Tax deduction on interest on residential house loan – Section 80EE

Home buyer can get additional tax deduction up to Rs 50000 on interest on loan taken for residential house property if all the conditions of section 80EE are satisfied.

As per the present tax laws, a home buyer can claim both interest and principal components of home loan repayment for tax benefit.

section 80ee tax deduction on interest on residential house property

Principal repayment of the home loan can be claimed under section 80C of Income Tax Act, 1961 within the limit of Rs 1, 50,000.

Earlier to this new change, interest payable on a self-occupied house is subject to a maximum deduction of Rs 2 lakh under the head “Income From House Property”. Benefit of Section 80EE can be claimed over and above the tax deduction of Rs. 2, 00,000 U/S 24 and Rs. 1, 50,000 U/S 80C.

Before claiming the additional benefit of section 80EE, we suggest you to first exhaust your limit U/S 24.

Quantum of deduction and who can claim it under section 80EE

Deduction under section 80EE is available only to Individual. This means, if you are a HUF, AOP and Company then tax deduction under this section is not allowed.

Section 80EE does not specify whether the individual is required to be resident or non resident. For this reason, it can be concluded that both resident and non-resident individual can claim this deduction.

Deduction under section 80EE shall not exceed Rs 50,000.

Tax Year on which section 80EE benefit is allowed

Section 80EE was introduced with effect from 2013-2014 and was available for financial year 2013-14 and 2014-15 only.

In budget 2016, this section has again been reintroduced with effect from financial year 2016-17 (assessment year 2017-18). As per section 80EE, tax deduction up to Rs 50, 000 can be taken for the assessment year beginning on 1-4-2017 and in subsequent assessment years.

Conditions related to the loan

The individual is allowed deduction under Section 80EE on account of interest payable on loan taken by the individual from any financial institution for the purpose of acquisition of a residential property subject to following conditions being satisfied;

  • The loan has been sanctioned by the financial institution during the period beginning on 1-4-2016 and ending on 31-3-2017.
  • The amount of loan sanctioned for acquisition of the residential house property does not exceed Rs 35 lakh.
  • The value of residential house property does not exceed Rs 50 lakh.
  • Assessee does not own any residential house property on the date of sanction of loan.
  • Where a deduction under section 80EE is allowed for any interest, deduction shall not be allowed in respect of such interest under any other provision of this act for the same or any other assessment year.

For section 80EE, financial institution means, a banking company to which the banking regulation act 1949 applies or any bank or banking institution referred to in section 51 of the Act or a housing finance company. Housing finance company means a public company formed or registered in India with the main object carrying on the business of providing long-term finance for construction or purchase of houses in India for residential purposes.

Editorial Staff at Yourfinancebook is a team of finance professionals. The team has more than a decade experience in taxation and personal finance.