If an assessee satisfies conditions of both Section 24 and Section 80EEA of Income Tax Act, he/she will be able to claim benefits under both sections.
Under the objective ‘Housing for all’, the government announced an additional interest deduction on repayment of home loans under certain conditions. Currently, the taxman allows deduction of up to Rs. 2 lakh on payment of interest on home loans under Section 24 of the Income Tax Act, 1961. The government has proposed in Budget 2019 to introduce Section 80EEA to allow for an additional interest deduction of up to Rs. 1.5 lakh on repayment of home loans. The total deduction in taxable income will be provided to those taking home loans up to March 31 next year to buy property worth up to Rs. 45 lakh for self-occupying.
Given below are key things to know about government’s interest deduction limit on home loans:
The deduction under the new section will be available only to individuals. This deduction will not be available to any other taxpayer. “If you are a Hindu Undivided Family (HUF), Association of Persons (AOP), Partnership firm, a company, or any other kind of taxpayer, you cannot claim any benefit under this section,” says Archit Gupta, Founder and CEO, ClearTax.
Amount of deduction
A deduction for interest payments up to Rs. 1.5 lakh will be available under Section 80EEA. This deduction will be over and above the deduction of Rs. 2 lakh for interest payments available under Section 24 of the Income Tax Act. Therefore, taxpayers will be able to claim a total deduction of Rs. 3.5 lakh for interest on home loan, if they meet the conditions of section 80EEA.
Conditions for claiming the deduction
In order to claim the additional interest deduction on repayment of home loans, the loan must have been taken from a financial institution or a housing finance company for buying a residential house property. Stamp duty value of the house property should be Rs. 45 lakhs or less.
The taxpayer should be a first-time home buyer. He/she should not own any residential house property as on the date of sanction of the loan.
The section does not specify if the assessee needs to be a resident to be able to claim this benefit. “Therefore, it can be concluded that both resident and non-resident Indians can claim this deduction,” says Mr Gupta of ClearTax.
“The section also does not specify if the residential house should be self-occupied to claim the deduction. So, borrowers living in rented houses can also claim this deduction,” he further elaborates.
“Moreover, the deduction can only be claimed by individuals for the house purchases jointly or singly. If a person jointly owns the house with a spouse and they both are paying the installments of the loan, then both of them can claim this deduction. However, they must meet all the conditions laid down,” he explains.
How to claim the additional deduction
If an assessee satisfies the conditions of both Section 24 and Section 80EEA of the Income Tax Act, he/she will be able to claim the benefits under both the sections.
“First, exhaust your deductible limit under Section 24, which is Rs. 2 lakh. Then, go on to claim the additional benefits under Section 80EEA. Therefore, this deduction is in addition to the Rs. 2 lakh limit allowed under Section 24,” elaborated Mr Gupta of ClearTax.