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.
Some of the important features of Section 80EE of the Income Tax Act are as follows:
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.
This section makes housing loans affordable since you can continue to claim it every financial year, for the entire duration of your loan.
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.
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:
To qualify for an 80EE deduction, a taxpayer must meet the following eligibility criteria:
To know the exact tax deduction you can claim under this section, do the following:
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.
To claim tax deductions under section 80EE, a taxpayer must satisfy the following conditions:
The following entities cannot claim tax deductions under this section
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|
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)
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.
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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.
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.
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.
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.
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.
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.
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