Finance Act, 2013 with a view to provide additional benefit towards interest paid by assessee against housing loan inserted a new section of deduction i.e Section 80EE w.e.f. 01.04.2014. i.e.

Deduction in respect of interest on loan taken for residential house property.

80EE. (1) In computing the total income of an assessee, being an individual, there shall be 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 house property.

(2) The deduction under sub-section (1) shall not exceed one lakh rupees and shall be allowed in computing the total income of the individual for the assessment year beginning on the 1st day of April, 2014 and in a case where the interest payable for the previous year relevant to the said assessment year is less than one lakh rupees, the balance amount shall be allowed in the assessment year beginning on the 1st day of April, 2015.

(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, 2013 and ending on the 31st day of March, 2014;

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

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

(iv) the assessee does not own any residential house property on the date of sanction of the 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 provisions of the 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 (10 of 1949) applies including 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.

Again, Act is already providing a benefit against interest paid on such housing loan taken by assessee vide section 24(b)

Deductions from income from house property.

24(b)  where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital:

Provided further that where the property referred to in the first proviso is acquired or constructed with capital borrowed on or after the 1st day of April, 1999 and such acquisition or construction is completed 77[within three years from the end of the financial year in which capital was borrowed], the amount of deduction under this clause shall not exceed one lakh fifty thousand rupees.

Explanation.—Where the property has been acquired or constructed with borrowed capital, the interest, if any, payable on such capital borrowed for the period prior to the previous year in which the property has been acquired or constructed, as reduced by any part thereof allowed as deduction under any other provision of this Act, shall be deducted under this clause in equal instalments for the said previous year and for each of the four immediately succeeding previous years:]

78[Provided also that no deduction shall be made under the second proviso unless the assessee furnishes a certificate, from the person to whom any interest is payable on the capital borrowed, specifying the amount of interest payable by the assessee for the purpose of such acquisition or construction of the property, or, conversion of the whole or any part of the capital borrowed which remains to be repaid as a new loan.

Explanation.—For the purposes of this proviso, the expression “new loan” means the whole or any part of a loan taken by the assessee subsequent to the capital borrowed, for the purpose of repayment of such capital.]

If we go through with both the section one of the interpretation may arises like same component of interest is allowed as income deducting factor under both section but Section 80EE exclusively specified that interest allowed under this section shall not be allowed as deduction in any other section of this Act. This means any part of interest (to the extent allowable under this section) if taken as deduction then we shall not take any benefit as deduction of such part of interest under any other section.

The question is arises which part of interest is to be claim as deduction at which section of the act. One most important factor of both sections is time period of allowance of interest as deduction. Section 80EE allowed deduction as and when loan is sanctioned by the bank or financial institution but Section 24(b) allowed deduction only after completion of construction (within 3 years). That means Section 80EE is for immediate benefit but section 24(b) accumulate the interest upto the period of construction and allowed interest as deduction on five instalments to extent of Rs. 150,000/- after the completion of construction period. Here we should take the benefit of timing difference available under both section.

Let us have an illustration:-

Loan taken by assessee as on 01.04.2013

Interest paid per year Rs. 75000/-

Construction of completed on 31.03.2016

In such case assessee may take the benefit of Section 80ee for A.Y. 2014-15 for Rs. 75000/- and for A.Y. 2015-16 for Rs. 25000/- (Total limit of deduction Rs. 100000/-). Remaining part of interest may be claim as deduction u/s 24(b) i.e Rs. 125000/- (Interest of F.Y. 2014-15, Rs. 50000/- and Interest of F.Y. 2015-16, Rs. 75000) in A.Y 2016-17 i.e. on completion of construction.

In this way assessee may take the additional benefit of Section 80ee along with the benefit of section 24(b) in case of house property constructed for self occupation.

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CA Prachand Dhoj Karki

Email:- karki.prachand@yahoo.com

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16 responses to “Analysis on cross connection between Sec. 80EE and Sec. 24(b)”

  1. Sarab says:

    Can Husband & Wife take joint loan and both can avail Housing Loan benifits?

  2. Raj Singh says:

    Please tel me where section 80EE is existed with income tax site . there is 80c but not 80 ee and 24. so how can i claim my loan intrrest

  3. Rajiv Saxena says:

    I need clarity considering time line condition under section 24(b). If Loan sanction date is Oct’2010 and property is occupied during Sep’14, then interest benefir of 1,50,000 can be taken or not?

  4. Gaurav Kr. says:

    Please let us know the rebate limit under 24 B for a flat which we rent out (not self occupied). Please note the construction of flat completed in 5 years.

  5. Prashant Kumar says:

    Sir,

    I have bought a commercial property of 15 lakhs,

    I got a loan of amount 10 Lakhs, Since the property is under construction, amount disbursed currently is 8 Lakhs and 2 lakhs are yet to be disbursed when construction completes.

    My pre EMI (Only interest) has started , Would i be able to claim the interest paid as income tax rebate under section 24(b), Or may be in any other section.

    Please guide..
    Thanks in advance
    Prashant

  6. CHANDRASEKHAR JAL says:

    I AM A BSNL EMPLOYEE. I HAVE AVAILED HOUSE BUILDING LOAN FROM DEPARTMENT ON 2002.ONLY PRINCIPAL DEDUCTED FROM 2002 TO 2012 .DEDUCTION OF INTEREST STARTED FROM MY SALARY FROM 2012 AND CONTINUING .CAN I AVAIL INTEREST REBATE FROM IT FOR THE YEAR 2014-2015.

  7. Vikas Dhawan says:

    Hi,

    please help me. In my case, the construction is completed after three years from the date of borrowing the capital from bank. My employer is not giving me the benefit of interest deduction on the pretext that the construction is not completed within three years. Here the point is, what is my fault if the construction is not completed within 3 years, as it was something which was beyond my control. Kindly update me about any Circular or Judgment in this regard.

    vikas dhawan
    #9968054858

  8. Niel_N says:

    I have taken a loan of Rs 25.25 Lakh for my second house. The new house is purchased jointly with my wife as 1st owner, where as I have a earlier house in my name alone. Presently the new house is complete. Loan sanctioned in and disbursed in Feb’14.

    How can take benefit of principal and interest u/s 24B abd 80 EE ?

    • SHAH SURESH MOTILAL says:

      Hi,

      I have constructed a New House after demolishing entire old house from its base. For the construction of this New House, I have borrowed a Home Loan from BOB. I wanted to know, shall I claim Interest amount of this home loan to avail benefit of income tax. Your prompt reply to my query will help me a lot.

      Thanks & Regards
      SM Shah

  9. Shakti says:

    I have Question:

    I have transfered the Loan from LIC to SBI . Can i take the benefit of 80 EE

    With Regards,
    Shakti

  10. ITSUMAN says:

    Being an existing loanee availing deduction u/s 24b,can I claim deduction for fresh loan u/s 80ee & 24b.also provide more examples.plz.

  11. Pravin says:

    Per your example, once interest of 25,000 is claimed in AY 2015-16 under 80EE claim is not possible under Sec.24 as it is prohibited by 80EE. The interest till completion date (excl 80EE amount) can be cummulated and claimed under Sec.24 at later years on 1/5th basis.

  12. CA says:

    Thanks for the wonderful article. I have the following doubts
    1.The Sec 80EE has not mentioned anywhere as Rs 1 Lac as the total limit . So why can not we assume that Rs.1. Lac will be taken as a deduction in each year ?
    2. The assessee should not own any other property at the date of sanction of loan but on subsequent acquisition will it affect him from claimimg deduction u/s 80EE as the onnus here is only on the date of Sanction and not on the date of availing deduction

  13. Mustafa says:

    I have a query,

    In the example given above how can the assessee claim 50000 in AY 16-17 as the calculation of pre construction interest gives that the assessee can claim only 45000 as deduction.

  14. Sai Sridhar says:

    I have a contrary view, when you have a specific section dealing with Pre-construction period interest, then we cannot go ahead with General section of 80EE.

    Its my view.

    Regards,
    Sai Sridhar

  15. sathish says:

    sir,
    is benefit of 80EE available on interest paid for acquiring property as well as construction?

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