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.

{ 21 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…

Reply

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?

Reply

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.

Reply

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.

Reply

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.

Reply

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.

Reply

Abhishek Sinha March 21, 2013 at 12:57 pm

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

Reply

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.

Reply

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.

Reply

Akshat April 15, 2013 at 10:48 am

Thanks Manshu !!!

Reply

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

Reply

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?

Reply

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.

Reply

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/

Reply

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?

Reply

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.

Reply

Leave a Comment

Previous post:

Next post: