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Income Tax Section 80EE Benefit on Home Loan Interest

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Clarification of Section 24 and 80EE-

       Where the property has been acquired, constructed, repaired, renewed or reconstruction with borrowed capital, the amount of any interest payable on such capital is deductible under section 24(b), subject to the prescribed conditions.

     As per Sub Section 4 section 80EE, assessee can avail deduction in respect of interest payable on loan only when assessee does not claim any deduction in respect of such interest in any other provisions of the Act.

     However Finance Bill , 2013 contain an announcement of additional deduction of interest on housing loan for first time buyer state that-

     I propose to allow such home buyers an additional deduction of interest of Rs.100000/- to be claimed in A.Y.2014-15. If the limit is not exhausted, the balance may be claimed in A.Y.2015-16. This deduction will be over and above the deduction of Rs.150000/-allowed for self occupied properties under section 24 of the income tax Act.

So as per above explanation there is clash between Sub section 4 of section 80EE and as per announcement under para 132.So according to me assessee may also claim additional deduction U/s 80EE apart from deduction U/s 24.

Key Notes

1)          Deduction available to individual only not to other persons.

2)          Deemed owner concept does not apply in respect of such deduction.

3)          Spouse would not disqualify for relief U/s 80EE in case of residential house purchased in joint names.

4)          Assessee can purchase house for both purpose .i.e. it can be for self occupied or can be Non self occupied.

5)          Interest includes “any service fee or other charges in respect of money borrowed or processing fees”.

6)          Date of make application to loan irrelevant but date of sanction of loan is relevant.

First time individual homebuyers can get tax deduction on interest of home loan, under newly inserted section 80EE of the Income Tax Act, applicable for assessment year 2014-15. This is in addition to tax rebate on interest payment of home loan, under section 24.

Eligibility for 80EE rebate

This rebate on home loan interest is applicable only for home loans satisfying the following conditions:

i. Loan is sanctioned by a financial institution or housing finance company between 1st April 2013 and 31st March 2014.

ii. Loan amount is Rs 25 lakhs or less and cost of residential house is Rs 40 lakhs or less

This should be the only house owned by the taxpayer at the time of sanction.

Maximum deduction limit under 80EE

Up to Rs 1 lakh can be claimed towards interest payable on home loan in the financial year 2013-14. If interest payable in this year is less than Rs 1 lakh then the balance can be claimed in the following year.

For instance if interest payable in FY 2013-14 is Rs 75,000 then tax rebate on remaining Rs 25,000 can be claimed in FY 2014-15.

The amount claimed under 80EE cannot be claimed for tax rebate under any other sections in any year.

How to get 80EE tax benefit

You can either produce certificate from your lender to the HR and get deduction on salary TDS or you can deduct the amount from total income while filing income tax return.

Fintotal comment

With a narrow margin of home loan amount and cost of home, applicability limited to first time homebuyers, it is understood that this tax deduction is to incentivise affordable housing among the middle class. However, it is a one-time benefit since the deduction applies to just one assessment year or can extend to two, at the most. If, after claiming interest rebate under section 24, you are still left with interest outgo, this can be claimed under section 80EE in AY 2014-15.

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