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Section 24 & 80EE of the income tax act provides deduction in respect of home loan interest.

Important points U/s 24B & U/s 80EE

1) Interest on housing loan is allowable as the deduction on accrual basis not on paid basis (even if account books are kept on the cash basis) if capital is borrowed for the purpose of purchase, construction, repair, renewal or reconstruction of the house property. The deduction can be claimed for two or more housing loans.

2)Interest includes service fees, brokerage, commission, prepayment charges etc.

3)Interest/penalty on unpaid interest shall not be allowed as deduction.

4)The deduction shall be allowed irrespective of the nature of loan whether it is housing loan or personal loan from any person/institution.

5) If a person instead of raising a loan from a third party pays sale price to the seller in installments along with interest than such interest is also allowable.

6) Interest on borrowed money which is payable outside India shall not be allowed as deduction under section 24(b), unless the tax on the same has been paid or deducted at source and in respect of which there is no person in India, who may be treated as an agent of the recipient for such purpose.

7) For claiming deduction under this section, the assessee must be the owner or deemed owner of the house property and loan shall be in the assessee name.

Maximum Limit of deduction under section 24B

These limits of deduction are applicable assessee wise and not property wise. Therefore if an assessee owns two or more house property then the total deduction for that assessee remain same.

1) In Let Out Property/Deemed to be Let Out – No maximum limit

2) Self Occupied House (SOP) – Rs. 2,00,000. (1,50,000 for A.y 2014-15 and before)

In the following cases, the above limit of Rs 2,00,000 for SOP shall be reduced to Rs. 30,000

– Loan borrowed before 01-04-1999 for any purpose related to house property.

– Loan borrowed after 01-04-1999 for any purpose other than construction or acquisition.

– If construction/acquisition is not completed within 5 years from the end of the financial year (3 years till the financial year 2015-16) in which capital was borrowed. For example, a loan is obtained for construction/acquisition on 28 Oct 2011 then the deduction limit should reduce to Rs 30,000 if the construction/acquisition completes after 31 March 2017.

Also Extra Deduction of Rs. 1,50,000 on Home Loan Interest under Section 80EE w.e.f. 1/4/2016

Interest for pre-construction/acquisition period

Interest for pre-construction/acquisition period is allowable in 5 equal installments beginning from the year of completion of house property. This deduction is not allowable if the loan is utilized for repairs, renewal or reconstruction.

Pre-Construction/Acquisition period starts from the date of borrowing and ends on the last day of preceding Financial Year in which the construction is completed. For example, if house property is completed on 21st March 2012 then the deduction is allowed from Financial Year 2011-2012 to 2015-16.

Deduction in case of Co-borrower

If the home loan is taken on joint names then the deduction is allowed to each co-borrower in proportion to his share in the loan. For taking such deduction it is necessary that such co-borrower must also be co-owner of that property. If the assessee is a co-owner but is repaying the full loan himself, then he can claim the deduction of full interest paid by him.

The limit of deduction in case of Self occupied property applies individually to each co-borrower . In other words, each co-borrower can claim deduction up to Rs. 2 lakh/Rs. 30,000. No limit is applicable to let out property.

Interest Deduction with HRA

HRA under section 10(13A) and interest deduction can be availed simultaneously even if house property is in the same city in which you resides on rented property.

Form 12BB is to be filed with employer if you want your employer to take deduction under this section into consideration and thus deduct lower TDS

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The maximum tax exemption limit under Section 80C has been retained as Rs 1.5 Lakh only. The various investment avenues or expenses that can be claimed as tax deductions under section 80c are as below;

1)PPF (Public Provident Fund)EPF (Employees’ Provident Fund)

2)Five year Bank or Post office Tax saving Deposits

3)NSC (National Savings Certificates)

4)ELSS Mutual Funds (Equity Linked Saving Schemes)

5)Kid’s Tuition Fees

6)SCSS (Post office Senior Citizen Savings Scheme)

7)Principal repayment of Home Loan

8)NPS (National Pension System)

9)Life Insurance Premium

11)Sukanya Samriddhi Account Deposit Scheme

12)Section 80CCC(1)

13)Section 80CCD(2)

14)Section 80CCD(1B)[Additional exemption Rs.50,000/- out of 1.5 lakh U/s 80C

The employee can contribute to Government notified Pension Schemes (like National Pension Scheme – NPS). The contributions can be up to 10% of the salary (or) Gross Income and Rs 50,000 additional tax benefit u/s 80CCD (1b) was proposed in Budget 2015.

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To claim this deduction, the employee has to contribute to Govt recognized Pension schemes like NPS. The 10% of salary limit is applicable for salaried individuals and Gross income is applicable for non-salaried. The definition of Salary is only ‘Dearness Allowance.’ If your employer also contributes to Pension Scheme, the whole contribution amount (10% of salary) can be claimed as the tax deduction under Section 80CCD (2).

Note that the Total Deduction under section 80C, 80CCC and 80CCD(1) together cannot exceed Rs 1,50,000 for the financial year 2016-17. The additional tax deduction of Rs 50,000 u/s 80CCD (1b) is over and above this Rs 1.5 Lakh limit.

Section 80D

Deduction u/s 80D on health insurance premium is Rs 25,000. For Senior Citizens it is Rs 30,000. For very senior citizen above the age of 80 years who are not eligible to take health insurance, the deduction is allowed for Rs 30,000 toward medical expenditure.

Preventive health checkup (Medical checkups) expenses to the extent of Rs 5,000/- per family can be claimed as tax deductions. Remember, this is not over and above the individual limits as explained above. (Family includes: Self, spouse, dependent children and parents).

Section 80DD

You can claim up to Rs 75,000 for spending on medical treatments of your dependents (spouse, parents, kids or siblings)who have 40% disability. The tax deduction limit of up to Rs 1.25 lakh in case of severe disability can be availed.

To claim this deduction, you have to submit Form no 10-IA.

Section 80DDB

An individual (less than 60 years of age) can claim up to Rs 40,000 for the treatment of specified critical ailments. This can also be claimed on behalf of the dependents. The tax deduction limit under this section for Senior Citizens is Rs 60,000 and for very Senior Citizens (above 80 years) the limit is Rs 80,000.

To claim Tax deductions under Section 80DDB, it is mandatory for an individual to obtain ‘Doctor Certificate’ or ‘Prescription’ from a specialist working in a Govt or Private hospital.

For the purposes of section 80DDB, the following shall be the eligible diseases or ailments:

Neurological Diseases where the disability level has been certified to be of 40% and above:-

(a) Dementia

(b) Dystonia Musculorum Deformans

(c) Motor Neuron Disease

(d) Ataxia

(e) Chorea

(f) Hemiballismus

(g) Aphasia

(h) Parkinson’s Disease

Malignant Cancers

Full Blown Acquired Immuno-Deficiency Syndrome (AIDS) ;

Chronic Renal failure

Hematological disorders

Hemophilia

Thalassaemia

Section 24 (B)

The interest component of home loans is allowed as the deduction under Section 24B for up to Rs 2 lakh in case of a self-occupied house. If your property is a let-out one then the entire interest amount can be claimed as the tax deduction.

Section 80EE

This is a new proposal which has been made in Budget 2016-17. The first time Home Buyers can claim an additional Tax deduction of up to Rs 50,000 on home loan interest payments u/s 80EE. The below criteria has to be met for claiming tax deduction under section 80EE.

The home loan should have been sanctioned in FY 2016-17.Loan amount should be less than Rs 35 Lakh.

The value of the house should not be more than Rs 50 Lakh & the home buyer should not have any other existing residential house in his name.

Section 80U

This is similar to Section 80DD. A tax deduction is allowed for the tax assessee who is physically and mentally challenged.

Section 80GG

As per the budget 2016 proposal, the Tax Deduction amount under 80GG has been increased from Rs 24,000 per annum to Rs 60,000 per annum. Section 80GG is applicable for all those

Section 80TTA:- Tax Relief from Savings Bank Interest, who’s Taxable Income less than 5 lakh, they can get the Tax Relief from Bank Savings Interest up to Rs. 10 thousand.

Section 87A:- Tax Rebate up to Rs.5,000/- who’s taxable income less than 5 lakh