Section 80EE of the Income Tax Act, 1961 was formulated with the aim of making housing more affordable in India. It allows a first-time homeowner, whose home loan was sanctioned between 1st April 2016 and 31st March 2017, to claim tax deductions of up to ₹50,000 on the interest portion of the mortgage. You can continue to claim the 80EE deduction till the time your loan has been fully repaid.

Section 80EE Deduction Features

Some of the important features of Section 80EE of the Income Tax Act are as follows:

1. Helps Maximise Your Tax Deduction

You can claim tax deductions of up to ₹50,000 per financial year on the interest component of your home loan under this section. This will be over and above the maximum deduction limit of ₹2 Lakh that you can claim under Section 24(b), available to owners of self-occupied properties.

2. Increases Affordability

This section makes housing loans affordable since you can continue to claim it every financial year, for the entire duration of your loan.

3. No condition on Self-occupancy

Unlike Section 24 (b), which mandates that the taxpayer must occupy the property for which he is claiming a tax deduction on their home loan payments, Section 80EE has no such precondition. Whether you reside in the property for which you have taken a home loan or not is immaterial.

Terms of Claiming Section 80EE Deduction

While Section 80EE was introduced with the intention of making housing more affordable in the country, it, however, comes with a set of terms and conditions as follows:

It is only available on home loans approved between 1st April, 2016 and 31st March, 2017
It can only be claimed by a first-time homebuyer. To be more precise, a homebuyer, who wants to claim tax deductions under Section 80EE of I-T Act, can only do so if they own no other property at the time of loan sanction
The value of the property cannot exceed ₹50 Lakh
The loan value sanctioned must be less than or equal to ₹35 Lakh
The applicability of Section 80EE of Income Tax is decided on a per-person basis and not on a per-property basis. This means that if a property is purchased jointly by two individuals and both are contributing towards repayment of the said home loan, then each can claim deductions under this section separately
A taxpayer, who wants to claim a Section 80EE deduction, can also claim tax benefits under other sections, such as Section 24 and Section 80C of the I-T Act

Eligibility for Claiming Section 80EE Deduction

To qualify for an 80EE deduction, a taxpayer must meet the following eligibility criteria:

Tax deduction under Section 80EE can only be claimed by an individual. It is not applicable to Hindu Undivided Families (HUFs), Association of Persons (AOPs), Body of Individuals (BoIs), companies, and trusts.
The loan must be sanctioned by a legally recognised lender, such as a housing finance company, a bank, or a non-banking financial company (NBFC)
The home loan borrower must take a declaration from the lender clearly identifying how much is the principal and how much is the interest
The home loan borrower must be a first-time homebuyer

Also Read

80C to 80U Deduction List [AY 2023-24]

Section 80C of Income Tax Act Deduction Limit FY 2022-23

How to Claim Tax Deduction Under Section 80EE?

To know the exact tax deduction you can claim under this section, do the following:

First find out what the total interest component of your home loan is
Under Section 24, you can claim a tax deduction of up to ₹2 Lakh
Once you exhaust this limit, you can then claim a maximum deduction of ₹50,000 on the remaining amount paid as interest under Section 80EE

Let us understand this with the help of an example.

Suppose you obtain a home loan of ₹35 Lakh for a tenure of 15 years. The rate of interest on that loan is 7% p.a. (say). For the first year, you will have to repay ₹3,77,508. Out of the total repayment, ₹2,40,665 would be the interest component. Now, under the provisions of Section 24, you can claim a deduction of ₹2,00,000 for this amount. The remaining amount of ₹40,665 can be claimed as a tax deduction under Section 80EE of the income tax act.

Who can Claim a Deduction Under Section 80EE?

To claim tax deductions under section 80EE, a taxpayer must satisfy the following conditions:

They must be a first-time homebuyer
They must be an individual person

Who is not Eligible to Claim 80EE Deduction?

The following entities cannot claim tax deductions under this section

A business entity, a company, a trust, an association of persons, a body of individuals or a Hindu Undivided Family (HUF)
A person who owned another property at the time of approval of the home loan for which the tax deduction is being claimed

What will be the Total Tax Benefit under Section 80EE?

Under this section, you can claim a maximum deduction of ₹50,000 per financial year until the full repayment of your home loan (only on home loans sanctioned between 1st April, 2016 and 31st March, 2017). But, you can also claim tax deductions under Sections 80C and 24B on your home loan repayments.

So, this is the maximum tax deduction you can claim, provided you have taken a loan for a self-occupied property and it is your first home that you have purchased:

Section	Home Loan Component	Amount
80C	Principal	₹1.5 Lakh
24B	Interest	₹2 Lakh
80EE	Interest	₹50,000

Section 24B vs 80EE

Under Section 24B of the I-T Act, individuals can claim a deduction of ₹2 Lakh on the interest component of a home loan only for self-occupied property.

Under Section 80EE, an additional tax deduction of up to ₹50,000 can be claimed by individuals. But first, one must exhaust the tax exemption limit under Section 24B, if applicable, before claiming deduction under Section 80EE. In case, one is eligible for both, a maximum tax exemption of ₹2.5 Lakh can be claimed. Note Section 80EE is applicable only for first-time homebuyers (on loans approved between April 1, 2016, and March 31, 2017)

Final Word

Section 80EE was reintroduced in Budget 2016-2017 to provide additional relief to home loan borrowers as they could potentially claim deductions under Section 80C, Section 24B, and Section 80EE for repaying the same home loan. Today, it has been replaced by Section 80EEA to extend benefits on low-cost housing. However, first-time homebuyers, whose loan was sanctioned between 1st April, 2016 and 31st March, 2017, can continue to claim 80EE deductions for the full duration of their loan.

Thinking about buying a home? With Navi Home Loan, you can get up to ₹5 Crore, at attractive interest rates, starting at 8.85% p.a. and flexible repayment tenures of up to 30 years. Oh! And did we mention that we provide instant approval with minimal documentation? Moreover, we charge no processing fee and no foreclosure charges. If that’s not enough, let us also tell you that your entire home loan journey – from application to approval – is 100% paperless. Don’t believe us? Download the Navi App today and try for yourself. Trust us, you won’t be disappointed!

FAQs

I have a property in my wife’s name for which I pay the EMIs. Can I claim a tax deduction under Section 80EE?

In this case, you are not the co-owner of the property. Section 80EE of the Income Tax Act specifies that the co-borrower of a home loan should also be the co-owner of a property. However, you can ask your wife to execute a gift deed or sale deed for you to include as a co-owner of the property.

I already own a house. Am I eligible for tax benefit under Section 80EE?

Section 80EE of the Income Tax Act allows a tax deduction on the interest component only for first-time homebuyers. So, if you already own a property in the country, then you are not eligible to obtain a tax deduction under this section.

Is the deduction under Section 80EE available every financial year, or is it a single time claim?

Section 80EE of the Income Tax Act allows tax deductions of up to Rs. 50,000 on a home loan’s interest payout per financial year. Meaning, that if you have borrowed a home loan between April 1, 2016, and March 31, 2017, then you can obtain a tax deduction of Rs. 50,000 every financial year until you repay the loan.

What is the difference between Section 24 and Section 80EE of the Income Tax Act?

Tax deduction under Section 80EE is only applicable to individual taxpayers in India. On the other hand, Hindu Undivided Families can also claim a tax deduction under Section 24. Moreover, Section 80EE is allowed for only first-time homebuyers, whereas there are no such restrictions in Section 24.

Is a possession letter mandatory to obtain tax benefits?

Yes, as per the Income Tax Laws, you must produce the possession letter to claim tax deductions. You can obtain this certificate by visiting your nearby Anchal Adhikari office or the RTPS office. Note that different states entail different processes for obtaining a possession letter.

Can I make a claim under section 80EE if I own the property but do not reside in it?

In order to claim this deduction an individual does not need to reside in the property. The individual can claim the deduction even if he lives in a rented house. One just needs to buy the property in his or her name in order to be eligible for this deduction under section 80EE of the income tax act.