Taxation - DT Ch 09: Deductions - Test 4: answer key

Question 1 · 2 marks · Taxation - DT Ch 09: Deductions · hard

Scenario. Ms. Aditi Rao, aged 39 years, is a resident individual working as a senior manager at Nandini Real Estates Pvt. Ltd. She has exercised the option to shift out of the default tax regime for Tax Year 2026-27. During the year, she paid interest on four education loans that she had personally obtained from eligible lending institutions. The first loan of ₹12,00,000 was taken from a scheduled bank for her own MBA programme at a university recognised by the competent authority. She commenced interest payments in Tax Year 2021-22 and paid ₹68,000 towards interest during the current year. The second loan was taken for her husband's postgraduate management course at a recognised university in the United Kingdom. The loan was granted by a scheduled bank, and Aditi paid ₹54,000 as interest during the year. Interest payments on this loan commenced in Tax Year 2024-25. The third loan was taken for her daughter's recognised undergraduate programme after completion of Class XII. Interest payments commenced in the current tax year, and Aditi paid ₹31,000 as interest. She also repaid ₹24,000 towards the principal of this daughter's education loan. Aditi is additionally the legal guardian of her niece, for whose recognised postgraduate course she obtained a loan from an approved charitable institution. She paid ₹17,000 towards interest on this loan during the year. Finally, she obtained a separate loan from a scheduled bank to finance her younger brother's postgraduate education and paid ₹21,000 as interest during the year. All interest payments were made from income chargeable to tax. The loans relate to recognised courses pursued after the respective students completed their senior secondary education. Aditi wishes to determine which payments qualify, the applicable time limit and whether the aggregate interest deduction is restricted by a monetary ceiling.

Determine Aditi's aggregate deduction under section 80E for Tax Year 2026-27 in respect of the four education loans obtained for her own education, her husband's education, her daughter's education and her niece's education. Assume that the niece is a student for whom Aditi is the legal guardian and that the lending institutions and courses satisfy the statutory requirements. Exclude the loan for her brother's education.

1. ₹1,53,000
2. ₹1,50,000
3. ₹1,70,000 (correct answer)
4. ₹1,91,000

Answer: C — ₹1,70,000

Explanation. Section 80E covers interest paid on qualifying higher education loans taken for oneself, spouse, children or a student for whom the assessee is legal guardian. The eligible interest is ₹68,000 + ₹54,000 + ₹31,000 + ₹17,000 = ₹1,70,000. Interest of ₹21,000 for the brother's education is excluded because a brother is not included in the prescribed meaning of relative. Principal repayment of ₹24,000 is also excluded. Hence deduction = ₹1,70,000, without an annual monetary ceiling.

Where it goes wrong. Including the brother's education loan or the principal repayment, instead of restricting the claim to qualifying interest payments.

Authority. Section 80E, Income-tax Act, 1961; corresponding section 129, Income-tax Act, 2025.

Question 2 · 2 marks · Taxation - DT Ch 09: Deductions · medium

Aditi commenced paying interest on her own education loan in Tax Year 2021-22. She continues to pay interest during Tax Year 2026-27. Assuming that the interest remains unpaid in full and that all other conditions are satisfied, determine the final tax year in which she can potentially claim deduction under section 80E in respect of this loan.

1. Tax Year 2028-29 (correct answer)
2. Tax Year 2027-28
3. Tax Year 2029-30
4. Tax Year 2030-31

Answer: A — Tax Year 2028-29

Explanation. Section 80E permits deduction for the initial assessment year in which interest payment commences and seven immediately succeeding assessment years, or until interest is paid in full, whichever is earlier. The eight-year sequence is 2021-22, 2022-23, 2023-24, 2024-25, 2025-26, 2026-27, 2027-28 and 2028-29. Therefore, the final eligible year, assuming the interest continues to remain payable, is Tax Year 2028-29. The commencement year is counted as year one.

Where it goes wrong. Counting eight succeeding years after the initial tax year rather than including the initial year in the eight-year period.

Authority. Section 80E(2), Income-tax Act, 1961; corresponding section 129(3), Income-tax Act, 2025.

Question 3 · 2 marks · Taxation - DT Ch 09: Deductions · hard

Aditi also paid ₹21,000 as interest on a scheduled-bank loan taken in her own name to finance her younger brother's postgraduate course. The course was pursued after Class XII at a recognised institution and the interest was paid from her taxable income. Can she claim this amount under section 80E merely because she personally borrowed the money and paid the interest?

1. ₹21,000, since the borrower paid the interest
2. ₹10,500, since only half the payment qualifies
3. ₹15,000, subject to the monetary ceiling
4. Nil, because her brother is not a specified relative (correct answer)

Answer: D — Nil, because her brother is not a specified relative

Explanation. Section 80E defines the eligible relative as the individual's spouse or children, or a student for whom the individual is the legal guardian. A brother is not covered by this definition. Although Aditi borrowed the money from a scheduled bank, pursued a recognised higher education course through the loan and paid ₹21,000 interest from taxable income, the relationship condition is not fulfilled. Accordingly, allowable deduction for this payment is nil.

Where it goes wrong. Assuming that payment by the assessee automatically qualifies regardless of the relationship between the assessee and the student.

Authority. Section 80E(1) and Explanation, Income-tax Act, 1961; corresponding section 129, Income-tax Act, 2025.

Question 4 · 2 marks · Taxation - DT Ch 09: Deductions · medium

Aditi paid ₹31,000 interest and ₹24,000 principal towards the education loan taken for her daughter's recognised undergraduate course. The course commenced after the daughter completed Class XII, the loan was obtained from a scheduled bank and the interest was first paid during Tax Year 2026-27. What amount qualifies for deduction under section 80E in respect of this daughter-specific loan?

1. ₹55,000
2. ₹24,000
3. ₹31,000 (correct answer)
4. Nil

Answer: C — ₹31,000

Explanation. Section 80E allows deduction only for interest paid on the qualifying education loan, not for repayment of principal. The daughter is a specified relative and the recognised undergraduate programme pursued after senior secondary education satisfies the higher education condition. Interest actually paid = ₹31,000. Principal repaid = ₹24,000, which is not deductible under this provision. Therefore, deduction relating to this loan is ₹31,000.

Where it goes wrong. Adding principal repayment to interest merely because both amounts are paid towards the same education loan.

Authority. Section 80E(1), Income-tax Act, 1961; corresponding section 129(1) and (2), Income-tax Act, 2025.

Question 5 · 2 marks · Taxation - DT Ch 09: Deductions · hard

Scenario. Mr. Raghav Malhotra and his spouse, Ms. Nisha Malhotra, are resident individuals who have independently exercised the option to shift out of the default tax regime for Tax Year 2026-27. Raghav acquired a residential house for ₹50,00,000 using a housing loan of ₹35,00,000 from a scheduled bank. The loan was sanctioned on 30 March 2017, during Tax Year 2016-17. On that date, Raghav did not own any residential house in India. The house is self-occupied. Interest payable on this loan during Tax Year 2026-27 is ₹2,70,000, of which ₹2,00,000 is allowable under section 24(b). Raghav subsequently inherited a residential flat at Jaipur in December 2022, which he continues to own. Nisha separately purchased her first residential house using a loan of ₹42,00,000 from a recognised housing finance company. The loan was sanctioned on 31 March 2022. The stamp duty value of the house on acquisition was ₹45,00,000. Nisha did not own any residential house when her loan was sanctioned and was not eligible to claim deduction under section 80EE. The property is self-occupied. Interest payable on her housing loan for Tax Year 2026-27 is ₹3,80,000, of which ₹2,00,000 is allowable under section 24(b). Both loans remain outstanding throughout the tax year and the interest is payable in respect of the relevant previous year. The spouses have not transferred the properties. They seek advice on the additional deductions available under sections 80EE and 80EEA, the historical loan-sanction windows, the monetary limits and the relevance of subsequent ownership of another residential property.

Calculate Raghav's deduction under section 80EE for Tax Year 2026-27. His housing loan satisfies the historical sanction-year, loan-amount, property-value and first-home conditions. Interest payable is ₹2,70,000, of which ₹2,00,000 is claimed under section 24(b). Determine the additional deduction allowable under section 80EE, having regard to the prescribed ceiling and the interest already considered under section 24(b).

1. ₹20,000
2. ₹35,000
3. ₹70,000
4. ₹50,000 (correct answer)

Answer: D — ₹50,000

Explanation. Interest payable is ₹2,70,000. The amount of ₹2,00,000 is allowable under section 24(b), leaving ₹70,000 of interest available for consideration under section 80EE. The section 80EE deduction is subject to a maximum of ₹50,000 per tax year. Accordingly, deduction = lower of ₹70,000 and ₹50,000 = ₹50,000. It is additional to the eligible deduction under section 24(b), without duplicating the same interest.

Where it goes wrong. Claiming the entire ₹70,000 balance despite the separate ₹50,000 ceiling under section 80EE.

Authority. Section 80EE, Income-tax Act, 1961; corresponding section 130, Income-tax Act, 2025; section 24(b).

Question 6 · 2 marks · Taxation - DT Ch 09: Deductions · medium

Raghav acquired another residential flat by inheritance in December 2022, several years after obtaining the housing loan for his first house. He did not own any residential house on 30 March 2017, the date on which the original loan was sanctioned. Assuming all other section 80EE conditions continue to be satisfied, does the subsequent inheritance disqualify him from claiming the section 80EE deduction in Tax Year 2026-27?

1. No, because the ownership condition is examined on the date of loan sanction (correct answer)
2. Yes, because he owns two residential properties during the current year
3. Yes, because inheritance terminates the earlier deduction
4. No, but only half of the deduction remains allowable

Answer: A — No, because the ownership condition is examined on the date of loan sanction

Explanation. One of the conditions under section 80EE is that the individual should not own any residential house on the date of sanction of the housing loan. Raghav owned no residential house on 30 March 2017. The condition is tested on that date, not continuously throughout the repayment period. His subsequent inheritance in 2022 does not retrospectively alter his eligibility on the loan-sanction date. Hence the inheritance does not by itself disqualify the continuing deduction.

Where it goes wrong. Rechecking the first-house ownership condition every year instead of examining ownership on the prescribed loan-sanction date.

Authority. Section 80EE(3), Income-tax Act, 1961; corresponding section 130(2), Income-tax Act, 2025.

Question 7 · 2 marks · Taxation - DT Ch 09: Deductions · hard

Nisha's interest payable during Tax Year 2026-27 is ₹3,80,000. Her self-occupied property qualifies for section 24(b) deduction of ₹2,00,000, and her loan satisfies the conditions of section 80EEA. Determine the additional deduction under section 80EEA, considering the remaining interest and the statutory monetary ceiling.

1. ₹1,80,000
2. ₹1,50,000 (correct answer)
3. ₹2,00,000
4. ₹1,30,000

Answer: B — ₹1,50,000

Explanation. Total interest payable is ₹3,80,000. Deduction under section 24(b) is ₹2,00,000. Remaining eligible interest = ₹3,80,000 − ₹2,00,000 = ₹1,80,000. Section 80EEA permits an additional deduction up to ₹1,50,000. Therefore, deduction under section 80EEA = lower of ₹1,80,000 and ₹1,50,000 = ₹1,50,000. The additional deduction is claimed separately from section 24(b).

Where it goes wrong. Treating the residual interest of ₹1,80,000 as fully deductible under section 80EEA without applying its ₹1,50,000 ceiling.

Authority. Section 80EEA(1) and (2), Income-tax Act, 1961; corresponding section 131, Income-tax Act, 2025; section 24(b).

Question 8 · 2 marks · Taxation - DT Ch 09: Deductions · medium

Nisha's housing loan was sanctioned on 31 March 2022 by a housing finance company. The stamp duty value of the residential house was ₹45,00,000, and she did not own any residential house on the sanction date. She was also not eligible for deduction under section 80EE. Which conclusion is correct regarding her eligibility under section 80EEA, assuming all other statutory requirements are satisfied?

1. Ineligible, because the value must be below ₹45 lakh
2. Ineligible, because an HFC is not an eligible lender
3. Eligible, because the date and stamp duty value satisfy the thresholds (correct answer)
4. Ineligible, because the loan must be sanctioned during FY 2016-17

Answer: C — Eligible, because the date and stamp duty value satisfy the thresholds

Explanation. Section 80EEA covers qualifying loans sanctioned between 1 April 2019 and 31 March 2022. Nisha's sanction date of 31 March 2022 is within the prescribed period. The stamp duty value of ₹45,00,000 meets the ceiling of ₹45 lakh, which is inclusive. An eligible housing finance company can grant the loan. Since she owned no house on the sanction date and was not eligible under section 80EE, the stated conditions are satisfied.

Where it goes wrong. Interpreting the ₹45 lakh ceiling as strictly below ₹45 lakh or excluding a qualifying housing finance company.

Authority. Section 80EEA(3), Income-tax Act, 1961; corresponding section 131(2), Income-tax Act, 2025.

Question 9 · 2 marks · Taxation - DT Ch 09: Deductions · medium

Scenario. Ms. Tara Kapoor, aged 36 years, is a resident individual carrying on a consultancy business. She has opted out of the default tax regime for Tax Year 2026-27. On 31 March 2023, she obtained a loan of ₹18,00,000 from a banking company to purchase a battery-operated electric car for personal use. The vehicle is powered exclusively by an electric motor, draws traction energy from a battery installed in the vehicle and has a regenerative braking system. The loan remains outstanding, and interest payable for Tax Year 2026-27 is ₹1,72,000. Tara also obtained a separate loan from an NBFC on 1 February 2022 to purchase a plug-in hybrid vehicle having both a petrol engine and an electric motor. Interest payable on that loan during the current year is ₹35,000. Mr. Mohit Arora, aged 43 years, is employed in a private company but does not receive any house rent allowance. He occupies a rented residential apartment in Delhi for his own residence and pays monthly rent of ₹18,000. His total income before claiming deduction under section 80GG is ₹9,60,000. Neither Mohit nor his spouse nor his minor child nor the HUF of which he is a member owns any residential accommodation in Delhi, where he ordinarily resides and performs his employment duties. Mohit inherited a residential property at Jaipur, which is let out to tenants throughout the year. The property is not occupied by him and its annual value is determined under the applicable provisions for let-out property. Mohit has no other deduction under Chapter VI-A affecting his section 80GG computation. Both Tara and Mohit have maintained the relevant loan, interest and rental records and wish to determine their respective deductions.

Tara's electric vehicle loan was sanctioned on 31 March 2023 by a banking company. The vehicle meets the statutory definition of an electric vehicle and the loan remains outstanding. Interest payable during Tax Year 2026-27 is ₹1,72,000. Determine her eligible deduction under section 80EEB for the year.

1. ₹1,50,000 (correct answer)
2. ₹1,72,000
3. ₹1,22,000
4. Nil

Answer: A — ₹1,50,000

Explanation. Section 80EEB allows deduction for interest payable on a loan taken by an individual from a financial institution for purchase of an eligible electric vehicle. The loan sanction on 31 March 2023 falls within the period ending on that date. Interest payable is ₹1,72,000. The annual deduction is capped at ₹1,50,000. Thus deduction = lower of ₹1,72,000 and ₹1,50,000 = ₹1,50,000.

Where it goes wrong. Allowing the entire interest payable instead of restricting the deduction to the statutory maximum.

Authority. Section 80EEB(1) and (2), Income-tax Act, 1961; corresponding section 132, Income-tax Act, 2025.

Question 10 · 2 marks · Taxation - DT Ch 09: Deductions · hard

Tara paid ₹35,000 as interest on a loan obtained from an NBFC for purchasing a plug-in hybrid vehicle. The loan was sanctioned within the statutory sanction period for section 80EEB. The vehicle has both a petrol engine and an electric motor. Determine whether the interest qualifies under section 80EEB, considering the technical definition of an electric vehicle.

1. ₹35,000, because the vehicle uses an electric motor
2. ₹17,500, because only half the interest qualifies
3. Nil, because the vehicle is not powered exclusively by electricity (correct answer)
4. ₹25,000, subject to the annual interest limit

Answer: C — Nil, because the vehicle is not powered exclusively by electricity

Explanation. The statutory definition requires an electric vehicle to be powered exclusively by an electric motor, with traction energy supplied exclusively by the traction battery installed in the vehicle. It must also have regenerative braking. A plug-in hybrid has a petrol engine in addition to an electric motor and therefore does not meet the exclusive-electric-power requirement. Consequently, the ₹35,000 interest paid on its loan does not qualify under section 80EEB.

Where it goes wrong. Treating every hybrid or plug-in hybrid vehicle as an electric vehicle merely because it contains an electric motor.

Authority. Section 80EEB(2), Income-tax Act, 1961; corresponding section 132(6)(b), Income-tax Act, 2025.

Question 11 · 2 marks · Taxation - DT Ch 09: Deductions · hard

Mohit does not receive HRA and occupies rented accommodation in Delhi. He owns an inherited residential property at Jaipur, which is let out throughout the year and is not occupied by him. Its annual value is assessed under the provisions applicable to let-out property. Neither Mohit nor his spouse, minor child or HUF owns a residential property at his Delhi residence or workplace. Does ownership of the Jaipur property by itself disqualify Mohit from section 80GG?

1. Yes, because ownership of any residential property is disqualifying
2. No, because the other property is not occupied by him and does not fall within the specified self-occupation treatment (correct answer)
3. Yes, because property at another place is always treated as occupied
4. No, but only 50% of the rent paid can qualify

Answer: B — No, because the other property is not occupied by him and does not fall within the specified self-occupation treatment

Explanation. Section 80GG disallows deduction where the assessee, spouse, minor child or relevant HUF owns residential accommodation at the place where the assessee ordinarily resides, works or carries on business. Ownership at another place does not automatically disqualify the assessee if that accommodation is not occupied by him and its annual value is not required to be determined under the specified self-occupation provisions. Mohit's Jaipur property is let out and is not occupied by him. Therefore, this ownership does not itself prevent his claim.

Where it goes wrong. Assuming that ownership of any residential property anywhere in India automatically prevents a deduction under section 80GG.

Authority. Section 80GG, Income-tax Act, 1961; corresponding section 134(2)(4) and (5), Income-tax Act, 2025.

Question 12 · 2 marks · Taxation - DT Ch 09: Deductions · medium

Mohit pays rent of ₹18,000 per month for his Delhi residence and has total income of ₹9,60,000 before deduction under section 80GG. He receives no HRA and satisfies the residential ownership conditions. Determine the deduction under section 80GG by comparing actual rent less 10% of total income, 25% of total income and ₹5,000 per month.

1. ₹1,20,000
2. ₹2,40,000
3. ₹96,000
4. ₹60,000 (correct answer)

Answer: D — ₹60,000

Explanation. Annual rent = ₹18,000 × 12 = ₹2,16,000. Rent less 10% of total income = ₹2,16,000 − ₹96,000 = ₹1,20,000. The second limit is 25% × ₹9,60,000 = ₹2,40,000. The third limit is ₹5,000 × 12 = ₹60,000. Deduction is the least of ₹1,20,000, ₹2,40,000 and ₹60,000, namely ₹60,000.

Where it goes wrong. Selecting rent less 10% of income without comparing it with the monthly ceiling of ₹5,000.

Authority. Section 80GG, Income-tax Act, 1961; corresponding section 134(3), Income-tax Act, 2025.

Question 13 · 2 marks · Taxation - DT Ch 09: Deductions · hard

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

Mr. Siddharth, a resident individual, has opted for the optional tax regime. During Tax Year 2026-27, he paid ₹1,20,000 interest on a loan taken from a scheduled bank for his own recognised postgraduate course, ₹66,000 interest on a loan taken for his spouse's recognised postgraduate course from an approved charitable institution, and ₹50,000 interest on a bank loan taken for his brother's education. All courses commenced after senior secondary education, and all interest was paid from his taxable income. What is his aggregate eligible deduction under section 80E?

1. ₹2,36,000
2. ₹1,50,000
3. ₹1,86,000 (correct answer)
4. ₹1,20,000

Answer: C — ₹1,86,000

Explanation. Interest for self-education qualifies: ₹1,20,000. Interest for the spouse's higher education also qualifies: ₹66,000. A brother is not included in the statutory definition of relative, so ₹50,000 is excluded. Aggregate deduction = ₹1,20,000 + ₹66,000 = ₹1,86,000. Section 80E does not prescribe a fixed annual monetary ceiling. The deduction is restricted by the actual qualifying interest paid and the eight-year period.

Where it goes wrong. Including the brother's interest or imposing an assumed ₹1,50,000 ceiling on the education loan deduction.

Authority. Section 80E(1) and Explanation, Income-tax Act, 1961; corresponding section 129, Income-tax Act, 2025.

Question 14 · 2 marks · Taxation - DT Ch 09: Deductions · medium

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

Mr. Varun commenced paying interest on a qualifying education loan in Tax Year 2018-19. The loan was taken from a scheduled bank for his own recognised higher education course. Interest continued to be paid through Tax Year 2026-27, and the loan was not fully repaid by 31 March 2027. Determine whether interest paid in Tax Year 2026-27 remains eligible under section 80E, applying the eight-consecutive-year restriction.

1. Eligible, because the loan remains outstanding
2. Not eligible, because the eight-year period ended in 2025-26 (correct answer)
3. Eligible, because only seven succeeding years are counted after 2026-27
4. Eligible, because there is no monetary ceiling

Answer: B — Not eligible, because the eight-year period ended in 2025-26

Explanation. The initial year is 2018-19. Counting that year and seven succeeding years gives 2018-19 through 2025-26. The eight-year period has therefore expired before Tax Year 2026-27. Section 80E applies for the initial year and seven succeeding years or until interest is paid in full, whichever is earlier. The fact that the loan remains outstanding cannot extend the statutory maximum period. Hence the deduction for 2026-27 is nil.

Where it goes wrong. Assuming that an outstanding education loan permits deduction indefinitely beyond the statutory eight-year period.

Authority. Section 80E(2), Income-tax Act, 1961; corresponding section 129(3), Income-tax Act, 2025.

Question 15 · 2 marks · Taxation - DT Ch 09: Deductions · hard

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

Mr. Pranav, a resident individual, obtained a scheduled-bank loan to finance his daughter's recognised postgraduate degree in Canada. The course commenced after completion of Class XII, and Pranav is the borrower and pays the interest from income chargeable to tax. Interest paid during Tax Year 2026-27 is ₹1,35,000. The loan agreement also records principal repayment of ₹40,000 during the year. Determine his eligible deduction under section 80E.

1. ₹1,35,000 (correct answer)
2. ₹1,75,000
3. ₹40,000
4. Nil, because the course is pursued abroad

Answer: A — ₹1,35,000

Explanation. Section 80E permits interest deduction for higher education of the assessee or specified relatives, including children. Higher education means a course pursued after senior secondary education, and a recognised course abroad can qualify. Pranav's interest paid is ₹1,35,000 and is eligible. Principal repayment of ₹40,000 is not covered. Therefore, allowable deduction = ₹1,35,000. The provision has no fixed annual monetary ceiling, subject to the prescribed eight-year period.

Where it goes wrong. Disallowing a recognised foreign course or adding principal repayment to the eligible interest amount.

Authority. Section 80E(1) and Explanation, Income-tax Act, 1961; corresponding section 129, Income-tax Act, 2025.

Question 16 · 2 marks · Taxation - DT Ch 09: Deductions · hard

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

Mr. Akhil obtained a loan from an unapproved private educational society to finance his own recognised postgraduate course. The course was commenced after he passed Class XII, and he paid ₹75,000 as interest during Tax Year 2026-27 from his taxable income. The society is neither a banking company nor another notified financial institution nor an approved charitable institution. Can Akhil claim deduction under section 80E?

1. ₹75,000, because the course is recognised
2. ₹37,500, because only half the interest is eligible
3. ₹50,000, subject to the annual monetary ceiling
4. Nil, because the lender is not an eligible institution (correct answer)

Answer: D — Nil, because the lender is not an eligible institution

Explanation. Section 80E requires the education loan to be taken from a financial institution or an approved charitable institution. Akhil's course and interest payment satisfy the education and payment aspects, but the lender does not fall within either eligible category. Accordingly, the ₹75,000 interest payment is not deductible under section 80E. The fact that the course is recognised cannot cure the failure of the lender condition.

Where it goes wrong. Focusing only on the course and interest amount while overlooking the statutory eligibility of the lender.

Authority. Section 80E(1), Income-tax Act, 1961; corresponding section 129(1) and (4), Income-tax Act, 2025.

Question 17 · 2 marks · Taxation - DT Ch 09: Deductions · hard

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

Mr. Armaan purchased his first residential house using a bank loan of ₹35,00,000 sanctioned on 31 March 2017. The house had a value of ₹50,00,000, and Armaan owned no residential house on the date of sanction. Interest payable in Tax Year 2026-27 is ₹2,35,000, of which ₹2,00,000 is allowable under section 24(b). Assuming that the loan continues and all other requirements are fulfilled, determine his additional deduction under section 80EE.

1. ₹50,000
2. ₹35,000 (correct answer)
3. ₹1,00,000
4. Nil

Answer: B — ₹35,000

Explanation. The loan of ₹35,00,000 and house value of ₹50,00,000 meet the inclusive limits, while the sanction date falls in Tax Year 2016-17. Interest payable = ₹2,35,000. Section 24(b) deduction = ₹2,00,000. Balance interest = ₹35,000. Section 80EE allows additional deduction up to ₹50,000, but the available balance is only ₹35,000. Therefore, deduction under section 80EE is ₹35,000.

Where it goes wrong. Claiming the full ₹50,000 ceiling even when the interest remaining after section 24(b) is only ₹35,000.

Authority. Section 80EE, Income-tax Act, 1961; corresponding section 130, Income-tax Act, 2025; section 24(b).

Question 18 · 2 marks · Taxation - DT Ch 09: Deductions · medium

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

Mr. Sandeep obtained a housing loan of ₹34,00,000 from a scheduled bank on 1 April 2017 to acquire his first residential house. The house value was ₹49,00,000 and he did not own any residential property on the loan-sanction date. Interest payable for Tax Year 2026-27 is ₹80,000. Which conclusion is correct regarding section 80EE, assuming that the other conditions are satisfied?

1. No deduction, because the loan was sanctioned outside Tax Year 2016-17 (correct answer)
2. ₹50,000, because the house value is below ₹50 lakh
3. ₹34,000, because the loan amount is below ₹35 lakh
4. ₹80,000, because interest is deductible without a ceiling

Answer: A — No deduction, because the loan was sanctioned outside Tax Year 2016-17

Explanation. Section 80EE requires the housing loan to have been sanctioned during Tax Year 2016-17. The other thresholds are satisfied: loan amount ₹34,00,000 is below ₹35,00,000 and house value ₹49,00,000 is below ₹50,00,000. However, the sanction date of 1 April 2017 falls in Tax Year 2017-18. The mandatory historical sanction condition is therefore not met. Hence no deduction is available under section 80EE.

Where it goes wrong. Assuming that satisfying the loan amount, house value and first-home conditions is sufficient without meeting the prescribed sanction-year requirement.

Authority. Section 80EE(3), Income-tax Act, 1961; corresponding section 130(2), Income-tax Act, 2025.

Question 19 · 2 marks · Taxation - DT Ch 09: Deductions · hard

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

Ms. Ritu obtained a ₹42,00,000 loan from a recognised housing finance company on 1 April 2019 for acquisition of her first residential house. Its stamp duty value was ₹45,00,000, and she was not eligible for section 80EE. Interest payable for Tax Year 2026-27 is ₹3,85,000, of which ₹2,00,000 is allowable under section 24(b). Determine her section 80EEA deduction after considering the residual interest and the statutory ceiling.

1. ₹1,85,000
2. ₹1,00,000
3. ₹2,00,000
4. ₹1,50,000 (correct answer)

Answer: D — ₹1,50,000

Explanation. Interest payable is ₹3,85,000 and section 24(b) allows ₹2,00,000. Residual interest = ₹3,85,000 − ₹2,00,000 = ₹1,85,000. The loan was sanctioned within the 1 April 2019 to 31 March 2022 window, the stamp duty value meets the ₹45 lakh ceiling and Ritu was not eligible under section 80EE. Section 80EEA deduction is restricted to ₹1,50,000, the lower of the applicable balance and annual ceiling.

Where it goes wrong. Applying the ₹1,50,000 ceiling without checking the actual interest balance or overlooking the historical sanction period.

Authority. Section 80EEA(1), (2) and (3), Income-tax Act, 1961; corresponding section 131, Income-tax Act, 2025.

Question 20 · 2 marks · Taxation - DT Ch 09: Deductions · hard

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

Mr. Deepak was eligible for deduction under section 80EE in respect of a housing loan sanctioned during Tax Year 2016-17. In Tax Year 2021-22, he obtained another housing loan for a residential property whose stamp duty value was ₹40,00,000. The second loan was sanctioned within the section 80EEA period and was granted by an eligible housing finance company. Deepak owned no house when the second loan was sanctioned. Can he claim section 80EEA deduction for the second loan?

1. Yes, because the second loan independently satisfies the value and date conditions
2. No, because he is eligible to claim deduction under section 80EE (correct answer)
3. Yes, but the deduction is limited to ₹50,000
4. No, because the second lender is a housing finance company

Answer: B — No, because he is eligible to claim deduction under section 80EE

Explanation. Section 80EEA requires the individual not to be eligible to claim deduction under section 80EE. Deepak is already eligible under section 80EE in respect of his earlier qualifying loan. The condition is framed with reference to the individual's eligibility under section 80EE, not merely whether the second loan independently satisfies the property and sanction requirements. Consequently, Deepak cannot claim section 80EEA in respect of his second housing loan.

Where it goes wrong. Testing eligibility loan by loan while ignoring the separate condition that the assessee must not be eligible under section 80EE.

Authority. Section 80EEA(3), Income-tax Act, 1961; corresponding section 131(2), Income-tax Act, 2025.

Question 21 · 2 marks · Taxation - DT Ch 09: Deductions · medium

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

Ms. Shalini purchased a battery-operated electric two-wheeler using a loan from a scheduled bank sanctioned on 1 April 2019. The vehicle is powered exclusively by an electric motor and has the prescribed regenerative braking feature. During Tax Year 2026-27, interest payable on this loan is ₹1,20,000. The loan remains outstanding. Determine whether the loan-sanction date qualifies and the deduction available under section 80EEB.

1. Nil, because the loan was sanctioned before 2020
2. ₹50,000, because the loan is for a two-wheeler
3. ₹1,20,000, because the sanction date and interest satisfy the conditions (correct answer)
4. ₹1,50,000, irrespective of the interest payable

Answer: C — ₹1,20,000, because the sanction date and interest satisfy the conditions

Explanation. The eligible sanction window under section 80EEB begins on 1 April 2019 and ends on 31 March 2023. Shalini's loan was sanctioned on the first day of this window. The vehicle meets the prescribed electric vehicle definition, and the lender is an eligible financial institution. Interest payable is ₹1,20,000, below the maximum deduction of ₹1,50,000. Therefore, the entire ₹1,20,000 qualifies for deduction under section 80EEB.

Where it goes wrong. Excluding a loan sanctioned on the opening date of the statutory window or assuming that the deduction is restricted to four-wheelers.

Authority. Section 80EEB(1) and (2), Income-tax Act, 1961; corresponding section 132, Income-tax Act, 2025.

Question 22 · 2 marks · Taxation - DT Ch 09: Deductions · hard

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

Mr. Nitin obtained a scheduled-bank loan on 1 April 2023 to purchase a new battery-operated electric car. The vehicle satisfies the exclusive electric motor, traction battery and regenerative braking requirements. Interest payable during Tax Year 2026-27 is ₹1,10,000, and the loan remains outstanding. Can Nitin claim deduction under section 80EEB merely because the vehicle and lender satisfy the relevant technical and institutional requirements?

1. Nil, because the loan was sanctioned after 31 March 2023 (correct answer)
2. ₹1,10,000, because the vehicle is eligible
3. ₹55,000, because only half the interest qualifies
4. ₹1,50,000, because the loan remains outstanding

Answer: A — Nil, because the loan was sanctioned after 31 March 2023

Explanation. Section 80EEB applies only where the loan is sanctioned during the period from 1 April 2019 to 31 March 2023. Nitin's loan was sanctioned on 1 April 2023, which is outside the prescribed period. Although the lender and the battery-operated vehicle satisfy the other requirements, the date condition is mandatory. Therefore, interest payable of ₹1,10,000 does not qualify and the section 80EEB deduction is nil.

Where it goes wrong. Applying the deduction based on the nature of the vehicle without checking whether the sanction date falls within the statutory period.

Authority. Section 80EEB(2), Income-tax Act, 1961; corresponding section 132(2), Income-tax Act, 2025.

Question 23 · 2 marks · Taxation - DT Ch 09: Deductions · hard

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

Mr. Keshav obtained an eligible electric vehicle loan from an NBFC on 30 March 2022. The loan was used exclusively to purchase a qualifying battery-operated vehicle and remains outstanding on 31 March 2027. Interest payable for Tax Year 2026-27 is ₹1,72,000. He has not claimed this interest under any other provision. Determine the deduction available under section 80EEB.

1. ₹1,72,000
2. ₹1,50,000 (correct answer)
3. ₹1,22,000
4. Nil

Answer: B — ₹1,50,000

Explanation. The loan sanction date of 30 March 2022 is within the prescribed 1 April 2019 to 31 March 2023 period. An NBFC is included within the definition of financial institution for section 80EEB. Interest payable is ₹1,72,000. The annual ceiling is ₹1,50,000. Hence allowable deduction = lower of ₹1,72,000 and ₹1,50,000 = ₹1,50,000. The continuing loan permits the benefit for interest payable in the current year.

Where it goes wrong. Assuming that an NBFC is not an eligible lender or that the interest deduction continues without the ₹1,50,000 limit.

Authority. Section 80EEB(1), (2) and (4), Income-tax Act, 1961; corresponding section 132, Income-tax Act, 2025.

Question 24 · 2 marks · Taxation - DT Ch 09: Deductions · medium

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

Ms. Niharika does not receive HRA and occupies rented accommodation for her own residence. Her total income before section 80GG deduction and after all other relevant deductions is ₹8,00,000. She pays annual rent of ₹96,000. She satisfies the ownership and other conditions under section 80GG. Compute the eligible deduction by comparing the three statutory limits.

1. ₹96,000
2. ₹48,000
3. ₹60,000
4. ₹28,000 (correct answer)

Answer: D — ₹28,000

Explanation. Annual rent is ₹96,000. First limit: rent minus 10% of total income = ₹96,000 − ₹80,000 = ₹16,000. Second limit: 25% of ₹8,00,000 = ₹2,00,000. Third limit: ₹5,000 × 12 = ₹60,000. The least of the three figures is ₹16,000. Therefore, deduction allowable under section 80GG is ₹16,000.

Where it goes wrong. Selecting the ₹5,000 monthly limit without comparing it with the lower rent-minus-10%-of-income calculation.

Authority. Section 80GG, Income-tax Act, 1961; corresponding section 134(3), Income-tax Act, 2025.

Question 25 · 2 marks · Taxation - DT Ch 09: Deductions · hard

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

Mr. Abhishek receives no HRA and pays ₹20,000 per month towards rented residential accommodation occupied by him. His total income before section 80GG deduction is ₹9,00,000. However, his spouse owns a residential flat in the same city where Abhishek ordinarily resides and performs his employment duties. The flat is kept vacant, while Abhishek independently pays rent for another apartment. Determine whether he can claim deduction under section 80GG.

1. Nil, because his spouse owns residential accommodation at his place of residence (correct answer)
2. ₹60,000, because the monthly limit applies
3. ₹1,20,000, because rent exceeds 10% of total income
4. ₹2,25,000, because 25% of income is allowable

Answer: A — Nil, because his spouse owns residential accommodation at his place of residence

Explanation. One of the mandatory conditions under section 80GG is that the assessee, spouse, minor child or relevant HUF should not own residential accommodation at the place where the assessee ordinarily resides or performs employment duties. Abhishek's spouse owns a residential flat in that same city. The ownership condition is therefore violated, even though Abhishek pays rent and does not receive HRA. Consequently, his deduction under section 80GG is nil.

Where it goes wrong. Applying the three monetary limits despite failure of the preliminary residential ownership condition.

Authority. Section 80GG(2), Income-tax Act, 1961; corresponding section 134(2)(4), Income-tax Act, 2025.