In order to revive the real estate sector and to ensure housing for all, the Government allowed an additional deduction for interest on housing loan paid by an individual taxpayer. The deduction is available from Financial Year 2016-17 onwards.
Who is eligible for this deduction?
This deduction is available to an individual taxpayer who is buying his first house property.
When deduction is allowed?
The deduction for interest on housing loan is allowed when an individual fulfils the following conditions:
- The individual taxpayer takes housing loan for purchase or construction of his residential house property.
- The housing loan is sanctioned during the financial year 2016-17.
- Such housing loan is taken from a bank or Indian housing finance company whose main business is to provide finance for residential houses in India.
- The amount of housing loan should not exceed Rs. 35 lakhs.
- The value of residential house property for which loan is taken should not exceed Rs. 50 lakhs.
How much deduction is allowed?
Maximum deduction of Rs. 50,000 is allowed under this provision. If interest paid on housing loan is less than Rs. 50,000, the deduction shall be allowed only for the amount paid. In other words, the deduction is lower of Rs. 50,000 or interest actually paid on housing loan.
How long this deduction shall be allowed?
A taxpayer can claim such deduction from Financial Year 2016-17 till the year in which entire housing loan is repaid.
What if I am not eligible to claim deduction?
This is an additional deduction allowed to individuals who fulfil the aforementioned conditions. If an individual does not fulfil the above conditions, he can claim the deduction for such interest on housing loan (under Section 24). The deduction for interest on housing loan is allowed up to Rs. 200,000 under section 24 if house is used for own residence [see details in Interest on Housing Loan]
Can a taxpayer claim both deductions under Section 24 and Section 80EE?
If a taxpayer is eligible to claim deductions under this provision (section 80EE), he can claim a deduction of up to Rs. 200,000 in Section 24. Thus, the total deduction of Rs. 250,000 (Rs. 200,000 in Section 24 and Rs. 50,000 in Section 80EE) can be claimed by a person.
However, no double deduction shall be available for interest on housing loan, i.e., interest claimed as deduction under this section should not be claimed again under Section 24.