Section 80EE Income Tax Deduction for Interest on Home Loan
Section 80EE allows income tax benefits on the interest portion of the residential house property loan availed from any financial institution. You can claim a deduction of up to Rs. 50,000 per financial year as per this section. You can continue to claim this deduction until you have fully repaid the loan.
Features of the 80EE Deduction
Eligibility criteria: The deduction under this section is available only to individuals. This means, if you are a HUF, AOP, a company or any other kind of taxpayer, you cannot claim any benefit under this section.
Amount limit: This deduction (up to Rs. 50,000) is over and above the Rs 2 lakh limit under section 24 of the income tax act.
Other conditions: To claim this deduction, you should not own any other house property on the date of the sanction of a loan from a financial institution
Conditions to be Met for Claiming Deduction
- Value of the house should be Rs 50 lakhs or less
- Loan taken for the house must be Rs 35 lakhs or less
- The loan must be sanctioned by a Financial Institution or a Housing Finance Company
- The loan must be sanctioned between 01.04.2016 to 31.03.2017
- As on the date of the sanction of loan, no other house property must be owned by you.
Things to Remember
Section 80EE came into effect from the financial year 2013-14. It was available for only 2 years, FY 2013-14 and FY 2014-15. The deduction allowed earlier was limited to a maximum of Rs 1 lakh in total and was available for only 2 financial years.
However, this section has been reintroduced, effective FY 2016-17 (AY 2017-18). Now the deduction is allowed for up to Rs. 50,000 per year until the loan is repaid.
The section does not specify if you need to be a Resident to be able to claim this benefit. Therefore it can be concluded that both Resident and Non-Resident Indians can claim this deduction.
The section also does not specify if this house should be self-occupied to claim the deduction. So, borrowers living in rented houses can also claim this deduction.
Moreover, the deduction can only be claimed by individuals for the house purchases jointly or singly. If a person jointly owns the house with a spouse and they both are paying the instalments of the loan, then both of them can claim this deduction.
Section 80EE and Section 24
If you are able to satisfy the conditions of both Section 24 and Section 80EE of the Income Tax Act, be quick to claim the benefits.
- First, exhaust your deductible limit under section 24, which is Rs. 2 lakh.
- Then go on to claim the additional benefits under section 80EE.
Therefore, this deduction is in addition to the Rs 2 lakh limit allowed under section 24.
Section 80EE and Section 80EEA
The union budget 2019 has introduced a new section 80EEA to extend the tax benefits of the interest deduction up to Rs 1,50,000 for housing loan taken for affordable housing during the period 1 April 2019 to 31 March 2020. The individual taxpayer should be a first-home buyer and should not be entitled to deduction under section 80EE.
Frequently Asked Questions
Can I claim section 80EE benefits if the home loan is taken now?
Rebate under section 80EE is available only to those individual borrowers whose loan was sanctioned between 1st April 2016 and 31st March 2017.
If another residential house property is purchased in the subsequent year of purchase of the first house, can deduction under section 80EE be continued to be claimed?
As per the law, the deduction under section 80EE is allowed to the individuals purchasing residential house property for the first time. They should not possess any other house on the date of sanction of loan from the financial institution. Hence, if another house is purchased subsequently, deduction under section 80EE can be continued to be claimed on the first house.
Can the borrower claim deduction under section 80EE if he is not residing in the house for which benefit is availed?
For claiming deduction under section 80EE, it is not required to reside in the same property on which the benefit is availed. The borrower can claim the deduction even if he is staying in a rented house.
What is the difference between section 80EE and section 24(b) of the Income Tax Act?
Under section 24(b), a deduction of Rs.2 lakhs is allowed for self-occupied property, and entire interest is deductible for let out property.
However, under section 80EE, an additional deduction of Rs.50,000 is allowed only after exhausting the limit of section 24(b). It can be availed by individuals buying the house for the first time and loans sanctioned by financial institutions between 1.04.2016 and 31st March 2017.