Section 80EE: New section In budget to allow increased housing loan deduction

by Guest Blogger on March 13, 2013

in Tax

This article is written by Aashish Ramchand, a Chartered Accountant by profession. Aashish is the co-founder of makemyreturns.com. He also has completed his CFA Level I (American) and is very passionate about writing articles on taxes and tax advisory. He can be reached at connect@makemyreturns.com

A new section has been introduced in the income tax act i.e. Section 80 EE. This section has been introduced to cater to the need for affordable housing. This section allows for a deduction up to Rs. 100000/- for the AY 2014-15 (i.e. FY 2013-14) to individual assesses for interest payable on their housing loan. Few conditions are required to be satisfied for this section to be applicable.

1)  The loan is sanctioned between the FY 1/4/2013-31/3/2014.

2)  The loan sanctioned does not exceed Rs. 25 Lakh.

3)  The value of residential house does not exceed Rs. 40 Lakhs.

4)  The assessee does not own any other residential house as on the date of sanction of the loan. In other words, this house is supposed to be his self occupied property.

5)  The assessee is a first time home buyer

Where the interest payable is less than Rs. 100000/- for AY 2014 – 15, then the balance amount shall be allowed in AY 2015-16. If a deduction under this section is allowed for any interest, no deduction shall be allowed in respect of such interest under any other provisions of the Act. The benefit under this section is mainly for one time primarily for AY 2014-15 and to a certain extent for AY 2015-16 for balance interest as mentioned above.

Also it is important to note that this deduction is in addition to the deduction of Rs. 150000/- in respect of interest on loans for self occupied property U/s 24(b). This is the current scenario as per the tax laws i.e. there is a maximum deduction of Rs. 150000/- on interest on housing loan for one’s self occupied property.

In my opinion, this new section would benefit the low to medium income section of assesses. It will greatly benefit such people who are first time house buyers as not only do they get a deduction up to Rs. 150000 for interest paid on housing loan but also an additional deduction of Rs. 100000/- from their gross total income as a result of introduction of this section.

It can be said that since the maximum cap of housing loan amount is Rs. 25 lakhs, on an average the yearly interest obligation on such loans amounts to Rs. 2.5 – 2.75 lakh. Thus as a result of this section, an individual can now effectively claim this entire interest expense as a deduction (i.e. 150000/- as per Section 24 (b) + Rs. 100000/- as per Section 80EE) from his gross total income and reduce his tax obligation accordingly.

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{ 41 comments… read them below or add one }

Rajesh March 13, 2013 at 9:07 am

Hi,

Please tell about the implication of this section w.r.t Joint Loan Holders. Example: If myself and my brother bought the house in joint name; u/s24(b) deduction of interest amount 150,000/- will be applicable to each joint holder. Will Section 80EE is also applicable to both i.e. both can claim additional deduction of Rs.10,00,000 each or proportionate of joint holding ? (Assume all the above conditions to avail 80EE section are qualified by both the joint holders)..
Please provide the info.

Reply

CA Karan Batra March 14, 2013 at 10:06 am

Yes Rajesh

Your interpretation is correct.. Both the Joint Holders can claim deduction u/s 80EE in proportion of the Interest paid by them.

Max Limit of Rs. 1,00,000 is per taxpayer and all the joint holders can claim Rs. 1,00,000 as deduction each..

Reply

Rajesh March 15, 2013 at 10:07 am

Karan, Thank You so much for info…

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Balu March 29, 2013 at 8:42 pm

I have another question here…. For joint loan, can we each go for 25 lac loan? can total value of the house be 80 lac in this case?

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Manshu March 29, 2013 at 8:53 pm

No total value can’t be 80 lakhs. The value of the house is fixed and won’t increase based on the number of applicants.

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Abhishek Sinha March 13, 2013 at 12:23 pm

Hi! My loan is already santioned but not disbursed.Should I wait for the 1st of April for disbursal since the loan is already sanctioned its no use waiting for 1st april noq.The property we have bought is in more than 40 lakhs but in Joint name.Does that help.Suppose the loan amount is 30 lakhs does the home buyer get no benefit at all or is this just a ceiling.

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Manshu March 20, 2013 at 10:03 am

Based on my understanding, if the value of the house is more than Rs. 40 lakhs, then you aren’t eligible for this loan. A joint ownership doesn’t make a difference here.

This is just my interpretation, and could be wrong, but that’s how it sounds to me when I read it.

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Sriraksha March 21, 2013 at 9:49 am

This is another effective way of making real estate more affordable to the lower and lower middle class, esp. since the capital values of buying a house haven’t fallen in a long time. But only the people in small towns and cities may benefit, as it is very difficult to find even a 1 BHK house in a metro like Mumbai or Delhi for 25 Lakhs, the maximum allowable loan. Even though the value of the house can go upto Rs. 40 Lakhs, not many people in the target income bracket will have that kind of money, i.e 15 Lakhs of own funds to invest.

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Abhishek Sinha March 21, 2013 at 12:57 pm

Thanx for the clarification Manshu.I feel your interpretation is correct.

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Akshat April 12, 2013 at 5:03 pm

The properry doesnt exceed 40 Lakh. Is it agreement cost or total Grand cost including all the MSEB, Society formtion fees, Maintenance.

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Manshu April 14, 2013 at 7:31 pm

That’s a good point Akshat, and I’m sorry that I don’t know the answer to that, as far as I know they haven’t defined it at that level yet.

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Akshat April 15, 2013 at 10:48 am

Thanks Manshu !!!

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Nagarajan. K April 17, 2013 at 6:31 pm

Hi,

I have one doubt on the first point. (1) The loan is sanctioned between the FY 1/4/2013-31/3/2014.) I took my new house possition on June/2012. my loan amount is less then 25Lacs, this is my first home. will I be eligible for 80EE. Because I am paying around 2.5Lacs for interest so I got confussed why this is for new home loan buyers. what about the old home loan buyers?

Thanks,
Nagarajan. K

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Manshu April 18, 2013 at 12:56 am

I don’t know if I understand your question correctly, but based on what you have said, yes you are eligible, what makes you think you are not eligible?

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Sdutta April 18, 2013 at 3:23 pm

Hi,

I am staying in Chennai in a rented property and is going to purchase a flat in Kolkata.
Loan amt- 25 lakhs; Property value – less than 40 lakhs
Questions:
Can I claim the deductions u/s 80EE and 24(b)
If yes, its fine.
If not, then how to claim the deductions for the interest paid
Please let me know.

Thanks.

Reply

Manshu April 18, 2013 at 7:57 pm

Yes, based on these details I do believe you can get exemption under both sections.

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Ashish April 19, 2013 at 2:21 pm

Hi,

does this deduction of one lac applicable on pre-emi interest also?

for eg…if i got a home loan senction for Rs. 20 lacs against property of Rs. 30 lacs in Apr 2013. I dont have any other property in my name as on date. I’ll get possession of this property in say in Apr 2016. Now i am paying only pre-emi interest till the time of possession.

As per my understanding, sec 24 deduction is available only after possession of property.
Please advice.

Thnx

Reply

Manshu April 19, 2013 at 9:01 pm

That is a good question Ashish, and I don’t know the answer to that yet, I will send a response to you once I know something about it.

Reply

Manshu April 19, 2013 at 9:10 pm

I got a response quicker than I expected, so here goes. My friend Karan Batra who is a CA gave this reply to your question:


Hi Manshu

The law is silent on the point that whether this Section is applicable to already constructed houses or under-construction houses…

In the absence of any specific instruction, it is always assumed that it is applicable to everyone i.e. it is applicable to all types of houses… the law has specified some conditions and if those conditions are met, an assessee can claim deduction u/s 80EE irrespective of whether the house is under-construction of completed…

Regards,

Karan Batra

This is his website, if you wanted to ask any more questions: http://www.charteredclub.com/

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Akshat May 14, 2013 at 2:16 pm

In income tax website there is no information about 80EE section. My company said they have confirmed and this extra section has not approved yet. Is this correct?

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Vidya Charan Shukla May 25, 2013 at 2:27 pm

if a person have a prperty in his name. If new house is in name of wife & loan is joint then deduction u/s 80ee will be available to husband. like deduction u/s 24 (b) is available to spouse in case property is in name of wife interest deduction can be claimed by husband.

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Avishek June 7, 2013 at 6:37 pm

Hi all, is this rule includes flat value and service tax too? Also will it include the amenities charges as well? What exactly mean by flat value? will parking value be also included?

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Abhay June 19, 2013 at 3:06 pm

Hi Manshu,

Information provided by you is really helpful.

I am little confused about the 3rd clause,
3) The value of residential house does not exceed Rs. 40 Lakhs.

Will this cost includes flat cost with agreement, registration, VAT, service tax and infrastructure charges?
I have booked a flat at 49Lakhs in pune(Including all), so i am not sure whether i am eligible for 80EE or not?

Reply

Nandini June 24, 2013 at 1:09 pm

Hi,

Have recently bought a flat under joint home loan scheme(loan is still in processing)
Loan amt- 25 lakhs; Property value – less than 40 lakhs
Questions:
Can we both claim (myself and my husband) the deductions u/s 80EE and 24(b) of amount 1L + 1.5L individually or proportionately ..?
Please let me know.

Reply

Sharib August 21, 2013 at 5:26 pm

Hi,

I have a simple question, I have my first house bought in Sep 2012, and My loan also sanction during Sep 2012. Am I eligible for this section.

As you have replied to Nagarajan. K that even though he has bought house in Oct 2012, still he is eligible for rebate.

Regards,
Sharib Amin

Reply

istan September 6, 2013 at 6:14 pm

Hi,
If I am elibile for 80EE but my total interest for this FY is less than 1.5L. My payable interest for next year would be assuming to be 2.5 L. Can I claim the 1L (under 80EE) in total for the next year?

say for this line: “Where the interest payable is less than Rs. 100000/- for AY 2014 – 15, then the balance amount shall be allowed in AY 2015-16.”

I put my interest payable as 0 (for 80EE) then i can use the 1L for AY 15-16?

This scenario is faced by people who have applied for loan after August this year.

Thank you,

Reply

Snehal September 11, 2013 at 6:43 pm

We have a joint loan on me and my husband’s name which was sanctioned in F.Y 2010-11. Are we eligible to claim additional 1 Lac under 80EE?

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vishal September 18, 2013 at 12:50 pm

But 80EE clearly states that, If a deduction under this section is allowed for any interest, no deduction shall be allowed in respect of such interest under any other provisions of the Act. Then how can one claim deduction U/s 24(b) of amount rs.150000 on self-occupied property.

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kaushik November 9, 2013 at 4:24 pm

Hi ,

My home loan which is less than 25 lakh was approved before April 2013 but my 1st disbursement for home loan is on 1st April 2013 . There is a confusion as some people are saying loan can be approved at any time but the date that matters to take the section 80EE benefit of 1 lakh is the 1st disbursement date which should be between 1st april 2013 to 2014. Main reason being many banks may sanction the loan earlier but that may never get disbursed or started.

Would like to know if i am eligible for this deduction?

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Lalit December 2, 2013 at 4:07 pm

Hi ,
I have purchased a flat in 2009 paying interest 220425Rs in current FY 13-14.
But now I am not staying in this flat and this flat is not rent-out (let out), I am staying in a rented a house for some reason in the same area.
Shall I eligible to get deduction u/s 24 more than 150000Rs ?

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hari December 9, 2013 at 2:33 pm

no

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hari December 9, 2013 at 2:32 pm

no its deemed to be let out so u nt eligible

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Tulasi Ram January 12, 2014 at 3:15 pm

Hi,

I have purchased a residential plot for residential purpose in the year 2013-14. This is my first property indeed. The value of the site would be app 15 lakhs. I have taken a loan of Rs. 9 lacs. This loan is the purpose of a site. it is a vacant site.

Can i avail the benefits under 80EE? Please confirm.

Thanks

Tulasi Ram T N

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sRINIVAS January 16, 2014 at 5:12 pm

Under section 80 EE, Can the interest of 1 Lakh be claimed for AY 2015-16

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Nitin January 21, 2014 at 6:37 pm

Hi,

I have a loan of Exact 25 lakhs sanctioned during this FY 2013-14. I haven’t taken the possession of the flat. I would be getting it during Jan-Feb 2014 period. So can i make a claim on both HRA+ Interest on home Loan with this additional benefit(sec80EE) or Just HRA+Principal+Sec80EE(additional benefits)? I want to get the details ASAP, so that i declare accordingly.

Thanks
Nitin

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malavan January 24, 2014 at 2:20 pm

i have taken loan for 23 lak, on aug-2013 from SBI,,, for house property 25 lak which is on construction expecting completion by Nov-2014 ….
but my EMI starts from jan-2016 ( ie after 15 months ), how shall i get benefit of interest under 80EE or section 24…. ( i am aware till possesion principle in 80 C cant be availed )

Reply

rakesh chander March 22, 2014 at 7:16 pm

sir i ve taken loan exectly as 80ee described. but my possession is expected on nov 14. can i avail rebate as per 80ee

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Zari February 3, 2014 at 7:24 pm

Hi Manshu,
I request you to comment on my scenario.
Description of the scenario:
I have taken an under-construction property and the total pre-construction period interest is: 1,60,000/-
If I divide this by 5, that is 32,000/- can be claimed in 5 consecutive years.
Questions:
1. What if in the next year I pay 1, 60,000/- as interest and I still need to claim pre-construction period interest.
Taking into consideration that only 1,50,000/- as interest can be claimed in a financial year.
2. Is it mandatory to claim the pre-construction interest in 5 consecutive years only? Can it be taken in a lifetime?
3. Am I eligible for 80EE if my loan was sanctioned on 29 Jan, 2013 and I got the 1st disbursement (Cheque) on 05 May, 2013? The loan is a joint loan.
4. If 80EE is applicable for me, in the income tax excel sheet can I show a negative income of -250000 for the income from 1st house?

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Vishal February 27, 2014 at 8:20 pm

Me and my wife have a joint ownership of the property of less than 40 lakhs Loan sanctioned in 2013

1) I have sanctioned the loan of 29 lakhs although I have only going to leverage 25 lakh. Is it still imp to have the loan sanction 25 L itself or the scenario I mentioned will work where the sanctioned amount is more than actual leveraged?

2) I have this as a second property but my wife’s first can my wife avail the additional 1L benefit if not me ?

Reply

alok March 3, 2014 at 4:07 pm

Hello i took 30 lakhs loan from SBI bank in this period 1/4/2013 – 1/3/14
and property is under construction mean while i m paying interest to bank per month 18k. So i m eligible for rebate for this year plz

Reply

alok March 3, 2014 at 4:11 pm

if yes then in which section

Reply

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