In case of a self-occupied property, how much of interest on housing loan can be claimed as deduction?

Ans. In the case of self-occupied property, deduction under section 24(b)​​ cannot exceed Rs.2,00,000 or Rs. 30,000 (as the case may be). If all the following conditions are satisfied, then the limit in respect of interest on borrowed capital will be Rs.2,00,000:

➣ Capital is borrowed on or after 1-4-1999.

➣ Capital is borrowed for the purpose of acquisition or construction (i.e., not for repair, renewal, reconstruction).

➣ Acquisition or construction is completed within 5 years from the end of the financial year in which the capital was borrowed.

➣ The person extending the loan certifies that such interest is payable in respect of the amount advanced for acquisition or construction of the house or as re-finance of the principal amount outstanding under an earlier loan taken for acquisition or construction of the property.

If any of the above condition is not satisfied, then the limit of Rs. 2,00,000 will be reduced to Rs. 30,000. 

Deduction from Assessment Year 2017-18

As per Section 80EE of the Income-tax Act, deduction of up to Rs. 50,000 is allowed to an Individual towards interest on loan taken for acquisition of a residential house property. However, the deduction is allowed subject to following conditions:

The deduction under Section 80EE​ is allowed subject to 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 deduction up to Rs. 150,000 under Section 80EEA​ subject to following conditions:

(a)  Loan should be sanctioned by the financial institution during the period beginning on 01-04-2019 and ending on the 31-03-2022;

(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 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).