Budget 2016: Incentives for Promoting Housing for All

The existing provisions of section 80EE provide a deduction of up to 1 lakh rupees in respect of interest paid on loan by an individual for acquisition of a residential house property. This benefit is available for the two assessment years beginning on the 1st day of April 2014 and on the 1st day of April 2015.

In furtherance of the goal of the Government of providing ‘housing for all’, it is proposed to incentivise first-home buyers availing home loans, by providing additional deduction in respect of interest on loan taken for residential house property from any financial institution up to Rs. 50,000. This incentive is proposed to be extended to a house property of a value less than fifty lakhs rupees in respect of which a loan of an amount not exceeding thirty five lakh rupees has been sanctioned during the period from the 1st day of April, 2016 to the 31st day of March, 2017. It is also proposed to extend the benefit of deduction till the repayment of loan continues.

The deduction under the proposed section is over and above the limit of Rs 2,00,000 provided for a self-occupied property under section 24 of the Act.

These amendments will take effect from 1st April, 2017 and will, accordingly, apply in relation to the assessment year 2017-18 and subsequent assessment years.

Clause 37 of the Finance Bill 2016

Clause 37 of the Bill seeks to substitute section 80EE of the Income-tax Act relating to deduction in respect of interest on loan taken for residential house property.

The provisions contained in the existing section provides for deduction upto one lakh rupees in respect of interest payable on loan taken by an assessee being an individual from any financial institution for the purpose of acquisition of a residential property. This benefit was available during the assessment years begining on the 1st day of April, 2014 and ending on the 31st day of March, 2016.

It is proposed to substitute the said section so as to provide a deduction for those who buy residential house property for the first time, in respect of interest on loan taken from any financial institution upto fifty thousand rupees subject to other conditions specified therein. It is proposed to extend the benefit of deduction till repayment of loan continues.

This amendment will take effect from 1st April, 2017 and will, accordingly, apply in relation assessment year 2017-2018 and subsequent years.

Substitution of new section for section 80EE. Deduction in respect of interest on loan taken for residential house property.

36.    For section 80EE of the Income-tax Act, the following section shall be substituted with effect from the 1st day of April, 2017, namely:—

 ‘80EE. (1) In computing the total income of an assessee, being an individual, there shall be     45
deducted, in accordance with and subject to the provisions of this section, interest payable on loan taken by him from any financial institution for the purpose of acquisition of a residential property.

(2) The deduction under sub-section (1) shall not exceed fifty thousand rupees and shall be allowed in computing the total income of the individual for the assessment year beginning on the 1st day of April, 2017 and subsequent assessment years.

(3) The deduction under sub-section (1) shall be subject to the following conditions, namely:—

(i)  the loan has been sanctioned by the financial institution during the period beginning on the 1st day of April, 2016 and ending on the 31st day of March, 2017;

(ii)   the amount of loan sanctioned for acquisition of the residential house property does not  exceed thirty-five lakh rupees;

(iii)  the value of residential house property does not exceed fifty lakh rupees;

(iv) the assessee does not own any residential house property on the date of sanction of loan.

(4) Where a deduction under this section is allowed for any interest referred to in sub-section (1), 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.

(5) For the purposes of this section,—

(a) “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 that Act or a housing finance company;

(b) “housing finance company” means a public company formed or registered in India with the main object of carrying on the business of providing long-term finance for construction or purchase of houses in India for residential purposes.’.

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  • srikanth raghavan

    Can we claim tax deduction for the amount paid as brokerage while buying apartment?

    • namit chhabra

      Yes

  • Sourav Kashyap

    if a person buying residental property and pay home loan interest above 300000 can they avial deduction in Sec 80EE and how much amt. claim?