Section 80EE is a tax benefit provided under the Income Tax Act, which allows deductions of up to Rs. 50,000 annually on the interest paid to buy your first home.
The Section was introduced earlier for FY 2013-14 and FY 2014-2015 with overall deductions of up to Rs. 1 lakh.
In FY 2016-17, Section 80EE was reintroduced with the following modifications:
Rs. 50,000 annual tax deductions
Until the loan is repaid completely
What is Section 80EE of the Income Tax Act?
Section 80EE offers tax relief to taxpayers who have taken out a home loan. It allows home buyers to take income tax benefits on the interest they need to pay on a home loan.
As per this section, a deduction of up to Rs. 50,000 per financial year can be claimed. This deduction can be claimed only if the taxpayer opts for the old tax regime.
*The home loan must be sanctioned between 1st April, 2016, and 31st March, 2017.
What are the features of Section 80EE deduction?
Section 80EE allows Income Tax Benefits on Home Loan to first-time buyers in the following events:-
- This deduction will be provided only if the cost of the property acquired is not more than Rs. 50 Lakhs, and the amount of the loan taken is up to Rs. 35 Lakhs.
- The loan should be sanctioned between 1st April 2016 and 31st March 2022
- The advantage of this deduction would be possible until the loan payment continues.
- This deduction would be accessible from the financial year 2016-17 and onwards.
| Particulars | Quantum of Deduction (Rs.) | |
|---|---|---|
| Self-Occupied Property | Non-Self Occupied Property | |
| Section 24 (interest) | 2,00,000 | No Limit |
| Section 80C (principal) | 1,50,000 | 1,50,000 |
| Section 80EE (interest) | 50,000 | 50,000 |
- The earlier tax deductions are per person and not per home. So in case a taxpayer has acquired a property collectively and has taken a joint home loan, each person repaying the loan amount would be qualified to claim the deduction individually.
- For declaring the above tax deduction, a taxpayer would be expected to furnish the declaration provided by the bank clearly showing the amount owed and paid towards interest and principal.
Eligibility for claiming a deduction under section 80EE
- Individual taxpayers can claim benefits under this section either individually or jointly. If a person has purchased a property contemporaneously with his or her mate and they are both giving the payments of the loan, then both of them can claim this deduction.
The tax benefit is not available to- Association of Persons (AOP),
- Hindu Undivided Families (HUF),
- Companies,
- Trusts, etc.
- Only first-time home buyers can claim tax benefits under Section 80EE i.e., the assessee does not own any residential house property on the date of sanction of loan. To claim this deduction, the person must have received the loan from a financial institution or a housing finance company.
- Section 80EE tax benefit is available on a per-person basis and not on the basis of per property.
- The maximum deduction of Rs 50,000 can be claimed under this section.
- This tax deduction is over and above the limit of Rs. 2 lakh as per section 24(b).
What are the conditions for claiming Section 80EE deductions to be met?
- The taxpayer should not own any residential house property on the date of loan sanction.
- The value of the house property should be up to Rs. 50 lakhs.
- The home loan taken should be up to Rs. 35 lakhs.
- Section 80EE provides a deduction only for the interest portion of a house loan.
- The house loan must be sanctioned by a Housing Finance organization or a financial institution.
- The tax benefit is not available for loans on commercial property for commercial businesses.
- For claiming deductions under this section, the loan must have been sanctioned between 01.04.16 to 31.03.2022
How to Claim House Loan Interest in ITR?
- Collect Loan Documents: Gather all the relevant documents related to your housing loan. This includes the loan agreement, interest certificate, and details of the principal and interest components paid during the financial year.
- Determine Tax Deductions: As a homeowner, you can claim tax deductions on the interest paid on your housing loan under Section 24(b) of the Income Tax Act. The maximum deduction allowed is up to Rs. 2 lakh per financial year for a self-occupied property. If the property is rented out, there is no maximum limit on the deduction, and you can claim the entire interest amount.
- Form 16 or Interest Certificate: If you are a salaried individual and have a home loan, your employer will provide Form 16, which contains details of the interest paid on the housing loan during the financial year. If you are not a salaried individual, your lender will issue an interest certificate reflecting the interest paid.
- Fill ITR Form: Use the appropriate ITR form based on your income sources and financial status. For most individuals with salary income and house loan interest, ITR-1 or ITR-2 is usually applicable.
FAQs
Who is eligible for 80EE?
The Section 80EE deduction is available only to first-time homeowners. If two individuals co-own the home and both contribute to loan payments, they both qualify for the deduction.
What is 80EE exemption?
Section 80EE permits home loan tax benefits to individuals on the interest part of the residential house property loan taken from any financial institution. According to this section, one can claim a deduction of up to Rs 50,000 per financial year. You can claim this deduction until you have completely repaid your loan. Note that taxpayers can claim a deduction under 80EE only if they had a home loan that was sanctioned between 1 April 2016 to 31 March 2017.