Deduction up to Assessment Year 2019-20:
Income-tax Act allows a deduction to an individual under section 24(b) and section 80EE for the interest paid on loan taken to purchase or construct a residential house property. Section 24(b) allows aggregate deduction of up to Rs. 2 lakh in case of self-occupied properties, subject to certain conditions. Further, an individual can also claim an additional deduction of up to Rs. 50,000 under section 80EE with respect to interest on housing loan.
The deduction under section 80EE is allowed subject to the following conditions:
a) the loan should be sanctioned by the financial institution during the period beginning on the 01-04-2016 and ending on 31-03-2017;
b) the amount of loan should not exceed Rs. 35 lakhs;
c) the value of residential house property should not exceed Rs.50 lakh; and
d) the assessee should not own any residential house property on the date of sanction of loan.
Deduction from Assessment Year 2020-21:
With an objective to provide an impetus to the ‘Housing for all’ initiative of the Government and to enable the home buyer to have low-cost funds at his disposal, the Finance (No.2) Act, 2019 has inserted a new section 80EEA under the Income-tax Act for those individuals who are not eligible to claim deduction under section 80EE. An individual can claim a deduction of up to Rs. 1,50,000 under section 80EEA subject to the following conditions:
a) The loan should be sanctioned by the financial institution during the period begin running on 01-04-2019 and ending on the 31-03-2020;
b) Stamp duty value of residential house property should not exceed Rs. 45 lakhs;
c)The assessee should not own any residential house property on the date of sanction of the loan, and
d)The assessee should not be eligible to claim deduction under section 80EE.
Hence, an individual who does not meet the criteria of section 80EE shall now be eligible to claim deduction under section 80EEA of up to Rs. 150,000 in addition to deduction under section 24(b). Thus, the aggregate deduction which can be claimed in respect of interest on housing loan shall be Rs.350,000.
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