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Section 80EE

Section 80EE - Deduction on Home Loan Interest

Tax deduction under Section 80EE of the Income Tax Act 1961, can be claimed by first-time home buyers for the amount they pay as interest on home loan. The maximum deduction that can be claimed under this section is Rs. 50,000 during a financial year. The amount can be claimed over and beyond the deduction of Section 24 and Section 80C, which are Rs. 2,00,000 and Rs. 1,50,000, respectively.

Section 80EE was designed for the first time in the FY 2013-14 for individual taxpayers to avail tax deduction on interest on home loans. At that time, the maximum deduction that could be claimed was Rs. 1,00,000. This tax benefit was available for only two years - FY 2013-14 and FY 2014-15. The Section was reintroduced on FY 2016-17, and the quantum of deduction was changed to Rs. 50,000 for interest paid towards home loan.

Terms for Claiming Section 80EE Deductions

The conditions associated with claiming deductions under Section 80EE are:

  • This must be the first house that the taxpayer has purchased.

  • he value of the house should be Rs. 50 lakhs or less.

  • The home loan availed should be Rs. 35 lakhs or less.

  • Section 80EE allows deduction only for the interest portion of a home loan.

  • The home loan has been sanctioned by a Housing Finance Company or a Financial Institution.

  • As on the date of the loan sanction, the individual must not be owning another house.

  • The loan should not have been availed for commercial properties.

  • For claiming deductions under this section, the loan should have been sanctioned between 01.04.16 to 31.03.17.

Eligibility for Claiming Section 80EE Deductions

To become eligible for claiming 80EE deductions, a taxpayer has to make sure of the following:

  • Only individual taxpayers can claim deduction under Section 80EE on properties purchased either singly or jointly. If an individual has bought a property jointly with his or her spouse and they are both paying the instalments of the loan, then the two can individually claim this deduction.

  • e tax benefits are not applicable for Hindu Unified Families (HUF), Association of Persons (AOP), companies, trusts, etc.

  • Tax benefits under Section 80EE can only be claimed by first-time home buyers. In order to claim this deduction, the individual must have taken the loan from a financial institution for buying his/her first residential house property.

  • Section 80EE is applicable on a per person basis rather than a per property basis.

  • To claim this benefit, it is not necessary for the taxpayer to reside in the property for which he or she is claiming this deduction. Borrowers living in rented homes can also claim this deduction.

Claiming 80EE Tax Deductions

A taxpayer can claim deduction under Section 80EE at the time of filing tax returns. To find out how much one can claim as deduction, here is what needs to be done:

  • Calculate the total amount of interest that is paid during a financial year on the home loan.

  • Once the total interest amount paid is ascertained, claim deduction up to Rs. 2,00,000 (under Section 24 of Income Tax Act, 1961).

  • The balance amount, up to Rs. 50,000, can be claimed under Section 80EE of Income Tax Act, 1961.

Features of the Deduction

The features of Section 80EE are as under:

  • The deduction under Section 80EE can only be claimed by individual taxpayers on properties purchased either singly or jointly. It is not applicable for Hindu Unified Families (HUF), Association of Persons (AOP), companies, trusts, etc.

  • The maximum deduction that can be claimed under this section is Rs. 50,000 during a financial year.

  • The deduction that can be claimed is above and beyond the limit of Rs. 2,00,000, as under Section 24 of the Income Tax Act.

  • The property can be either self-occupied or non-self-occupied.

Section 80EE and Section 24

Deduction can be claimed for interest on home loan under Section 24 of the Income Tax Act, 1961. The limit under this section is Rs. 2,00,000. This deduction can only be claimed if the owner or his or her family members reside in the house property. The entire interest shall be waived off as a deduction in case the house is on rent.

If one is able to meet the conditions of both the sections i.e. Section 24 and Section 80EE, the individual can avail benefits under the two. To do so, the individual will first need to exhaust the limit under Section 24 and then claim the additional benefit under section 80EE. Therefore, the deduction under Section 80EE is in addition to the limit of Rs. 2,00,000, as under Section 24.

Frequently Asked Questions

What is Section 80EE?

Income Tax deduction under Section 80EE of the Income Tax Act, 1961 can be claimed by first-time home buyers for the amount they pay as interest on home loan. The maximum deduction that can be claimed under this section is Rs. 50,000 during a financial year. The amount can be claimed over and beyond the deduction of Section 24 and Section 80C, which are Rs. 2,00,000 and Rs. 1,50,000, respectively.

When was Section 80EE first introduced?

Section 80EE was designed for the first time in the FY 2013-14 for individual taxpayers to avail tax deduction on interest on home loans. At that time, the maximum deduction that could be claimed was Rs. 1,00,000. This tax benefit was available for only two years - FY 2013-14 and FY 2014-15. The Section was reintroduced on FY 2016-17, and the quantum of deduction was changed to Rs. 50,000 for interest paid towards home loan.

What is the maximum amount that can be claimed as deductions u/s 80EE?

The maximum deduction that can be claimed under this section is Rs. 50,000 during a financial year. The amount can be claimed over and beyond the deduction of Section 24 and Section 80C, which are Rs. 2,00,000 and Rs. 1,50,000, respectively.

I didn’t claim the deductions for FY 2016-17 even though I purchased a new property in August 2016. Can I claim the deduction now?

No, the deduction could only have been claimed the latest by the end of FY 2016-17, i.e. by 31st March 2017.

What are the conditions associated with claiming deduction under Section 80EE?

The following are the conditions that need to be noted to claim deduction under Section 80EE:

  • This must be the first house that the taxpayer has purchased.

  • The value of the house should be Rs. 50 lakhs or less.

  • The home loan availed should be Rs. 35 lakhs or less.

  • The home loan has been sanctioned by a Housing Finance Company or a Financial Institution.

  • As on the date of the loan sanction, the individual must not be owning another house.

Who is eligible to avail tax benefits under Section 80EE?

Only individual taxpayers can claim deduction under Section 80EE on properties purchased either singly or jointly. The tax benefits are not applicable for Hindu Unified Families (HUF), Association of Persons (AOP), companies, trusts, etc.

How to claim tax deductions under Section 80EE?

A taxpayer can claim deduction under Section 80EE at the time of filing tax returns. To find out how much one can claim as deduction, here is what needs to be done:

  • Calculate the total amount of interest that is paid during a financial year on home loan

  • Once the total interest amount paid is ascertained, claim deduction up to Rs. 2,00,000 (under Section 24 of Income Tax Act, 1961).

  • The balance amount, up to Rs. 50,000, can be claimed under Section 80EE of Income Tax Act.

What are the features of Section 80EE?

The features of Section 80EE are as under:

  • The deduction under Section 80EE can only be claimed by individual taxpayers on properties purchased either singly or jointly. It is not applicable for Hindu Unified Families (HUF), Association of Persons (AOP), companies, trusts, etc.

  • The maximum deduction that can be claimed under this section is Rs. 50,000 during a financial year.

  • The deduction that can be claimed is above and beyond the limit of Rs. 2,00,000, as per Section 24 of the Income Tax Act, 1961.

  • The property can be either self-occupied or non-self-occupied.

How is Section 80EE different from Section 24?

Deduction can be claimed for interest on home loan under Section 24 of the Income Tax Act, 1961. The limit under this section is Rs. 2,00,000. This deduction can only be claimed if the owner or his or her family members reside in the house property.

If one is able to meet the conditions of both the sections i.e. Section 24 and Section 80EE, the individual can avail benefits under the two. To do so, the individual will first need to exhaust the limit under Section 24 and then claim the additional benefit under Section 80EE. Therefore, the deduction under Section 80EE is in addition to the limit of Rs. 2,00,000 as under Section 24.

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