A first-time buyer of a home has to go through a daunting process that begins with searching for the right dream home that fits the budget and aspirations to the even more grueling steps of availing a home loan.
Bought residential house property loan?? Avail income tax benefits on the interest portion of the residential house property loan availed from any financial institution via Section 80EE. The Income Tax, 1961, under Section 80EE, helps taxpayers to claim a deduction of up to Rs 50,000 per financial year.
As per the announcement under Budget 2023, when calculating the capital gains tax on the sale of a residential property, the cost of acquisition (i.e., the original purchase price of the property) should not include any home loan interest that the seller claimed as an income tax deduction during the period they owned the property.
Section 80EE - Home Loan Tax Benefit
None of us likes paying taxes and we often try to minimise the taxable income. The only legal way to reduce your taxable income is to leverage and make the most out of the tax deductions and exemptions offered by the income tax department. Section 80EE is one of the popular provisions under which taxpayers can avail a deduction if they have an ongoing home loan.
This was introduced in the Union Budget of 2013-14 with an aim to provide tax relief to first-time home buyers. Hence, a home loan can benefit you from saving taxes availing deduction under Section 80EE, Section 80EEA, Section 24b etc.
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?
- 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.
- After declaring the above deductions of tax benefits on home loans, the balance Income of a person would be taxed as per the Income Tax Slab rates.
Characteristics of the Deduction Under Sec 80EE of Income Tax Act
Eligibility Criteria | Only individuals may use the deduction provided by this section. This means you are not eligible to claim the benefit under this section if you are a HUF, AOP, company, or any other type of taxpayer. |
Maximum Deduction | The maximum deduction is ₹50,000. It exceeds the ₹2 lakh cap outlined in Section 24 of the Income Tax Act. |
Applicability of Section 24 | You can first exhaust the deductible limit under Section 24, i.e. Rs 2 lakh. Next, you can claim the additional deduction under Section 80EE. |
Stamp Duty | The house’s stamp duty value cannot exceed ₹50 lakhs. |
Other Conditions | You must not have owned any other residential property when a loan from a financial institution was sanctioned to be eligible for this deduction. |
A first-time homeowner must be the taxpayer to claim a deduction under this section. |
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
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).
How to claim tax deductions under section 80EE of the Income Tax Act?
- Estimate the total value of interest that is given during a financial year on the house loan.
- Once the complete interest component paid is determined, claim deduction up to Rs. 2,00,000 (under Section 24(b) of the Income Tax Act, 1961).
- The surplus amount, up to Rs. 50,000, can be claimed under Section 80EE of the Income Tax Act, 1961.
FAQs
Can 24B and 80EE be taken simultaneously?
Yes, you can claim the deduction under both sections 24B and 80EE simultaneously. Note that Section 80EE deduction is available over and above the deductions obtainable under Section 24B.
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.
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