Interest on Loan for Residential House Property (80EE)

Section 130 — Interest on loan for a residential house property (loans sanctioned in 2016-17)

Section 130 continues 1961 s. 80EE. An individual may deduct interest on a loan from a financial institution taken to acquire a residential house property, up to Rs 50,000 a tax year, where the loan was sanctioned between 1 April 2016 and 31 March 2017, the loan sanctioned did not exceed Rs 35 lakh, the value of the property did not exceed Rs 50 lakh, and the individual owned no residential house property on the date the loan was sanctioned (s. 130(2) and (3)). The sanction window has closed, so the section now governs only interest on loans sanctioned in that year.

Interest allowed under s. 130 is not deductible again under any other provision, such as s. 22(1)(b) (s. 130(4)). Section 131, for loans sanctioned between 1 April 2019 and 31 March 2022, is open only to an individual not eligible under s. 130. The deduction is in Chapter VIII, which the new tax regime excludes (s. 202(2)(a)(xii)).

POINTS TO NOTE

(i) The conditions are tested on the date the loan was sanctioned, not in each later year. (ii) The Rs 50,000 limit is separate from the Rs 2 lakh limit in s. 22(2) on interest for a self-occupied property, but the same interest is deductible only once (s. 130(4)). (iii) Under the 1961 Act the deduction ran from assessment year 2017-18 (s. 80EE(2)); this Act states it for the tax year beginning on 1 April 2016 and later years, so interest on a continuing loan stays deductible.

CROSS-REFERENCES

• Section 22 — interest on borrowed capital, and the Rs 2 lakh limit in s. 22(2).
• Section 131 — loans sanctioned 1-4-2019 to 31-3-2022 (up to Rs 1.5 lakh).
• Section 202 — the new tax regime, which excludes Chapter VIII deductions.