Deduction of home loan – Principal Interest…….

There are mainly two components in repayment of home loan Instalment. Principal Amount and Interest part. An assessee get deduction of principal under section 80C of chapter VI A of Income Tax Act 1961 subject to maximum amount of Rupees 1,50,000 as mentioned in previous article.

In the eyes of Income tax house property is divided in two parts i.e. Let-Out Property (Property given on rent) & Self Occupied Property. The provision for deduction of Interest is different for both the properties.

Income tax Act 1961.

The deduction of interest components for self-occupied Property is rupees 2 lakh under section 24b. Government allowed further deduction to enhance real estate sector with the introduction of new section 80EEA in budget 2021 different from section 80EE which is already a part of chapter VI A.

Following are the conditions and different aspect of section 80EE and Section 80EEA.

Section 80EE

An individual is eligible to get deduction under section 80EE with maximum limit of rupees of 50,000.

Conditions

1. Value of house should be less then Rupees 50 lakhs

2. Loan should be sanctioned during the P.Y. 2016-17

3. Loan sanctioned should be less than Rupees 35 Lakhs

4. The assesse should not own any residential house on the date of sanction of loan.

The benefit of deduction under this section under this section would be available till the repayment of loan continues.

The maximum deduction allowable is 50,000. The deduction of up to Rs. 50,000 under section 80EE is over and above the deduction of up to Rs. 2,00,000 available under section 24 for interest paid in respect of loan borrowed for acquisition of a self-occupied property.

Section 80EEA

Government introduces further deduction of home loan 2021 budget to boost real estate sector and provide additional deduction to the taxpayer.

Following are the conditions to be satisfied for availing deduction under section 80EEA.

1. Loan should be sanctioned by a Financial Institution during the period between 1st April, 2019 and 31st March 2021.

2. The individual should not be eligible to claim deduction u/s 80EE

3. The individual should not own any residential house on the date of sanction of loan

4. Stamp Duty Value of house ≤ Rs. 45 lakhs

The benefit of deduction under this section would be available from A.Y. 2020-21 and subsequent assessment years till the repayment of loan continues.

That means Budget 2021 has extended the availability of additional deduction allowed under section 80EEA (of the Income Tax Act) for interest paid on affordable housing loan by one year to March 31, 2022. This additional deduction of Rs 1.5 lakh was available under section 80EEA only up till March 31, 2021, prior to the extension announced in Budget 2021. This is deduction is available over and above the Rs 2 lakh deduction available under section 24. Thus, the total deduction available to an individual taxpayer on the interest payment on a housing loan taken to buy an affordable house is Rs 3.5 lakh in a financial year.

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This article is for information only and written as per the provision given under income tax law and finance act 2021. For any other information please contact on mail [email protected] amd whatsapp 8879882025.

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