ect of interest on %oan ta2en for residentia% house $ro$ert'.
80EE. (1) In computing the total income of an assessee, being an individual, there shall be deducted, in
accordance with and subject to the provisions of this section, interest payable on loantaken by him from
any financial institution for the purpose of acquisition of a residential house property.
() !he deduction under sub"section (1) shall not e#ceed one lakh rupees and shall be allowed in
computing the total income of the individual for the assessment year beginning on the 1st day of $pril,
%1& and in a case where the interest payable for the previous year relevant to the said assessment year
is less than one lakh rupees, the balance amount shall be allowed in the assessment year beginning on
the 1st day of $pril, %1'.
(() !he deduction under sub"section (1) shall be subject to the following conditions, namely)*
(i) the loan has been sanctioned by the financial institution during the period beginning on the 1st day of
$pril, %1( and ending on the (1st day of +arch, %1&,
(ii) the amount of loan sanctioned for acquisition of the residential house property does not e#ceed
twenty"five lakh rupees,
(iii) the value of the residential house property does not e#ceed forty lakh rupees,
(i") the assessee does not own any residential house property on the date of sanction of the loan.
(&) -here 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 $ct
for the same or any other assessment year.
(') .or the purposes of this section,*
(a) /financial institution0 means a banking company to which the 1anking 2egulation $ct, 13&3 (1% of
13&3) applies including any bank or banking institution referred to in section '1 of that $ct or a
housing finance company,
(#) /housing finance company0 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.
," 6 7hat are the tax &enefits that I can a8ai% of for re$a'in9 a home %oan :
$ou will #e eligi#le to claim #oth the interest and principal components of our repament during the ear!
o Interest can #e claimed as a deduction under ?ection %(! $ou can claim up to ;s! '*&,&&& or the
actual interest repaid whiche"er is lower! 0$ou can claim this interest onl when ou are in possession
of the house3
o Principal can #e claimed up to the maximum of ;s! '&&,&&& under ?ection 9&C! This is su#-ect to
the maximum le"el of ;s '&&,&&& across all 9&C in"estments!
o $ou will need to show the statement pro"ided # the lender showing the repament for the ear
as well as the interest + principal components of the same!
," # . .an I ta2e ad8anta9e of tax &enefits from a home %oan as ;e%% as c%aim House 3ent
A%%o;ance *H3A+ :
If ou took a home loan and are still li"ing in a rented place, ou will #e entitled toC
'! Tax #enefit on principal repament under ?ection 9&C
%! Tax #enefit on interest pament under ?ection %(
7! 1;A #enefit
6f course, ou can claim tax #enefits on the home loan onl if our home is read to li"e in during that
financial ear! 6nce the construction on our home is complete, the 1;A #enefit stops! If ou took a
home loan, got possession of the house, ha"e rented it out and sta in a rented accommodation, ou will
#e entitled to all the three #enefits mentioned a#o"e! 1owe"er, in this case, the rent ou recei"e would #e
considered as our taxa#le income!
," <.I %i8e in -e%hi in m' o;n house. In 20084 I too2 a housin9 %oan to fund the $urchase of an
under"construction f%at in another cit' *Farida&ad ;hich comes under 0ationa% .a$ita% 3e9ion of
-e%hi &ut other;ise fa%%s in Har'ana+. It is ex$ected to &e com$%eted in FY!. I ha8en=t c%aimed
an' tax &enefit so far. 7hat ha$$ens to the %oan insta%%ments I ha8e $aid so far: .an the' a%so &e
c%aimed for tax &enefit:
According to the Income)tax Act, '<6', where the propert has #een ac>uired or constructed with
#orrowed capital, the interest paa#le on such capital for the period prior to the ear in which the propert
has #een ac>uired shall #e allowed as deduction in fi"e e>ual instalments #eginning from the ear in
which the propert is ac>uired! Thus, the interest included in the loan instalment paid # ou during the
construction period shall #e eligi#le for deduction from the ear in which the flat is ac>uired8construction is
completed!
The principal amount of the loan repaid till date shall not #e a"aila#le as a deduction under section9&C till
the time the construction of the flat gets completed! 6nce the flat is completed and the possession is
handed o"er to ou, ou will #e eligi#le to claim deduction for interest paid on the loan under section %(0#3
and principal amount of loan under section 9&C! The total amount of deduction a"aila#le
under section 9&C shall #e limited to ;s! ' lakh! Thus, as of now, ou are not eligi#le for an tax
#enefit on such loan repaments!
,. 0 Is there an' additiona% deduction ;hich I can c%aim in res$ect of Interest on Housin9 %oan in
addition to interest (nder Section 2!*&+:
Ans. Finance Minister inserted a new section relating to the additional deduction in respect of interest on
loan taken for residential house propert! Assessee can a"ail the #enefits of this sectionin two A!$! %&'()
'* + %&'*)'6!Purpose of this section is to promote house ownership + gi"e a fillip to a num#er of
industries like steel, cement, #rick, wood etc! #esides -o#s to thousands of construction workers! to get
more information on the please read the Full Article ) ?ection 9&:: Income Tax .enefit on 1ome 5oan
Interest
[(5) in the case of an individual, the value of any travel concession or assistance received by, or
due to, him,
(a) from his employer for himself and his family, in connection with his proceeding on
leave to any place in India ;
(b) from his employer or former employer for himself and his family, in connection
with his proceeding to any place in India after retirement from service or after the
termination of his service,
subject to such conditions as may be prescribed
1
(including conditions as to number of
journeys and the amount which shall be e!empt per head) having regard to the travel
concession or assistance granted to the employees of the "entral #overnment $
Provided that the amount e!empt under this clause shall in no case e!ceed the amount
of e!penses actually incurred for the purpose of such travel%
Explanation.&or the purposes of this clause, 'family', in relation to an individual,
means
(i) the spouse and children of the individual ; and
(ii) the parents, brothers and sisters of the individual or any of them, wholly or mainly
dependent on the individual; (
LTA
Extract of Section 0*6+
Section 10(5) in the case of an individual, the value of any travel concession or assistance received by,
or due to, him,*
(a) from his employer for himself and his family, in connection with his proceeding on leave to any place
in India ,
(b) from his employer or former employer for himself and his family, in connection with his proceeding to
any place in India after retirement from service or after the termination of his service,
subject to such conditions as may be prescribed (including conditions as to number of journeys and the
amount which shall be e#empt per head) having regard to the travel concession or assistance granted to
the employees of the 4entral 5overnment )
Provided that the amount e#empt under this clause shall in no case e#ceed the amount of e#penses
actually incurred for the purpose of such travel.
6#planation.*.or the purposes of this clause, /family0, in relation to an individual, means*
(i) the spouse and children of the individual , and
(ii) the parents, brothers and sisters of the individual or any of them, wholly or mainly dependent on the
individual, 70
.onditions for the $ur$ose of section 0*6+ as >rescri&ed in 3u%e 2B of Income Tax 3u%es" Extract
of 3u%e 2B
2B. (1) !he amount e#empted under clause (') of section 1% in respect of the value of travel concession
or assistance received by or due to the individual from his employer or former employer for himself and
his family, in connection with his proceeding,*
(a) on leave to any place in India,
(b) to any place in India after retirement from service or after the termination of his service,
shall be the amount actually incurred on the performance of such travel subject to the following
conditions, namely )*
8(i) where the journey is performed on or after the 1st day of 9ctober, 133:, by air, an amount not
e#ceeding the air economy fare of the national carrier by the shortest route to the place of destination,
(ii) where places of origin of journey and destination are connected by rail and the journey is performed
on or after the 1st day of 9ctober, 133:, by any mode of transport other than by air, an amount not
e#ceeding the air"conditioned first class rail fare by the shortest route to the place of destination, and
(iii) where the places of origin of journey and destination or part thereof are not connected by rail and the
journey is performed on or after the 1st day of 9ctober, 133:, between such places, the amount eligible
for e#emption shall be )*
($) where a recognised public transport system e#ists, an amount not e#ceeding the 1st class or delu#e
class fare, as the case may be, on such transport by the shortest route to the place of destination, and
(1) where no recognised public transport system e#ists, an amount equivalent to the air"conditioned first
class rail fare, for the distance of the journey by the shortest route, as if the journey had been performed
by rail.7
() !he e#emption referred to in sub"rule (1) shall be available to an individual in respect of two journeys
performed in a block of four calendar years commencing from the calendar year 13;< )
8Provided that nothing contained in this sub"rule shall apply to the benefit already availed of by the
assessee in respect of any number of journeys performed before the 1st day of $pril, 13;3 e#cept to the
e#tent that the journey or journeys so performed shall be taken into account for computing the limit of two
journeys specified in this sub"rule.7
(() -here such travel concession or assistance is not availed of by the individual during any such block
of four calendar years, an amount in respect of the value of the travel concession or assistance, if any,
first availed of by the individual during first calendar year of the immediately succeeding block of four
calendar years shall be eligible for e#emption.
6#planation ) !he amount in respect of the value of the travel concession or assistance referred to in this
sub"rule shall not be taken into account in deter"mining the eligibility of the amount in respect of the value
of the travel con"cession or assistance in relation to the number of journeys under sub"rule ().7
8(&) !he e#emption referred to in sub"rule (1) shall not be available to more than two surviving children of
an individual after 1st 9ctober, 133; )
Provided that this sub"rule shall not apply in respect of children born before 1st 9ctober, 133;, and also
in case of multiple births after one child.7
-eduction a8ai%a&%e under Section 80 . for >rinci$a% re$a'ment of home %oan1 As per section 9& C an Indi"idual and
an 12F can claim principal repament component of a loan along with other eligi#le items like 5ife Insurance Premium,
@?Cs, :PF, :5?? and stamp dut and registration charges etc! The o"erall deduction is restricted to ;s! ' lakh in a ear!
;emem#er the deduction is onl for residential house propert and not for commercial propert! .esides it is also a"aila#le
onl for purchase or construction of a house and not for reno"ation, additions or repairs on an existing house propert! $ou
can claim principal repament if ou ha"e taken loan from specified entit like #anks, 1FCs, Central + ?tate go"ernment,
5IC, @1., Pu#lic Compan or a Pu#lic ?ector 2ndertaking! :"en a 2ni"ersit esta#lished # law or a local authorit or
corporation esta#lished under ?tate or Central laws also are co"ered under the categor! Moreo"er in case ou sell the
house ac>uired with home loan, within fi"e ears from the end of the ear in which possession of the house was taken, all
the deduction allowed for Principal repament in earlier ears shall #e withdrawn! This shall #e treated as income of the ear
in which this propert is sold! Moreo"er no deduction under ?ection 9& C shall #e allowed for principal repament made
during the ear!
-eduction a8ai%a&%e under Section 2!*&+ for Interest $a'mentC In addition to deduction for Principal, ?ection %(0#3 of the
Income Tax Act allows ou deduction for interest paa#le on loan taken to #u or construct a house propert, or e"en for
repair or reconstruction of an existing propert! This #enefit is a"aila#le for residential and commercial propert as well! It
ma #e interesting to note that e"en processing fee paid in respect of home loan shall also #e treated as interest so ou can
claim deduction in respect of processing fee paid for taking such loan! :"en in cases where ou prepa our loan, ou will
#e entitled to claim the amount of an prepament fee paid to the #ank for such prepament! 1ere ou can claim the
#enefits in respect of loans taken from our friends and relati"es #esides #anks and financial institutions! The deduction is
a"aila#le for self)occupied as well as let)out properties too! For self )occupied propert, the deduction is restricted to ;s!
'!*& lakhs p!a! For let)out propert, ou can claim full interest! If ou ha"e more than one self) occupied houses, ou ha"e
to select one house as self)occupied and the other house8s shall #e treated as let)out! In this case ou ha"e to offer notional
rent for taxation and can claim the full interest paa#le! ?o in order to maximiEe our tax #enefits, it is alwas ad"isa#le to
treat the propert on which interest is lower as self)occupied in case interest paa#le on an or all of the propert is more
than ;s! '!*& lakhs! For under construction propert, ou can onl claim the interest deduction from the ear construction is
complete and possession taken! 1owe"er in respect of interest paid for the period prior to the ear for taking possession,
ou can claim aggregate of such interest in fi"e e>ual installments from the ear in which construction is completed! There is
no re"ersal of interest #enefit e"en if ou sell the house #efore fi"e ears as is applica#le for repament #enefits!
-eduction under Section 80EE for the current 'ear1 For this financial ear an additional deduction of ;s! 6ne 5akh for
interest is a"aila#le under ?ection 9&::! This deduction can onl #e claimed if the loan amount is not more than ;s! %*
lakhs and the "alue of house does not exceed ;s! (& lakhs! 1owe"er ou should not own an other house! 1ere the loan
should ha"e #een sanctioned during 'st April %&'7 to 7'st March %&'(! This deduction has onl limited #enefit in respect of
self occupied residential house propert purchased with loan sanction and dis#ursed during financial ear %&'7)%&'( as ou
are entitled to claim full interest #enefit in respect of let out propert! IsnFt our home loan entitles ou for some real tax
#enefits tooG
;ead more atC httpC88www!monecontrol!com8news8tax8what)tax)#enefits)will)i)gethome)loanH<<I7&I!htmlJ
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