From FY 19-20 onwards in the Finance Act, 2019, government has allowed a major relief u/s 23 and 24 of the Income Tax Act, 1961 by allowing the taxpayers to declare in their tax return the value of their ‘Two’ houses as self –occupied, on a NIL basis. That means, now a person can enjoy the benefit of “NO TAX” in respect of his two owned house properties.

Now let us understand the impact and its benefits that we can claim if we have obtained any loan for the acquisition / construction of the second house property:

Under Section 24 of the Income Tax Act, 1961, vide Finance Act, 2019, an amendment has been incorporated “the aggregate of the amount of deduction” so as to include the payment of an interest made by a person w.r.t his/her owned house properties.

Let us understand the above amended section 24 of the Income Tax Act, 1961 though a below mentioned table:

Maximum deduction on Interest on borrowed capital In respect of Let out House property Actual interest paid shall be allowed as a deduction subject to the set off limit of maximum Rs. 2 lacs and balance loss shall be carried forward.
For self- occupied House property in respect of capital borrowed for an “Acquisition or construction” of a house property Maximum deduction of Rs, 2 lacs is allowable. However, in respect of a constructed house, its construction should have been completed within 5 years from the end of the FY in which capital was borrowed.
For self- occupied House property in respect of capital borrowed for “Reconstruction, repairs or renewals” of a house property or either its construction not completed within 5 years from the end of the FY in which capital was borrowed Maximum allowable deduction would be Rs. 30,000/-

Note: Any interest pertaining to the period prior to the year of acquisition/ construction of the house property shall be allowed as deduction in five equal instalments, beginning with the year in which the property was acquired/ constructed.

Apart from the above mentioned interest benefit deduction; additional benefits are also there for a loan taken by a taxpayer for his /her house property. Let us also understand the same though a table given hereby below:

Section Type of deduction Conditions and Limits
Section 80C Principal repayment of loan taken for residential house property Maximum Rs. 1,50,000/- on a payment basis with a lock in period of 5 years
Section 80EE Interest repayment of loan taken for residential house property Maximum Rs, 50,000/- followed by a given condition-

a) Loan sanctioned period is between 01.04.2016 to 31.03.2017

b) Amount of loan does not exceed Rs. 35 lacs

c) Value of a house property does not exceed Rs. 50 lacs

d) Assesse does not own any residential house property on the date of sanction of loan.

Section 80EEA Interest repayment of loan taken for residential house property Maximum Rs, 1,50,000/- followed by a given condition-

a) Loan sanctioned period is between 01.04.2019 to 31.03.2021

b) Stamp duty value of a house property does not exceed Rs. 45 lacs

c) Assesse does not own any residential house property on the date of sanction of loan.

Note: The above tax deductions are per person and not per property. So in case of joint ownership in house properties, each person repaying the amount would be eligible to claim whole deduction separately subject to the actual payment incurred in relation to an interest and Principal.

Note: For claiming the above tax deductions, interest certificate with proper bifurcation of the Principal and Interest paid in the financial year will be required along with the loan sanction letter.

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Qualification: CA in Practice
Company: Jindal Ila & Co | Chartered Accountants
Location: Gurgaon, Haryana, IN
Member Since: 09 Sep 2020 | Total Posts: 6
Jindal Ila & Co. is a chartered accountancy firm rendering comprehensive professional services which include audit, management consultancy, tax consultancy, accounting services, manpower management, secretarial services etc. Our industry exposure includes the logistics sector with transportation View Full Profile

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6 Comments

  1. MOHAN AGARWAL says:

    Dear Sir,
    In an instant case Sale Consideration of Flat is 52 Lacs, Stamp Duty Value is 45 Lacs. Stamp Duty Assessable Value is 52 Lacs (Higher of Sale Consideration or Stamp Duty Value). Loan Sanctioned between April 19 to March 22. Can deduction under Section 80EEA be taken in this case as the Stamp Duty Assessable Value is exceeding 45 Lacs but Stamp Duty Value by itself is not exceeding 45 Lacs.

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