Section 80EE: 2021 Guide On Section 80EE Deductions & How To Claim Them

First-time homebuyers can claim an 80EE deduction of up to Rs. 50,000 every financial year under Section 80EE of Income Tax Act. This deduction is allowed on the interest component of a home loan availed upon residential property. One can continue to benefit from 80EE deduction until the loan is repaid in full.

Read on to know more about this section.

Conditions under Section 80EE of the Income Tax Act

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

Only individual taxpayers can benefit from the provisions of this section. Moreover, if one is purchasing a property with a co-owner/borrower and both are making contributions towards the loan, they can opt for tax benefit.

80EE deduction is not applicable for:

Hindu Undivided Families (HUFs)
Association of Persons
Companies
Sole Proprietorships
Trusts, etc.

The 80EE deduction is allowed for only first-time homebuyers. Meaning, the individual must not own any other property at the time of applying for a housing loan.
One must obtain a housing loan from a financial institution or HFC (Housing Finance Company).
The maximum tax deduction that one can obtain under Section 80EE of the Income Tax Act is Rs. 50,000.
The loan must have been approved between April 1 2016, and March 31 2017.
To obtain an 80EE deduction, individuals must purchase a property with a stamp duty of not more than Rs. 50,00,000.
The loan amount must be Rs. 35,00,000 or less.

Individuals must note that this deduction of up to Rs. 50,000 is on top of the deduction in Section 24 of the Income Tax Act. As per Section 24, one can obtain a tax deduction of up to Rs. 2,00,000 on the interest component of a home loan.

So, overall, you can obtain a tax deduction of Rs. 2,50,000 under both these sections after meeting the prevailing conditions.

Steps to Claim Tax Deduction under Section 80EE of the Income Tax Act

To know how much you can benefit from the tax deductions under IT Act, follow these steps:

Step 1

Calculate the total interest payable on your home loan during the current financial year.

Step 2

Upon calculating the interest component, claim the deduction of up to Rs. 2,00,000, which comes under Section 24 of the IT Act.

Step 3

After that, you can claim the remaining amount of up to Rs. 50,000 under Section 80EE.

Let us understand this with the help of an example,

Suppose you obtain a home loan amounting to Rs. 35,00,000 for a tenor of 15 years. The rate of interest on that loan is 7% p.a. Here, for the first year, you will have to repay Rs. 3,77,508. Out of the total repayment, Rs. 2,40,665 would be your interest paid. Now, under the provisions of Section 24, you can claim a deduction of Rs. 2,00,000 for this amount. The remaining Rs. 40,665 can be claimed as a tax deduction under Section 80EE.

To get an idea of the principal and interest payable, you can refer to the home loan amortisation schedule.

Points to Remember Regarding Section 80EE of the Income Tax Act

Before claiming a deduction under this section, remember the following points:

This section was introduced in FY 2013-2014. Earlier, provisions of this section were available for two years, i.e., from FY 2013-2014 to FY 2014-2015. In addition, during that time, the maximum deduction limit was Rs. 1,00,000.
Section 80EE was amended and was said to function from FY2016-2017 with a maximum deduction limit of Rs. 50,000 on the interest payable for a housing loan.
There are no specifications as to whether the property should be self-occupied or not. So, borrowers staying in rented houses can also opt for a tax deduction under this section.
Borrowers applying for a joint home loan can also enjoy tax deduction under this section if both the borrowers meet the conditions specified.

Total Tax Benefits on Home Loans Available under the Income Tax Act

Here is a tabular representation of tax benefits for the interest component available under different sections of the IT Act for home loan borrowers:

IT Act Section	Max. Deduction Amount	Conditions
Section 24	Rs. 2,00,000	Loans sanctioned before April 1 1999
Section 80EE	Rs. 50,000	Loans approved between April 1 2016 and March 31 2017
Section 80EEA	Rs. 1,50,000	The taxpayer must not be eligible for tax deduction under Section 80EE

Final Word

Section 80EE of the Income Tax Act entails provisions on home loans’ interest component. If you are a taxpayer repaying a home loan on a residential property, make sure to go through the above-mentioned sections and enjoy reduced tax outgo.

Frequently Asked Questions

Q1. I have a property in my wife’s name for which I pay the EMIs. Can I claim a tax deduction under Section 80EE?

Ans: 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.

Q2. I already own a house. Am I eligible for tax benefit under Section 80EE?

Ans: 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.

Q3. Is the deduction under Section 80EE available every financial year, or is it a single time claim?

Ans: 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, 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.

Q4. What is the difference between Section 24 and Section 80EE of the Income Tax Act?

Ans: Tax deduction under Section 80EE is only applicable to individual taxpayers in India. On the other hand, Hindu Undivided Families (HUFs) 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.

Q5. Is a possession letter mandatory to obtain tax benefits?

Ans: 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.

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