Deduction 80EE: Home Loan Interest Deduction A.Y.2022-23

Deduction 80EE – Deduction in respect of Interest on Loan take for Residential House Property: If you had a loan sanctioned (Home Loan)  between 1st April 2016 and 31st March 2017, you will be eligible to take advantage of the deduction under section 80EE.

Please don’t confuse about section 24(b) and section 80EE; both sections allow an individual deduction on income tax for interest on a loan taken to purchase or construct a residential property. Although both sections have different application conditions.

We will discuss in detail here about the deduction of section 80EE here.

One of the differences is that Section 24(b) enables the deduction of up to Rs. 2 lakh from self-occupied properties under certain conditions and section 80EE (loan taken from 1-4-2016 to 31-03-2017) allows additional deduction of up to Rs. 50,000 with respect to interest on a housing loan. Lets’s look in detail at the deduction under section 80EE.

Maximum Amount of Deduction 80EE

The amount of interest payable on such a loan but subject to a maximum of Rs.50,000 subject to the following conditions.

Note: The deduction on repayment of the loan comes under section 80C. (You can read more about deduction u/s 80C here)An individual who has taken a loan from any bank/housing finance company for the purpose of acquiring a residential House Property.

Deduction 80EE Conditions

The deduction 80EE is applicable in certain conditions only. For an assessee, the benefit of SEC 80EE will be only available to him when the following criteria are met:

• The assessee should be buying his first house. In other words, the assessee does not own any residential house property on the date of sanction of the loan.
• The set limit of the value of the house is INR 50, 00, 000 (50 lakhs). In other words, the value of residential house property does not exceed Rs. 50 Lakhs.
• The sanctioned amount of loan should be equal to or less than INR 35, 00, 000 (35 lakhs)
• On the day on which the loan has been sanctioned, the assessee should not own any other house.
• A loan has to come from either a Housing Finance Company or a Financial Institute
• The loan is sanctioned from the period of 1.4.2016 to 31.3.2017.

Note: If an assessee has availed the benefit of deduction under SEC 80EE, he will not be able to take any further benefits in respect of ‘Interest on Loan’ under any other provision of the Income Tax Act for the same assessment year or any other.

Individuals must first exhaust the limits under Section 24 before claiming the additional benefits under Section 80EE. Thus, Section 80EE is in addition to the Section 24 limit of Rs. 2,00,000.

Deduction 80EE includes the consideration for service fee or any other charge connected to the loan. The assessee will not get an additional deduction advantage for charges related to loan approval or any other funding. The date of application for a loan is not important under this section. However, the date of sanction is vital.

Deduction 80EE and Section 24 Confusion

Deduction of housing loan interest is allowed as deduction under two sections, i.e., section 24(b) and Section 80EE. Individuals must first exhaust the limits under Section 24 before claiming the additional benefits under Section 80EE. Thus, deduction 80EE is in addition to the Section 24 limit of Rs. 2,00,000.

Section 24(b) allows deduction of interest paid on loans taken for purchase, construction or renovation of the property. The deduction under this section is allowed in the following manner:

1. Let-out property: Entire interest amount paid on the housing loan taken for the purpose of acquisition, construction, repairing, and re-construction is allowed as a deduction.
2. Self-occupied house property: Interest paid on housing loans taken for the purpose of acquisition or construction of house property is allowed as a deduction up to Rs. 2,00,000. If the loan is taken for the purpose of reconstruction, repairs or renewals of property, then the amount of deduction is restricted to Rs. 30,000.

More detail about deduction under section 24

Important Notes of Deduction 80EE

• The interest in respect of which deduction has been claimed against income from house property, shall not be deductible u/s 80EE or 80EEA.
• Deduction 80EE shall not be available to individuals/HUFs opting for an alternate tax regime.
• An individual can claim a deduction of 80EE up to Rs. 50,000 during each financial year. Besides Section 24 and Section 80C, which are Rs. 2,00,000 and Rs. 1,50,000, the amount can be claimed.
• Check also new section 80EEA inserted about deduction in respect of interest on loan taken for certain house property. (loan sanctioned between 1-4-2019 to 31-03-2020)