By Tanmay Bhatnagar
In her Budget speech, the Finance Minister spoke about the Government’s goal of achieving the objective of “Housing for All” by 2022. In pursuance of the same, the Government had launched two schemes in 2015 - the Pradhan Mantri Awas Yojna – Gramin (PMAY-G) and the Pradhan Mantri Awas Yojna – Urban (PMAY-U). Under the said schemes the Government aims to construct affordable houses which have been provided with amenities such as toilets, water supply, electricity and LPG connections.
In order to further the objective of “Housing for All”, amendments have been proposed to the Income-tax Act, 1961 (hereinafter ‘the Act’), namely, the amendment of Section 80-IBA and the insertion of Section 80EEA.
In order to further the objective of “Housing for All”, amendments have been proposed to the Income-tax Act, 1961 (hereinafter ‘the Act’), namely, the amendment of Section 80-IBA and the insertion of Section 80EEA.
Section 80-IBA of the Act provides for the deduction of one hundred percent of the profits and gains earned by assessees engaged in the business of developing and building housing projects from their total income. Amendment has been proposed to the same in order to align the definition of ‘afforable housing’ under the Act with that provided in the GST laws. The modified conditions which must be satisfied by a housing projects that are approved on or after 1st September 2019, are as follows:
- The stamp duty value of a residential unit in housing project cannot exceed Rs. 45 lakhs.
- The carpet area of a residential unit should not exceed 60 sq.mtr. for projects located in metropolitan cities and 90 sq.mtr. for projects located anywhere else.
The insertion of section 80EEA of the Act aims to provide a deduction to individual-assessees in respect of the interest on loan taken from any financial institution for the acquisition of residential house property. The proposed deduction would be available to assessees, who are not eligible to claim deduction under Section 80EE, from AY 2020-21 and whereby they would be able to claim deduction on the said interest up to the upper limit of Rs. 1.5 lakhs.
To be eligible for such deduction, the following conditions would have to be satisfied:
- the loan must have been sanctioned between 1st April 2019 and 31st March 2020;
- the stamp duty value of the residential house property should not be more than Rs. 45 lakhs; and
- the individual-assessee should not own any other residential property on the date of sanction of the loan.
If a deduction with respect to interest is claimed under this section, no further deduction can be claimed for such interest payment under any other provision of the Act for the same or any other assessment year.
A question which may arise while claiming the deduction under this section is whether the ‘stamp duty value’ of the residential house property would be the transaction value as set out in the instrument of transfer or if it would be the circle rate as notified by the government.
As per the provisions of Section 80EEA, the ‘stamp duty value’ is the value which is adopted by any authority or Government for the purpose of payment of stamp duty in respect of an immovable property. For the purpose of the computation of the stamp duty payable, usually the assessable value of the property is taken as the actual consideration paid or the circle rate for that property, whichever is higher. Thus, even for the purposes of claiming deduction under section 80EEA of the Act, both the actual consideration paid as well as the circle rate of the residential house property should be lesser than Rs. 45 lakhs.
One interesting question would arise if two persons, say A and B, jointly acquire a property, the stamp duty value of which is say Rs. 60 lakhs. In such a set of facts, neither A nor B would be able to claim deduction under section 80EEA of the Act, even though the value of their individual shares in the property could be less than Rs.45 lakhs. It is because the section itself clearly lays down that the stamp duty value of the property cannot exceed Rs. 45 lakhs. Thus, the requirement regarding the valuation is qua the property and not qua the owner.
The same is also in consonance with the proposed amendment to section 80-IBA of the Act since therein also it has been laid down that the stamp duty value of a residential unit cannot exceed Rs. 45 lakhs.
Another pertinent question which arises from the perusal of Section 80EEA of the Act is whether the deduction may be claimed by assessees who jointly acquire the residential house property. Thus, in a situation where two individuals A and B jointly acquire house property, the question would be whether both A and B would be eligible to claim deduction of Rs. 1.5 lakhs each.
Another variation of the above situation which may arise is where a residential house property is registered in the names of both A and B, and all the conditions laid down in Section 80EEA are fulfilled. There, the questions which would arise are whether both A and B would be allowed the deduction under Section 80EEA, and if allowed what would be the quantum of such deduction.
A possible interpretation which may be applied to this set of facts is the one laid down by the Bombay High Court while adjudicating upon the deduction under Section 24 of the Act in case of joint ownership of property in CIT v. Abdullabhai M. Moonim [[1981] 132 ITR 642 (Bombay)]. Section 24 provides that deduction from income from house property may be claimed on interest payments made with respect to loans taken inter-alia for acquisition of property. As per the said decision, deduction on the interest under Section 24 may be claimed by co-owners against their individual shares of the gross income from the property.
Therefore, by applying the said ratio laid down in the context of Section 24, it can be said that both A and B would be able to claim a deduction of Rs. 1.5 lakhs each under Section 80EEA of the Act.
Therefore, it would appear that the benefit intended to be provided by Section 80EEA of the Act with respect to affordable housing would be available even to joint owners of residential house properties. It remains to be seen if such view is also taken by the Department while allowing deduction under this section.
A question which may arise while claiming the deduction under this section is whether the ‘stamp duty value’ of the residential house property would be the transaction value as set out in the instrument of transfer or if it would be the circle rate as notified by the government.
As per the provisions of Section 80EEA, the ‘stamp duty value’ is the value which is adopted by any authority or Government for the purpose of payment of stamp duty in respect of an immovable property. For the purpose of the computation of the stamp duty payable, usually the assessable value of the property is taken as the actual consideration paid or the circle rate for that property, whichever is higher. Thus, even for the purposes of claiming deduction under section 80EEA of the Act, both the actual consideration paid as well as the circle rate of the residential house property should be lesser than Rs. 45 lakhs.
One interesting question would arise if two persons, say A and B, jointly acquire a property, the stamp duty value of which is say Rs. 60 lakhs. In such a set of facts, neither A nor B would be able to claim deduction under section 80EEA of the Act, even though the value of their individual shares in the property could be less than Rs.45 lakhs. It is because the section itself clearly lays down that the stamp duty value of the property cannot exceed Rs. 45 lakhs. Thus, the requirement regarding the valuation is qua the property and not qua the owner.
The same is also in consonance with the proposed amendment to section 80-IBA of the Act since therein also it has been laid down that the stamp duty value of a residential unit cannot exceed Rs. 45 lakhs.
Another pertinent question which arises from the perusal of Section 80EEA of the Act is whether the deduction may be claimed by assessees who jointly acquire the residential house property. Thus, in a situation where two individuals A and B jointly acquire house property, the question would be whether both A and B would be eligible to claim deduction of Rs. 1.5 lakhs each.
Another variation of the above situation which may arise is where a residential house property is registered in the names of both A and B, and all the conditions laid down in Section 80EEA are fulfilled. There, the questions which would arise are whether both A and B would be allowed the deduction under Section 80EEA, and if allowed what would be the quantum of such deduction.
A possible interpretation which may be applied to this set of facts is the one laid down by the Bombay High Court while adjudicating upon the deduction under Section 24 of the Act in case of joint ownership of property in CIT v. Abdullabhai M. Moonim [[1981] 132 ITR 642 (Bombay)]. Section 24 provides that deduction from income from house property may be claimed on interest payments made with respect to loans taken inter-alia for acquisition of property. As per the said decision, deduction on the interest under Section 24 may be claimed by co-owners against their individual shares of the gross income from the property.
Therefore, by applying the said ratio laid down in the context of Section 24, it can be said that both A and B would be able to claim a deduction of Rs. 1.5 lakhs each under Section 80EEA of the Act.
Therefore, it would appear that the benefit intended to be provided by Section 80EEA of the Act with respect to affordable housing would be available even to joint owners of residential house properties. It remains to be seen if such view is also taken by the Department while allowing deduction under this section.
[The author is an Associate, Direct Tax Team, Lakshmikumaran & Sridharan, Delhi]