For those of you who don’t know, Section 80EE provides home loan interest tax benefits on the loan amounts availed from a financial lender. This 80EE deduction is mainly for the interest paid on the home loan for up to maximum INR 50,000 every financial year. You can claim this deduction until your loan amount is entirely repaid.
Features of the 80EE Deductions
Here are some of the highlighting features of 80EE deductions under Income Tax
- This deduction is available only to individuals. In other words, if you are a HUF, AOP, an organization or any other kind of taxpayer – you cannot avail this home loan tax deduction.
- Under Section 24 of the Income Tax Act, this deduction is for the limit of INR 2 lakhs and above.
For claiming this deduction, you should not have any other property under your name when availing a loan from your lender.
Eligibility for Claiming Section 80EE Deductions
Here’s how you can check your eligibility for claiming 80EE deductions:
- Individual taxpayers are allowed to make a claim for 80EE deduction on properties that are purchased either singly or jointly. In case, you have bought the property with your partner and both of you are paying the installment, then the two of you can individually claim for this deduction.
- Home loan tax benefits are not applicable for HUF (Hindu Unified Families), AOP (Association of Persons), an organization, trusts, etc.
- 80EE deductions can be claimed by first-time home buyers. For claiming this deduction, you have to take the loan from a financial institute.
- The 80EE deduction is applicable on a per person basis instead of per property basis.
- For claiming this benefit, you do not have to reside in the property. You can make a successful claim by living in a rented property as well.
Who can Claim Deduction under Section 80EE
The tax deduction under Section 80EE of the Income Tax Act 1961, can be claimed by first-time homebuyers for the amount that is paid as interest on a 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 in FY 2013-14 was designed for individual taxpayers to avail tax deduction on interest on home loans. At that time, the maximum deduction that can be claimed was Rs. 1,00,000. This tax benefit was available for 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 on a home loan.
A taxpayer can claim deduction under Section 80EE at the time of filing the tax returns. To find out how much can be claimed as a 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.
When applying for a home loan make sure to check home loan eligibility with the help of a home loan eligibility calculator for quick approval of loan. This makes the loan application process easier.
Conditions for Claiming Deductions
Following are the conditions for claiming the 80EE deduction:
- Value of the purchased property should be INR 50 lakhs or less.
- A loan taken for the purchased property should be INR 35 lakhs or less.
- The loan amount should be sanctioned by a financial institution or a housing finance company.
- The loan should be sanctioned between April 1 of the current year and March 31 of the next year.
- As on the date of the sanctioned loan, you should not have any other property under your name.
This deduction can be claimed by individuals for the property purchased either singly or jointly. If you own the property jointly with your partner and both of you are paying the installments regularly, then both of you are eligible to make an individual claim the deduction.
Tax Benefits on Principal Re-paid
Under Section 80C of the Income Tax Act, the maximum deduction limit allocated for the repayment of the principal amount of the home loan is INR 1.5 lakh. Moreover, the deductions under section 80C include investments done in the PPF account, Equity Oriented Mutual funds, Tax Saving Fixed Deposit, and National Savings Certificate – subjected to a maximum of INR 1.5 lakh.
Apart from this, you can claim stamp duty and registration charges under the aforementioned section. However, it is noteworthy that the claim can only take place in the year when the payment is made.
The Bottom Line
You can most definitely save money on home loans by claiming 80EE deductions. With Finserv MARKETS, you not only enjoy tax benefits but can also take advantage of features like low EMI, minimal documentation, quick disbursement and more.
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