First time individual homebuyers can get tax deduction on interest of home loan, under newly inserted section 80EE of the Income Tax Act, applicable for assessment year 2014-15. This is in addition to tax rebate on interest payment of home loan, under section 24.
Eligibility for 80EE rebate
This rebate on home loan interest is applicable only for home loans satisfying the following conditions:
i. Loan is sanctioned by a financial institution or housing finance company between 1st April 2013 and 31st March 2014.
ii. Loan amount is Rs. 25 lakhs or less and cost of residential house is Rs. 40 lakhs or less
This should be the only house owned by the taxpayer at the time of sanction.
Maximum deduction limit under 80EE
Up to Rs. 1 lakh can be claimed towards interest payable on home loan in the financial year 2013-14. If interest payable in this year is less than Rs. 1 lakh then the balance can be claimed in the following year.
For instance if interest payable in FY 2013-14 is Rs. 75,000 then tax rebate on remaining Rs. 25,000 can be claimed in FY 2014-15.
The amount claimed under 80EE cannot be claimed for tax rebate under any other sections in any year.
The deduction under sub-section 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.