Section 80EE Income Tax Benefit on Home Loan InterestPosted In Income Tax | Articles | 6 Comments »Income Tax Benefit on Home LoanInterest under Section 80EE OfIncome Tax Act .For the A.Y. 2014-16.Introduction- Finance Minister inserted a new section relating to the additional deduction in respect of interest on loantaken for residential house property. Assessee can avail the benefits of this section in two A.Y. 2014-15 & 2015-16.Purpose of this section is to promote house ownership & give a fillip to anumber of industries like steel, cement, brick, wood etc. besides jobs to thousands of construction workers.Applicability- Benefit of this section can avail by Individual assessee. Deduction under this section is not available for any other assessee (like HUF, firm etc.). Individual can claim benefit under this section only when all the following conditions are satisfied, these are-o Purchaser should be first time buyer. i.e. he has never purchased any house and now he is going

to purchase a house.o Value of the house should not more than 40 lakh.o Loan taken by Individual for the purpose of buy a house should not be more than 25 lakh.o On the date of sanction of loan individual does not have any own residential house property.o Loan for this purpose taken by individual should be from the Financial Institution or Housing

Finance Company.o For this purpose, loan should be sanctioned between 01.04.13 to 31.03.14.U/s 80EE (4)   - Provides that where a deduction under this section is allowed for any interest payable on loan only when 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.Quantum of Deduction- Assessee can take deduction u/s 80EE on interest payable on home loanupto 1 Lakh in A.Y.2014-15. It can claim deduction in two assessments year. Means if whole amount of interest payable upto 1 lakh is not claim as deduction in A.Y.2014-15 then remaining balance amount upto 1 lakh can claim in A.Y.2015-16.Total deduction under this section shall not be more than 1 lakh.

Example- Assessee has taken a loan for the purpose of residential house property & interest payable on loan Rs. 90000/- for the A.Y.2014-15.In this case assessee can claim deduction 90000/- in A.Y.2014-15 and other remaining balance i.e. Rs. 10,000/- ,can claim in A.Y.2015-16Clarification of Section 24 and 80EE-

       Where the property has been acquired, constructed, repaired, renewed or reconstruction with borrowed capital, the amount of any interest payable on such capital is deductible under section 24(b), subject to the prescribed conditions.

     As per Sub Section 4 section 80EE, assessee can avail deduction in respect of interest payable on loan only when assessee does not claim any deduction in respect of such interest in any other provisions of the Act.

     However Finance Bill , 2013 contain an announcement of additional deduction of interest on housing loan for first time buyer state that-

     I propose to allow such home buyers an additional deduction of interest of Rs.100000/- to be claimed in A.Y.2014-15. If the limit is not exhausted, the balance may be claimed in A.Y.2015-16. This deduction will be over and above the deduction of Rs.150000/-allowed for self occupied properties under section 24 of the income tax Act.

So as per above explanation there is clash between Sub section 4 of section 80EE and as per announcement under para 132.So according to me assessee may also claim additional deduction U/s 80EE apart from deduction U/s 24.Key Notes

1)          Deduction available to individual only not to other persons.2)          Deemed owner concept does not apply in respect of such deduction.

3)          Spouse would not disqualify for relief U/s 80EE in case of residential house purchased in joint names.

4)          Assessee can purchase house for both purpose .i.e. it can be for self occupied or can be Non self occupied.5)          Interest includes “any service fee or other charges in respect of money borrowed or processing fees”.6)          Date of make application to loan irrelevant but date of sanction of loan is relevant.

Section 80EE : Deduction for interest on loan for residential house propertyPosted In Income Tax | Articles | 11 Comments »Deduction in respect of interest onloan taken for residential house property(Section 80EE):Vide Finance Act 2013, an individual is allowed a deduction upto a limit of Rs 1,00,000 being paid as interest on a loantaken from a Financial Institution, sanctioned during the period 01-04-2013 to 31-03-2014 (loan not to exceed Rs 25 lakhs) for acquisition of a residential house whose value does not exceed Rs 40 lakhs. However the deduction is available if the assessee does not own any residential house property on the date of sanction of the loan.Please Note :-

1. The Deduction is available for two years i.e. for A.Y. 2014-15 & A.Y. 2015-16.

2. Total Deduction which can be claimed in Both years in aggregate is Rs. 1,00,000/-.3.  Deduction U/s. 80EE  is in addition to deduction Under Section 24. So if an assessee is paying interest on Self Occupied Property Purchased during A.Y. 2014-15 of Rs. 2.40 Lakh , he can claim interest up to 1.50 Lakh under section 24 and balance 0.90 lakh U/s. 80EE.  Assessee can claim the balance deduction of 0.10 Lakh in Assessment Year 2015-16.

————————Extract of Section 80EE as per finance Act,2013 :-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 loantaken 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.

Q- 5  What are the tax benefits that I can avail of for repaying a home loan ?

You will be eligible to claim both the interest and principal components of your repayment during the year.o Interest can be claimed as a deduction under Section 24. You can claim up to Rs. 150,000 or the

actual interest repaid whichever is lower. (You can claim this interest only when you are in possession of the house)

o Principal can be claimed up to the maximum of Rs. 100,000 under Section 80C. This is subject to the maximum level of Rs 100,000 across all 80C investments.

o You will need to show the statement provided by the lender showing the repayment for the year as well as the interest & principal components of the same.

Q- 6 .  Can I take advantage of tax benefits from a home loan as well as claim House Rent Allowance (HRA) ?

If you took a home loan and are still living in a rented place, you will be entitled to:1. Tax benefit on principal repayment under Section 80C2. Tax benefit on interest payment under Section 243. HRA benefit

Of course, you can claim tax benefits on the home loan only if your home is ready to live in during that financial year. Once the construction on your home is complete, the HRA benefit stops. If you took a home loan, got possession of the house, have rented it out and stay in a rented accommodation, you will be entitled to all the three benefits mentioned above. However, in this case, the rent you receive would be considered as your taxable income.Q- 9.I live in Delhi in my own house. In 2008, I took a housing loan to fund the purchase of an under-construction flat in another city (Faridabad which comes under National Capital Region of Delhi but otherwise falls in Haryana). It is expected to be completed in FY14. I haven’t claimed any tax benefit so far. What happens to the loan installments I have paid so far? Can they also be claimed for tax benefit?

According to the Income-tax Act, 1961, where the property has been acquired or constructed with borrowed capital, the interest payable on such capital for the period prior to the year in which the property has been acquired shall be allowed as deduction in five equal instalments beginning from the year in which the property is acquired. Thus, the interest included in the loan instalment paid by you during the construction period shall be eligible for deduction from the year in which the flat is acquired/construction is completed.

The principal amount of the loan repaid till date shall not be available as a deduction under section80C till the time the construction of the flat gets completed. Once the flat is completed and the possession is handed over to you, you will be eligible to claim deduction for interest paid on the loan under section 24(b) and principal amount of loan under section 80C. The total amount of deduction available under section 80C shall be limited to Rs. 1 lakh. Thus, as of now, you are not eligible for any tax benefit on such loan repayments.Q. 10 Is there any additional deduction which I can claim in respect of Interest on Housing loan in addition to interest Under Section 24(b)?Ans. Finance Minister inserted a new section relating to the additional deduction in respect of interest on loan taken for residential house property. Assessee can avail the benefits of this sectionin two A.Y. 2014-15 & 2015-16.Purpose of this section is to promote house ownership & give a fillip to a number of industries like steel, cement, brick, wood etc. besides jobs to thousands of construction workers. to get more information on the please read the Full Article -  Section 80EE Income Tax Benefit on Home Loan Interest

[(5)  in the case of an individual, the value of any travel concession or assistance received by, or due to, him,—

(a)  from his employer for himself and his family, in connection with his proceeding on leave to any place in India ;

(b)  from his employer or former employer for himself and his family, in connection with his proceeding to any place in India after retirement from service or after the termination of his service,

subject to such conditions as may be prescribed17 (including conditions as to number of journeys and the amount which shall be exempt per head) having regard to the travel concession or assistance granted to the employees of the Central Government :

Provided that the amount exempt under this clause shall in no case exceed the amount of expenses actually incurred for the purpose of such travel.

Explanation.—For the purposes of this clause, "family", in relation to an individual, means—

(i)  the spouse and children of the individual ; and

(ii)  the parents, brothers and sisters of the individual or any of them, wholly or mainly dependent on the individual; ]

LTAExtract of Section 10(5)“Section 10(5)  in the case of an individual, the value of any travel concession or assistance received by, or due to, him,—(a)  from his employer for himself and his family, in connection with his proceeding on leave to any place in India ;(b)  from his employer or former employer for himself and his family, in connection with his proceeding to any place in India after retirement from service or after the termination of his service,subject to such conditions as may be prescribed (including conditions as to number of journeys and the amount which shall be exempt per head) having regard to the travel concession or assistance granted to the employees of the Central Government :Provided that the amount exempt under this clause shall in no case exceed the amount of expenses actually incurred for the purpose of such travel.Explanation.—For the purposes of this clause, “family”, in relation to an individual, means—(i)  the spouse and children of the individual ; and(ii)  the parents, brothers and sisters of the individual or any of them, wholly or mainly dependent on the individual; ]”Conditions for the purpose of section 10(5) as Prescribed in Rule 2B of Income Tax Rules- Extract of Rule 2B2B. (1) The amount exempted under clause (5) of section 10 in respect of the value of travel concession or assistance received by or due to the individual from his employer or former employer for himself and his family, in connection with his proceeding,—(a)  on leave to any place in India;(b)  to any place in India after retirement from service or after the termination of his service,shall be the amount actually incurred on the performance of such travel subject to the following conditions, namely :—[(i)  where the journey is performed on or after the 1st day of October, 1997, by air, an amount not exceeding the air economy fare of the national carrier by the shortest route to the place of destination;

(ii)  where places of origin of journey and destination are connected by rail and the journey is performed on or after the 1st day of October, 1997, by any mode of transport other than by air, an amount not exceeding the air-conditioned first class rail fare by the shortest route to the place of destination; and(iii) where the places of origin of journey and destination or part thereof are not connected by rail and the journey is performed on or after the 1st day of October, 1997, between such places, the amount eligible for exemption shall be :—(A)  where a recognised public transport system exists, an amount not exceeding the 1st class or deluxe class fare, as the case may be, on such transport by the shortest route to the place of destination; and(B)  where no recognised public transport system exists, an amount equivalent to the air-conditioned first class rail fare, for the distance of the journey by the shortest route, as if the journey had been performed by rail.](2) The exemption referred to in sub-rule (1) shall be available to an individual in respect of two journeys performed in a block of four calendar years commencing from the calendar year 1986 :[Provided that nothing contained in this sub-rule shall apply to the benefit already availed of by the assessee in respect of any number of journeys performed before the 1st day of April, 1989 except to the extent that the journey or journeys so performed shall be taken into account for computing the limit of two journeys specified in this sub-rule.](3) Where such travel concession or assistance is not availed of by the individual during any such block of four calendar years, an amount in respect of the value of the travel concession or assistance, if any, first availed of by the individual during first calendar year of the immediately succeeding block of four calendar years shall be eligible for exemption.Explanation : The amount in respect of the value of the travel concession or assistance referred to in this sub-rule shall not be taken into account in deter-mining the eligibility of the amount in respect of the value of the travel con-cession or assistance in relation to the number of journeys under sub-rule (2).][(4) The exemption referred to in sub-rule (1) shall not be available to more than two surviving children of an individual after 1st October, 1998 :Provided that this sub-rule shall not apply in respect of children born before 1st October, 1998, and also in case of multiple births after one child.]

Deduction available under Section 80 C for Principal repayment of home loan: As per section 80 C an Individual and an HUF can claim principal repayment component of a loan along with other eligible items like Life Insurance Premium, NSCs, EPF, ELSS and stamp duty and registration charges etc. The overall deduction is restricted to Rs. 1 lakh in a year. Remember the deduction is only for residential house property and not for commercial property. Besides it is also available only for purchase or construction of a house and not for renovation, additions or repairs on any existing house property.  You can claim principal repayment if you have taken loan from specified entity like banks, HFCs, Central & State government, LIC, NHB, Public Company or a Public Sector Undertaking. Even a University established by law or a local authority or corporation established under State or Central laws also are covered under the category. Moreover in case you sell the house acquired with home loan, within five years from the end of the year in which possession of the house was taken, all the deduction allowed for Principal repayment in earlier years shall be withdrawn. This shall be treated as income of the year in which this property is sold. Moreover no deduction under Section 80 C shall be allowed for principal repayment made during the year.

Deduction available under Section 24(b) for Interest payment: In addition to deduction for Principal, Section 24(b) of the Income Tax Act allows you deduction for interest payable on loan taken to buy or construct a house property, or even for repair or reconstruction of an existing property. This benefit is available for residential and commercial property as well.  It may be interesting to note that even processing fee paid in respect of home loan shall also be treated as interest so you can claim deduction in respect of processing fee paid for taking such loan. Even in cases where you prepay your loan, you will be entitled to claim the amount of any prepayment fee paid to the bank for such prepayment. Here you can claim the benefits in respect of loans taken from your friends and relatives besides banks and financial institutions. The deduction is available for self-occupied as well as let-out properties too. For self -occupied property, the deduction is restricted to Rs. 1.50 lakhs p.a.  For let-out property, you can claim full interest.  If you have more than one self- occupied houses, you have to select one house as self-occupied and the other house/s shall be treated as let-out. In this case you have to offer notional rent for taxation and can claim the full interest payable. So in order to maximize your tax benefits, it is always advisable to treat the property on which interest is lower as self-occupied in case interest payable on any or all of the property is more than Rs. 1.50 lakhs. For under construction property, you can only claim the interest deduction from the year construction is complete and possession taken. However in respect of interest paid for the period prior to the year for taking possession, you can claim aggregate of such interest in five equal installments from the year in which construction is completed. There is no reversal of interest benefit even if you sell the house before five years as is applicable for repayment benefits.

Deduction under Section 80EE for the current year: For this financial year an additional deduction of Rs. One Lakh for interest is available under Section 80EE. This deduction can only be claimed if the loan amount is not more than Rs. 25 lakhs and the value of house does not exceed Rs. 40 lakhs. However you should not own any other house. Here the loan should have been sanctioned during 1st April 2013 to 31st March 2014. This deduction has only limited benefit in respect of self occupied residential house property purchased with loan sanction and disbursed during financial year 2013-2014 as you are entitled to claim full interest benefit in respect of let out property. Isn’t your home loan entitles you for some real tax benefits too!

Read more at: http://www.moneycontrol.com/news/tax/what-tax-benefits-will-i-gethome-loan_997307.html?utm_source=ref_article