Purchasing a home can be expensive, and many generally take the help of a home loan to achieve this goal. However, given the quantum of loan you would need, the interest rates and associated charges of a home loan can be on the higher end.
Thankfully, the government has introduced various initiatives and taxation rules. One of these is the Section 80EE of the Income Tax Act. This section makes the process of owning a house affordable by providing deductions on the home loan interest payments.
Read on to learn what is Section 80EE of the Income Tax Act, its features, eligibility criteria, and more.
This section allows deduction benefits on the interest that you pay on a home loan for a residential property. According to this section, you get the benefit of claiming a deduction of up to ₹50,000 in a financial year.
Section 80EE’s deduction limit is over and above the deductions that you can claim under Sections 80C and 24(b) of the Income Tax Act. Additionally, you can claim this deduction only if you are a first-time borrower and till you completely repay the home loan.
Note that according to the Budget 2023, while calculating capital gains from a residential property sale, the acquisition cost must not include home loan interest. This interest must not be claimed by the seller as a deduction during the ownership period.
Now that you know the Section 80EE income tax deduction, here are some features that you must know about.
The primary benefit of Section 80EE of the Income Tax Act is that it allows you to claim tax deductions of up to ₹50,000 in a financial year. Moreover, this is above the ₹2 Lakh deduction you can claim u/s 24(b).
Under Section 80EE, interest on a housing loan is eligible for deductions irrespective of whether or not you occupy the property for residential purposes. This is in contrast to Section 24(b), which mandates that you need to occupy the property to claim a tax deduction.
Another benefit is that Section 80EE makes getting home loans affordable. This is because you can continue to claim the deductions every financial year until you completely repay the home loan. This also encourages people to purchase their own homes.
Here are the terms and conditions for claiming a deduction u/s 80EE:
Maximum value of the property can be ₹50 Lakhs
Home loan amount must not exceed ₹35 Lakhs
You must not own any residential property on the date of loan sanction
You can only claim deductions for the interest portion of the home loan
Deductions are not applicable for loans on commercial properties
Loan sanction date must be between 01.04.16 and 31.03.17
Either a housing finance organisation or a financial institution must sanction the home loan
Check out the Section 80EE eligibility criteria below:
Deductions can be claimed individually or jointly
Hindu Undivided Families (HUFs), companies, trusts, and Association of Persons (AOP) cannot claim this deduction
Only first-time home buyers can claim the deductions
Deductions are available on a per-person basis, not per property basis
Here are the steps to follow to benefit from Section 80EE of the Income Tax Act.
Step 1: Get an estimate of the total home loan interest during a financial year
Step 2: After determining the interest paid, claim a deduction of ₹2 Lakhs u/s 24(b)
As you can see, Section 80EE of the Income Tax Act extends benefits of reduced tax liability in the form of a deduction for the interest you pay on a home loan. Additionally, you can invest in some tax-saving options that can help you meet your goals.
On Bajaj Markets, you can explore a number of such investment options and start your investment journey. Here, you can also check out a range of credit solutions as well.
Yes, you can claim deductions under Section 80EE of the Income Tax Act even if you do not reside in the same property.
Under Section 24(b), you can claim a ₹2 Lakh deduction for self-occupied property. Under Section 80EE, you benefit from an additional deduction of ₹50,000. However, note that you can only claim deductions under Section 80EE after exhausting the Section 24(b) deduction limit.
No, you are not eligible to claim deductions under Section 80EE of the Income Tax Act since it is available only for first-time homebuyers.
Section 80EE allows tax deductions on the interest component of a home loan for each financial year. This means that if you have taken a home loan between 1st April 2016 and 31st March 2017, you can claim tax deductions every financial year till you repay the home loan.