What Is Section 80EE of the Income Tax Act? Tax Deduction on Home Loan Interest

ByShakshi Saxena
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Section 80EE of Income Tax Act proposes that first-time homeowners can claim tax deductions on the interest paid on their home loans. A maximum of ₹50,000 can be claimed as a tax deduction under this section of the Income Tax Act during the financial year. 

 

The 80EE deduction initially provided monetary relief to taxpayers who wanted to purchase their first home. The maximum threshold for claiming tax deductions was ₹1 lakh, and the relief was provided to taxpayers only for two years. An amended Section 80EE was reintroduced in 2017, where the deduction limit was revised to ₹50,000. The relief is now available until the loan is fully paid off.

 

If you are a first-time owner with a home loan to be paid, then the IT Act makes provisions to claim an 80EE deduction on the interest paid towards the repayment. As per this section of the IT Act, an individual may claim a maximum deduction of Rs 50,000 in a financial year on the interest component of the home loan. This amount can be claimed over and above the deductions under Section 80C and Section 24. In addition, additional deductions of Rs 150,000 and Rs 200,000 can be claimed too. 

What Are The Terms And Conditions Of Deduction?

These conditions should be fulfilled for claiming deductions on income tax under Section 80EE.

 

  • The flat or house should be valued at ₹50 lakh or less.

 

  • The loan used to purchase the property should be ₹35 lakh or less.

 

  • The interest of the home loan will be deducted only. 

 

  • A financial institution or Housing Finance Company must issue the loan.

 

  • During the sanction, the applicant must not own any other housing property. 

 

  • The loan should not have been availed for other commercial purposes.

 

  • The loan should have been sanctioned between 2016-2017.

 

Who Are Eligible To Claim Deductions?

 

To claim deductions under 80EE Income Tax, the following conditions should be met: 

 

  • Only the first-time buyer can claim.

 

  • The deduction can be claimed on the interest of the loan only.

 

  • The loan must be sanctioned by a recognized financial institution like a bank, a housing finance company, or a non-banking finance company.

 

  • The taxpayer cannot own another house when the loan is sanctioned.

 

  • The deduction can be claimed if the loan is obtained for residential properties, not commercial uses.

 

  • The loan should have been sanctioned between 01.04.16 and 31.03.17 of the financial year to claim deductions.

 

  • Tax deductions can be claimed for those who have purchased the house individually or jointly.

 

  • This deduction is not applicable for trusts, companies, a Hindu Undivided Family, or an Association of Persons.

 

  • The deduction is applicable per person and not on a property basis.

How to Claim Tax Deductions?

An individual can claim the tax returns under Section 80 EE when filing income tax returns. However, there are some steps given which should be followed to claim the deductions of the Income Tax Act:

The total interest amount paid in a financial year on the home loan should be estimated.

As soon as the total interest amount is calculated, you can make claims under Section 24 of tax deductions up to ₹2 lakh.

The balance amount of ₹50,000 under Section 80EE can be claimed too. 

Conclusion 

The advantages of this scheme are only available to first-time home buyers who bought a home with a loan during the financial year 2013-14. It is one-time tax relief for the citizens initiated by the government of India. The deductions under Section 80EE of Income Tax Act assist low-income home buyers with tax relief.  

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