The deduction of Rs 1.5 lakh in a financial year is available under section 80EEA of the Income-tax Act, 1961. Deduction on payment of interest on a housing loan was introduced in Budget 2019. This deduction is available over and above the Rs 2 lakh deduction available on the interest payment on housing loan subject to certain conditions. Thus, the total deduction available to an individual taxpayer on the interest payment of a housing loan for buying an affordable house is Rs 3.5 lakh in a financial year.
To avail the tax benefit under this section, certain conditions have to be fulfilled which are as follows:
- Housing loan must be taken from a financial institution such as a bank or a housing finance company for buying a residential house property.
- The home loan must be taken between April 1, 2021 and March 31, 2022.
- Stamp duty value of the house property should not exceed Rs 45 lakhs
- The individual taxpayer should not be eligible to claim deduction under the existing Section 80EE.
- The taxpayer should not own any residential house property as on the date of sanction of the loan.
This deduction on interest payment is available from gross total income of the taxpayer thereby reducing the tax liability of an individual taxpayer.
At present, for a self-occupied house, one can avail deduction on the principal amount repaid on the home loan as well as the interest paid on it. Under section 80C of the Income-tax Act, you get a deduction for the principal (of the loan) repaid up to Rs 1.5 lakh a year and the interest paid is deductible up to Rs 2 lakh per annum under section 24.
