Tax Deductions on payments related to Interest on House Property

A. Benefits under section 80EE

  1. Available only to individuals.

  2. Amount limit: The deduction is up to Rs 50,000. It is over and above the Rs 2 lakh limit under Section 24 of the Income Tax Act.

  3. To claim this deduction, following are the eligibility criteria:

  • Assessee should not own any other house property on the date of the sanction of a loan from a financial institution.

  • Value of the house should be Rs 50 lakh or less

  • Loan taken for the house must be Rs 35 lakh or less

  • The loan must be sanctioned by a financial institution or a housing finance company

  • The loan must be sanctioned between 01.04.2016 to 31.03.2017

  • As of the date of the sanction of the loan, no other house property should be owned by you.


B. Benefits under Section 80EEA - for first time home buyers

  1. Available only to individuals.

  2. Amount limit: The deduction is up to Rs 1,50,000. It is over and above the Rs 2 lakh limit under Section 24 of the Income Tax Act

  3. To claim this deduction, following are the eligibility criteria’s:

  • Assessee should not own any other house property on the date of the sanction of a loan from a financial institution.

  • Housing loan must be taken from a financial institution or a housing finance company for buying a residential house property.

  • The loan should be sanctioned during the period 1st April 2019 and 31st March 2022.

  • Stamp duty value of the house property should be Rs 45 lakhs or less.

  • The individual taxpayer should not be eligible to claim deduction under the existing Section 80EE.

  • The taxpayer should be a first-time home buyer. The taxpayer should not own any residential house property as on the date of sanction of the loan.

C. Benefits under Section 24


Deduction for Pre-construction Interest – House property income

  • Pre-construction interest is the interest that an assessee pays while the residential house is under construction. Such interest is available for deduction in 5 equal instalments.

  • Deduction on home loan interest cannot be claimed when the house is under construction. This pre-construction interest can be claimed only after the construction is finished.

  • Special condition for Stamp duty benefit: Stamp duty paid for purchase of house is eligible for deduction under section 80C. However, such property should not be sold in next five years. If the property is sold within next 5 years, the amount claimed under Section 80C will be added back to Assessee's income in the year of sale and will be taxed accordingly.

  • The acquisition or construction is completed within 5 years from the end of the financial year in which the loan was taken.

  • The first installment is available in the year in which the house is purchased or construction is completed.

  • It is important to note that in the interest paid is deductible up to Rs. 2,00,000/-. In case the interest paid is more than 2,00,000 such interest can be carried forward to next years for deduction.

D. Benefits under Section 80C


1. Principal loan Repayment

2. Stamp Duty



Various Deductions available for Interest paid on House Property – a comparative analysis of Section 80EE and 80EEA and 24 of the Income Tax Act, 1961.

Particulars

Section 80EE

Section 80EEA

Section 24

Stamp Duty value

Up to Rs 50 lakhs

Up to Rs 45 lakhs

Not Applicable

Loan amount

Up to Rs 35 lakhs

Not specified

Not applicable

Eligibility of Loan sanction date

Loan sanctioned between April 1, 2016 to March 31, 2017 are eligible

Loan sanctioned between April 1, 2019 to March 31, 2022 are eligible.

Loan sanctioned on or after 1st April, 1999 are eligible

Maximum deduction

Rs 50,000

Rs 1.50 lakhs

Rs 2 Lakhs Interest on Pre- Construction period is allowed in 5 instalment. Loan obtained 5 years before “construction completion” is eligible. Interest paid after construction period is allowed on actual payment basis

-Compiled by Amruta Sohani

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