Every individual has a moral and financial obligation to pay taxes. The government creates reform, growth, and development policies using citizens’ taxes. The government also provides various exemptions and tax payment deductions on various investments, including life and health insurance, Public Provident Funds, the National Pension System, and others. In addition, the government provides numerous tax benefits on home loan repayment as buying a property is also a significant investment. Let’s examine the tax breaks offered under Section 80EE of the Income Tax Act.
Many borrowers who obtain Housing Loans look for tax incentives to lower their obligation. Check your Home Loan eligibility online if you’re considering applying for a home loan. In this context, the Income Tax Act’s recently restored Section 80EE offers tax savings on house loan interest payments.
Read this article on Income Tax Section 80EE deductions on Home Loan interest rates if you want to take advantage of this benefit.
Certain requirements provided under Section 80EE of the Income Tax Act of 1961 enable taxpayers to claim an extra deduction of up to INR 50,000. This benefit relates to the home loan interest paid and is not covered by Section 80C of the Income Tax Act of 1961.
What is Section 80EE of the Income Tax?
First-time homebuyers are eligible for the income tax benefit on the interest of Home Loans under Section 80EE. However, there are a few limitations, which are as follows:
- This deduction will only be available if the property is purchased for less than INR 50 lakhs with a loan amount of up to INR. 35 lakhs.
- The loan should be approved between April 1, 2016, and March 31, 2017.
- The benefit of this deduction would be available as long as the loan is being paid.
- This deduction would be available starting the 2016–17 fiscal year.
Points to Note:
A taxpayer must understand the financial institution’s declaration, which clearly shows the amount owed and paid toward interest and principal, to claim the stated tax deduction. The remaining income of an individual would be taxed in accordance with the Income Tax slab rates after declaring the above tax benefits on home loans. Meanwhile, new 80EEA deductions have also been released. Let’s get in deep about 80EE vs 80EEA and learn much more about it.
Who can claim deductions under Section 80EE?
Taxpayers can file an individual or combined claim for benefits under this provision. If a taxpayer acquired a home jointly with another person and took out a home loan to pay for it, each person repaying the loan amount is eligible to claim the deduction on their own.
To claim the tax exemptions under Section 80EE, the following conditions must be met:
- When the loan is sanctioned, the taxpayer should not be the owner of any residential property.
- The property’s worth should be less than INR. 50 lakhs.
- A maximum of INR 35 lakhs should have been borrowed in the loan.
- A Housing Finance firm or any other fintech institution must approve the home loan.
- Only the interest part of the Home Loan is eligible for a deduction under Section 80EE.
- The tax benefit is not available for loans on commercial property for commercial businesses.
- The loan must have been approved between the time frame 01.04.16 to 31.03.17.
This tax benefit does not apply to:
- Association of Persons (AOP)
- Hindu Undivided Families (HUF)
- Companies
- Trusts
Must Read: Tax Benefits On Home Loan
How to Claim Tax Deductions Under 80EE of the Income Tax Act?
Step 1: Calculate the interest paid on a loan in a particular financial year.
Step 2: Declare a deduction up to INR 2,00,000 in accordance with Section 24(b) of the IT Act, 1961.
Step 3: Claim a maximum of INR 50,000 under Section 80EE of the Income Tax Act of 1961.
So, the total tax savings under section 80EE & section 24(b) for interest payments made on the Housing Loan can be claimed with a maximum cumulative upper limit of up to INR 2,50,000.
80EE vs 80EEA
The benefits permitted under Section 80EE for low-cost housing have been further expanded by Section 80EEA.
| Section 80EE | Section 80EEA | |
| Maximum Deduction | Up to INR 50,000
This applies only to the interest portion of the home loan |
Up to INR 1.5 lakh
This applies to the interest portion of the home loan |
| Property Value | Up to INR 50 lakh | Up to INR 45 lakh of stamp duty |
| Maximum Loan Amount | INR 35 lakh | Undefined |
| Loan Sanction Period | 1st April 2016 – 31st March 2017 | 1st April 2019 – 31st March 2022 |
Connect with us if you need assistance with your home loan or tax deductions or if you need to check your Home Loan eligibility.
