What is Section 80EE?

It has been proposed that under Section 80EE, first-time homebuyers can claim tax deductions on the interest paid on their home loans. During a financial year, a maximum of ₹50,000 can be claimed as a tax deduction under Section 80EE of the ITA.

The 80EE deduction was initially introduced in the year 2013-2014 to provide monetary relief to taxpayers looking to purchase their first home. At that point in time, the maximum threshold of claiming tax deductions under Section 80EE was ₹1 lakh and the tax relief was provided to taxpayers only for a span of two years. An amended Section 80EE was reintroduced in the year 2017, where the deduction limit was revised to ₹50,000 and is now available until the time the loan has been fully paid off.

Deduction under Section 80EE - Terms & Condition

For claiming deductions on your income tax under section 80EE of the Income Tax Act, the following conditions must be fulfilled.

  • The value of the house must be ₹50 lakh or less

  • The home loan employed for the purchase must be ₹35 lakh or less

  • Only the interest of the home loan will be deducted under section 80EE

  • A financial institution or HFC (Housing Finance Company) must have issued the home loan

  • Dring sanction of home loan, the applicant must not own any other housing property, i.e. it should be used towards the taxpayer’s first home.

  • The loan must not have been availed for commercial purposes

  • The loan should have been sanctioned between the financial year 2016-2017

Eligibility to Claim Deductions under 80E

To be an eligible applicant in order to make tax deductions, the applicant must fulfill the following criteria:

  • Tax deductions can be claimed by individual taxpayers who have purchased the house either individually or jointly

  • These deductions are not applicable for trusts, companies, a Hindu Undivided Family (HUF), or an Association of Persons (AoP)

  • Only first-time house buyers can claim these deductions

  • It is applicable on a person-to-person basis, and not on a property basis.

  • A new section, Section 80EEA, was introduced in the recent past to provide tax benefits to those who have taken loans for affordable housing projects. Those who are eligible for claiming benefits under Section 80EEA cannot claim benefits under Section 80EE.

  • Under Section 24, taxpayers can also claim deductions on the interest paid on their home loans. However, the eligibility criteria of both may differ. If you are eligible to claim deductions under both sections, you would first need to exhaust the deduction limit available under Section 24 (Rs. 2 lakhs). Upon exhausting this limit, you can claim the deductions under Section 80EE over and above Section 24.

How to Claim Tax Deductions Under 80EE

One can claim the income tax returns under section 80EE at the time of filing for income tax returns. You need to follow the steps given below in order to claim the deductions under section 80EE of the Income Tax Act:

  • Estimate the total interest amount paid in a financial year on your home loan

  • Once you ascertain the total interest amount, if you are eligible to make claims under Section 24, you can claim tax deductions up to ₹2 lakh under Section 24

  • You can claim the balance amount of ₹50,000 under Section 80EE

Key points Related to Section 80EE

Benefits of Section 80EE are:

  • Eligibility: Under this section, deductions are liable to individuals. Trusts, companies, Hindu Undivided Families (HUF), and Association of Persons cannot claim the tax deductions.

  • Amount: The deduction of ₹50,000 is above the limit of ₹2 lakh as per Section 24 of the Income Tax Act.

  • Other conditions: You must own any house property at the time of claiming this deduction.

Conclusion

Owing to Section 80EE of the Income Tax Act, first-time house owners can now enjoy income tax deductions on the home loans they opt for. Homeowners should make it a point to avail of the available deductions, since purchasing a home is no small feat.

For this very reason, you must also take all possible steps to safeguard your very first home. On purchasing your very first home, in addition to taking advantage of applicable deductions, you must also make it a point to opt for home insurance. There are numerous other options, such as the Home Insurance policy available on Finserv MARKETS that protects your house from unforeseen situations. You can get extensive coverage up to ₹10 Crore with Bajaj Allianz Home Insurance. With 3 simple steps, you will receive your insurance policy in your email within minutes! With up to 93% claim settlement ratio in India, 24/7 on-call assistance and minimal documentation requirements, the home insurance policy available on Finserv MARKETS will help financially protect your new abode!

FAQs

  • ✔️What is the difference between Section 80EE and Section 24?

    Under Section 24 of the Income Tax Act, applicants can claim interest up to ₹2 lakh on the interest of the home loan, whereas under section 80EE, interest up to ₹50,000 can be claimed. If you meet terms and conditions of both the sections, it is important that the applicant first exhausts the limit of Section 24 and then claims for deduction benefits of additional ₹50,000.
  • ✔️Who can avail of tax benefits of Section 80EE deductions?

    Here, deductions are applicable only to individuals. Trusts, companies, Hindu Undivided Family, and Association of Persons cannot claim the tax deductions.

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