The section (80EE) 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.
Here we want to clear about one thing that don’t confuse over repayment of home loan and interest on home loan.
The deduction on repayment of loan comes under section 80C. (You can read more about deduction u/s 80C here)
The deduction on interest on loan comes under section 80EE. (This article is about deduction under section 80EE)
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, the assessee does not own any residential house property on the date of sanction of the loan.
- The set limit of the value of the house is INR 50, 00, 000 (50 lakhs)
- The sanctioned amount of loan should be equal to or less than INR 35, 00, 000 (35 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
- The loan is sanctioned during the period of 1.4.2016 to 31.3.2017.
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
Provisions for A.Y.2017-18
Now provisions has changed in the A.Y. 2017-18. Now amount of deduction is available to a maximum of Rs.50,000 until the load is repaid starting from F.Y.2016-17.
Provisions for A.Y.2015-16 & A.Y.2014-15
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
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.