Tax Benefit on Home Loan: Section 24, 80EEA & 80C With Automated Excel Based Income Tax Revised Form 16 Part B for F.Y. 2019-20

The repayment of Home Loan comprises of 2 components i.e. Repayment of Principal and Repayment of Interest. As the repayment comprises of 2 different components, the tax benefit on a home loan is governedby different sections of the Income Tax Act and these are claimed as tax deductions under different sections while filing the Income Tax Return.

Tax Benefit of Home Loan
The following is the benefit of Home Loan which can be claimed as Deduction:-
Section Deduction allowed Allowed for
Section 24 Rs . 2,00,000 Interest repayment
Section 80C Rs . 1,50,000 Principal repayment
Section 80EEA Rs . 1,50,000 Interest repayment

These Sections under which Tax Benefit on Home Loan can be claimedare explained below:-
Section 80C : Tax benefit on Home Loan (Principal Amount)
The amount paid as Repaymentof Principal Amount of Home Loan by an Individual/HUF is allowed as tax deduction under Section 80C of the Income Tax Act. The maximum tax deduction allowed under Section 80C is Rs . 1,50,000.
This tax deduction is the total of the deduction allowed under Section 80C and includes amount invested in PPF Account, Tax Saving Fixed Deposits , Equity Oriented Mutual funds , National Savings Certificate, Senior CitizensSaving Scheme etc.
This tax deduction under Section 80Cis available on payment basis irrespective of the year for which the payment has been made. The Amount paid as Stamp Duty & Registration Fee is also allowed as tax deduction under Section 80C even if the Assessee has not taken Loan.

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However, tax benefit of home loan under this section for repayment of principal part of the home loan is allowed only after the construction is complete and the completion certificate has been awarded. No deduction would be allowed under this section for repayment of principal for those years during which the property was under construction.
Moreover, in case you are planning to buy an under-construction property as it is priced at a lower price as compared to a fully completed property, you are here also requested to note that GSTis also levied on under-construction Property. However, no Service Tax is levied on properties on which construction has been fully completed.
House Property should not be sold within 5 years
Section 80C (5) also states that in case the assessee transfers the house property on which he has claimed tax deduction under Section 80Cbefore the expiry of 5 years from the end of the Financial Year in which the possession has been obtained by him, then no deduction and tax benefit on Home Loan shall be allowed under Section 80C . The aggregate amount of tax deduction already claimedin respect of previous years shall be deemed to be the Income of the Assessee of such year in which the property has been sold and the Assessee shall be liable to pay tax on such income.
Tax benefit on Home Loan (Interest Amount)
Tax Benefit on Home Loan for payment of Interest on Home Loan can be claimed as Deduction under Section 24 as well as under the newly inserted section 80EEA ( Amended by Budget 2020)
Section 24: Income Tax Benefit on Interest on Loan for Purchase/Constructionof Real Estate

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Tax Benefit on Home Loan for payment of Interest is allowed as a deduction under Section 24 of the Income Tax Act. As per Section 24, the Income from House Property shall be reducedby the amount of Interest paid on Loan where the loan has been taken for the purpose of Purchase/ Construction/ Repair/ Renewal/ Reconstruction of Property.
The maximum tax deduction allowed under Section 24 of a self- occupied property is subject to a maximum limit of Rs . 2 Lakhs (increased in Budget 2014 from 1.5 Lakhs to Rs . 2 Lakhs ).
In case the property for which the Home Loan has been taken is not self- occupied , no maximum limit has been prescribed in this case and the taxpayer can take tax deduction of the whole interest amount under Section 24.
Please Note: In case a property has not been self- occupied by the owner by reason of the fact owing to his employment, business or profession carried on at any other place, he has to reside at that other place not belonging to him, then the amount of tax deduction allowed under Section 24 shall be Rs . 2 Lakhs only.

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Section 24 is deductible on payable basis, i.e. on accrual basis. Hence, deduction under Section 24 can be claimed on yearly basis even if no payment has been made during the year as compared to Section 80C which allows for deduction only on payment basis.
Moreover, if the property is not acquired/constructedcompleted within 5 years from the end of financial year in which the loan was taken, the interest benefit in this case would be reduced from 2 Lakhs to Rs 30 thousand only. (Limit increased from 3 years to 5 years from FY 2016-17 onwards ).
The Quantum of Deduction allowed for payment of Interest on Home Loan under Section 24 has been summarized below:-
Quantum of Deduction allowed for Payment of Interest on Home Loan under Section 24
Type of Property Self OccupiedProperty Not Self OccupiedProperty
Completion Status Completed within 5 years Not completed within 5 years Completed within 5 years Not completed within 5 years
Deduction Allowed Rs . 2,00,000 Rs . 30,000 No Limit No Limit
Budget 2017 Update

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In case of non-self occupiedproperty, the interest paid is reducedfrom the Rent paid to arrive at the Income from House Property. In some cases, it may happen that the Interest paid is more than the Rent earned which will result in Loss from House Property. This Loss is allowed to be set-off with Income from any other head.
The Finance Act 2017 announcedon 1st Feb 2017 has put a restriction to the maximum amount of Loss under head House Property that can be set-off from other heads of Income. From Financial Year 2017-18 onwards , Loss of a maximum of Rs . 2 Lakhs is allowed to be set-off with Income from other heads. The amount which is not set-off shall be carried forward to future years.
These new provisionsinserted in the Income Tax Act have been very nicely explained in this link – Income Tax Treatment of Loss from House Property.
Income Tax treatment of Pre-Construction Interest
In many cases, amount is paid for the purchase of property even before the construction is completed. Some home buyers , purchase properties on loan before the completion of construction and start paying EMI to the Bank.
In such cases, Section 24 very specifically states that Tax Deduction for payment of Interest shall not be allowed before the construction is complete. In such cases,
1. If Loan is taken for purpose of Repair/ Renewal/ Reconstruction: No Tax Deduction allowed for Interest paid before Completion
2. If Loan is taken for the purpose of Purchase/ Construction: The Interest that has been paid before the completion of construction should be aggregated and the whole aggregated amount shall be allowed as tax deduction in 5 equal installments for 5 successive Financial Years starting from the year in which the construction has been completed.
For eg : Mr. A purchases a House in New Delhi in 2009 and took a loan of Rs . 10,00,000 from a Bank paying Interest @ 10% p.a. The Construction was completed in April 2011.
Now, As per Section 24 of the Income Tax Act, tax deduction for payment of Interest would only be allowed from financial year 2011-12 onwards . However, the Interest paid on Loan before the completion of Construction (i.e. Rs . 2,00,000) would be allowed as tax deduction for the next 5 Financial years @ 40,000 p.a. commencing from Financial Year 2011-12 onwards . (Easy amounts have been taken in this example for simplification purposes)
Important Points:-
1. Interest paid for outstanding amount is not allowed as Tax Deduction ( Shew Kissan Bhatter v. CIT (1973) 89 ITR 61( SC )
2. This tax deduction shall be available only if the construction is completed within 5 years from the end of the financial year in which the capital is borrowed
3. Taxpayer cannot claim any deduction for Commission Paid for arranging the Loan
4. If the taxpayer is not earning any income from house property, but is paying Municipal Taxes and Int on Home Loan, this would lead to Loss under head Income from House Property. This loss arising under head Income from House Property is allowed to be set-off against income from various other heads in the same Financial Year.
5. In case the loss cannot be set-off against income from other sources in the same financial year, the loss can be carried forward to future years and set-off against income arising from House Property for the next 8 financial years.
6. Tax Benefits of Interest on Home Loan can be claimed only by the person who has acquired or constructed the property with the Borrowed Funds . It is not available to the Successor of the Property.

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For the purpose of simplicity and easy understanding, a comparison of Tax Benefit on Home Loan under Section 24 and Section 80C has been made here under:-
ParticularsSection 24 Section 80C
Tax Deduction allowed for Interest Principal
Type of Property Any Real Estate Property Only Residential House Property
Basis of Tax Deduction Accrualbasis Paid basis
Quantum of Tax Deduction allowed Self OccupiedProperty: Rs . 2,00,000. Non Self Occupied Property: No Limit Rs . 1,50,000
Purpose of Loan Purchase/Construction/ Repair/ Renewal/ Reconstruction of a Residential House Property. Purchase /Construction of a new House Property
Eligibility for claiming Tax deduction Purchase/ Construction should be completed within 5 years Nil
Restriction on Sale of Property Nil Tax Deduction claimed would be reversed if Property sold within 5 years

Section 80EEA : Income Tax Benefit on Interest on Home Loan (First Time Buyers )
The interest deduction can be claimedunder Section 80EEA as well which is over and above the deduction allowed to be claimed under Section 24 of Rs . 2 Lakhs and also above the deduction of Rs . 1.5 Lakhs allowed under Section 80C

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This Deduction of Section 80EEAwould be applicable only in the following cases:-

 1. This deduction would be allowed only if the stamp duty value of the property purchased is less than Rs . 45 Lakhs .
2. The loan should be sanctionedbetween 1st April 2019 and 31st March 2021.
The above 3 Sections relating to Tax Benefits on Home Loans have been summarised as under:-
Particulars Quantum of Deduction ( Rs .)
Self Occupied Property Non-Self Occupied Property
Section 24 2,00,000 No Limit
Section 80C 1,50,000 1,50,000
Section 80EE 1,50,000 1,50,000
Please Note:-
1. The above tax deductionsare per person and not per Property. So in case you’ ve purchased a property jointly and have taken a joint home loan, each person repayingthe amount would be eligible to claim whole deduction separately .
2. If you are living in a rentedpremise and are taking Tax Benefit of HRA Allowance, even then you can claim Tax benefit on home loan under Section 24, Section 80EE & Section 80C .
3. In case a person is optingfor the New Slab Rates as announced in Budget 2020, they would not be able to claim the benefit of any of these deductions .
For claiming the above tax deductions , you would be required to furnish the statement provided by the lender clearly indicating the amount payable and paid towards Interest and Principal. After claimingthe above deductions of Tax Benefit on Home Loan, the balance Income of an Individual would be taxed as per the Income Tax Slab Rates. ( Recommended Read: Income Tax Slab Rates)
If you have any more further queriesregarding claiming deduction under Section 80C for Principal Repayment or under Section 24 for Principal Repayment.

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Income Tax Calculation FY 2020-21 – Which Tax Structure to Select? With Automated Income Tax Revised Form 16 Part A&B and Part B for F.Y. 2019-20

How to do Income Tax The calculation for FY 2020-21? Which Tax Structure to Select?

According to Taxplan 2020, you can't guarantee any assessment reasoning or exclusion on the off chance that you intend to pick a new Income Tax Slab. Along these lines, as an individual citizen on the off chance that you settle on the new assessment system with a decrease charge rate, you have to do without all tax cuts accessible today. Luckily, you have an alternative to proceeding with old duty structure. A salaried individual can switch among old and new assessment structure.

Therefore, we will discuss which charge conclusion and exception you have to do without on the of the chance that you pick new expense structure with the diminishing charge rate. Furthermore, we will step through hardly any exam cases and do annual assessment estimation for FY 2020-21 to realize which duty structure to choose?

In other words, reduce of Tax Deductions and Exemption not permitted in new Tax Structure

1 Tax Deduction Under Section 80C

However, the most well-known duty the finding of 1.5 Lakh under segment 80C isn't appropriate for new expense structure. This implies you can't guarantee any profit for venture made in the instruments, for example, PF, PPF, Life protection premium, school education costs of youngsters, ELSS, PPF, NPS and so on.

You can guarantee a conclusion under area 80CCD for business commitment because of a representative for NPS.

2 Tax Deduction Under Section 80D

No duty finding takes into consideration the clinical protection premium and preventive wellbeing test under segment 80D for new expense structure.

3 No LTA Benefits

For instance, a new Tax Rate of  LTA – Leave travel remittance exception which is at present accessible to a salaried worker for twice in the square of four years isn't permitted.

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4 HRA

HRA is house lease recompense. HRA is paid to salaried people my boss as a piece of compensation. Prior citizen had the option to guarantee HRA up as far as possible. In a new assessment structure, it isn't passable.

5 Standard Deduction

A standard conclusion advantage of Rs.50000 as of now accessible to a salaried citizen isn't appropriate in the new assessment section.

6 Section 80TTA Benefits

Above all, Section 80TTA gives the conclusion of Rs.10000 on intrigue salary. On a new assessment system, this advantage isn't accessible.

7 Section 80DDB Benefits

In addition, advantages for handicap under segment 80DDB up to Rs.40000 not accessible in the event that you are intending to select new decreased duty structure.

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8 Section 80E Education Loan

Tax reduction passable on the intrigue paid on training advance won't be claimable under area 80E.

9 Section 80G of Donation

After that, you had the option to make a gift under area 80G and guarantee annual tax cut of the identical sum. The said reasoning isn't accessible in decreased expense structure.

10 Section 24 Home Loan Interest

Under area 24 of the Income charge act, an individual had the option to guarantee charge finding on the intrigue instalment on the lodging advance up to a most extreme measure of Rs.200000. This advantage isn't broadened in the event that you pick new duty structure.

Similarly, all derivation material under part VIA like segment 80C, 80CCC, 80CCD, 80D, 80DD, 80DDB, 80E, 80EE, 80EEA, 80EEB, 80G, 80GG, 80GGA, 80GGC, 80IA, 80-IAB, 80-IAC, 80-IB, 80-IBA, and so forth) won't be claimable by those deciding on the new duty system.

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Income Tax Calculation FY 2020-21 (AY 2021-2022)

Now let’s calculate actual tax benefits by doing Income Tax Calculation and comparing both the tax structures in various cases.

Case 1 – Salaried Individual claiming common deduction (80C,80D) and Home Loan Benefits

In first case I will take example of salaried individual with income of 20 Lakh & 10 Lakh. Let’s consider in both the cases individual takes benefits of standard deduction Rs.50000, deduction of Rs.1.5 Lakh under section 80C, Rs.25000 under section 80D and Interest on home loan up to Rs.200000.

Now two options are available to the salaried individual. First he/she can opt for old tax structure with all above deduction or he/she can forgo all deduction and opt for new reduced tax structure.

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If individual has annual income of 20 Lakh and old tax structure is opted with tax deductions. Applicable tax is 2.85 Lakh. If new tax structure is adopted applicable tax amount is 3.37 Lakh. Similarly, if annual income is 10 Lakh and old tax structure is adopted applicable tax is Rs.27500. For new tax structure applicable tax is Rs.75000. Calculation is given below.

Case 2 – Salaried Individual claiming common deduction under section 80C, 80D and Standard Deduction

Gross Income Rs/-	Tax as per Old Tax Structure Rs/-	Tax as per New Tax Structure Rs/-	Additional Tax Saving Rs/- / Payable
7.5 Lakh	18200	39000	-20800
10 Lakh	70200	78000	-7800
12.5 Lakh	124800	130000	-5200
15 Lakh	202800	195000	7800
20 Lakh	358800	351000	7800

In the second case, we should expect that salaried individual is taking full advantages of area 80C, 80D and standard derivations starting at now. Under a new assessment system, these conclusions are not material. Assume the salary level of individual is 10 Lakh. In the event that the old assessment system is chosen payable duty is Rs.70200 then again if

New tax regime is selected payable tax is Rs.78000.

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Case 3 – Salaried Individual not claiming any deduction or exemptions

In third case let’s assume that salaried individual is not claiming any deduction of exemptions as of now. So, under new tax regime he/she will get benefit of reduced tax rates and he/she needs to pay less taxes. Suppose income level of individual is 15 Lakh. If old tax regime is selected payable tax is Rs.257400 on the other hand if new tax regime is selected payable tax is Rs.195000 only.

ross Income Rs/-	Tax as per Old Tax Structure Rs/-	Tax as per New Tax Structure Rs/-	Additional Tax Saving Rs/-
7.5 Lakh	54600	39000	15600
10 Lakh	106600	78000	28600
12.5 Lakh	179400	130000	49400
15 Lakh	257400	195000	62400
20 Lakh	413400	351000	62400

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In conclusion,

From the model of the above case clearly in the greater part of the cases old expense rate with derivation offers higher tax reductions. New diminished expense rate is advantageous just in the event that you are not guaranteeing any reasoning starting at now. (which is uncommon)

In the event that you have home advance and higher pay, you will get higher tax cuts in old assessment rate contrasted with new expense rate.

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