Home loan Tax Benefits : Under Section 24(b), 80C, 80EE and 80EEA

The below article discusses The tax deductions & benefits available for the assessee on Housing Loan taken for the purpose of purchase, construction, repair, renewal or reconstruction of the house property.

Home loan

Home is a beautiful place where we reside permanently sharing our memories, spending our beautiful moments with our loved ones or family together. Every individual will dream to have such homes. To fulfill the dream the people takes home loans (housing loans).

Housing Loan Involves both Principal & Interest Component, Government of India has provided certain Exemptions & Deductions for both the Principal repayment & Interest Expenditure Incurred under various provisions of the Income Tax Act,1961.

Below we will discuss Deductions in respect of Housing Loan 

• Section 24(b)
• Section 80C
• Section 80EE
• Section 80EEA

Section -24 (b)

Section-24(b) of Income Tax act, 1961, provides deduction in respect of the Interest on Home loans taken for the purpose of the purchase, construction, repair, renewal or reconstruction of the property, under the Head Income from House Property 

Interest can be classified as post-construction period & Pre Construction period Interest.

Post- Construction Period Interest

Let out property

In Case of Housing Loan acquired for the purpose of the purchase, construction, repair, renewal or reconstruction of the Let out property, the assessee can claim a deduction in respect of that Interest expenditure incurred for that period without any quantum of the limit under section 24(b) of Income Tax Act,1961.

Self Occupied property

In Case of Housing Loan acquired for the purpose of purchase, construction, repair, renewal or reconstruction of the Self Occupied property, the assessee can claim deduction in respect of that Interest expenditure incurred for that period not exceeding Rs.30,000/- or Rs.2,00,000/- (as the case may be) limit under section 24(b) of Income Tax Act,1961.

Deduction For Self Occupied Property will be Rs.2,00,000/- under sec-24(b) in respect of interest on the loan is taken, if it satisfies below conditions

• Housing Loan borrowed on or after 1.04.1999
• Housing loan should be borrowed for the purpose of acquisition or construction (i.e., not for repair, renewal, reconstruction). 
• Acquisition or construction should be completed within 5 years from the end of the financial year in which the loan has been borrowed. 
• The lender of the loan should certify that such interest is payable in respect of the amount advanced for acquisition or construction of the house or as re-finance of the principal amount outstanding under an earlier loan taken for acquisition or construction of the property.

Recent amendment

w.e.f. A.Y.2020-21, Interest on Housing loan can be allowed as a deduction in respect of 2 self-occupied properties. 

Note: The overall limit should not exceed Rs.30,000/- or Rs.2,00,000/- as the case may be.

Pre- Construction Period Interest

Pre-construction period interest is the interest incurred between 

The date of borrowing loan 

and 

The date of repayment of loan/31st march immediately prior to the date of completion of the construction/acquisition of the property (whichever is earlier)

The Pre-Construction period Interest is allowed as a deduction in 5 equal installments starting from the year in which property has been constructed or Acquired.

 Section 80C-Deduction i.r.f Certain Payments

As per section 80C(XVII), the principal repayment for the housing loan borrowed & stamp duty, registration fee and other expenses incurred for the purpose of transfer of such house property can be claimed as a deduction.

The Overall Limit for claiming deduction should not exceed Rs.1,50,000/-

Section 80EE

As per sec-80EE of Income Tax act,1961, there shall be allowed a deduction of up to Rs.50,000/-  in respect of the Interest incurred on loan taken for the purpose of acquisition of house property if the following conditions have been satisfied

• Applicable to the only Individual
• Loan sanctioned should not exceed 35 Lakhs
• The value of residential property acquired should not exceed 50 Lakhs
• It should be the First House property for the assessee
• The loan should be sanctioned during the period 01/04/2016 to 31/03/2017.

Section 80EEA

w.e.f. 01/04/2020 a new section 80EEA (Deduction on certain housing loan interest) shall be inserted by the Income-tax cat,1961.

As per sec-80EEA of Income Tax act,1961, there shall be allowed a deduction of up to Rs.1,50,000/-  in respect of the Interest incurred on loan taken for the purpose of acquisition of residential house property, if the following conditions have been satisfied

• Applicable only to Individuals
• The value of residential property acquired should not exceed 45 Lakhs
• It should be the First House property for the assessee
• The loan should be sanctioned during the period 01/04/2019 to 31/03/2020.