Section 80EE of the Income Tax Act – Tax Deduction for Interest on Home Loan

To make buying houses more affordable, the Government of India allows you to claim deductions on the home loan interest payments. Section 80EE of the Income Tax Act, 1961, facilitates these tax benefits on the interest paid for a residential property.

Note that you can claim this deduction only if you are a first-time home buyer till you repay the borrowed sum.

Features of Section 80EE of the Income Tax Act

Here are some features of Section 80EE you must know about.

1.. Increases Tax Deduction

The primary benefit of Section 80EE is that it allows you to claim tax deductions of up to ₹50,000 in a financial year. Moreover, these deductions are over and above the exemptions that you can claim under Sections 80C and 24(b) of the Income Tax Act.

2. No Condition on Occupancy

Interest on a housing loan is eligible for deductions irrespective of whether or not you occupy the property for residential purposes. This is in contrast to Section 24(b), which mandates that you need to occupy the property to claim a tax deduction.

3. Makes Home Ownership Easy

Section 80EE also makes getting home loans affordable. This is because you can continue to claim the deductions every financial year until you completely repay the home loan. This also encourages people to purchase their own homes.

Terms and Conditions for Claiming Section 80EE Deductions

Here are the terms and conditions for claiming a deduction u/s 80EE:

Maximum value of the property can be ₹50 Lakhs
Home loan amount must not exceed ₹35 Lakhs
You must not own any residential property on the date of loan sanction
You can only claim deductions for the interest portion of the home loan
Deductions are not applicable for loans on commercial properties
Loan sanction date must be between April 1, 2016, and March 31, 2017
Either a housing finance organisation or a financial institution must sanction the home loan

Who Can Claim Deductions Under Section 80EE

The taxpayers who fulfil the following conditions can avail of the deductions available under 80EE:

Deductions can be claimed individually or jointly
Hindu Undivided Families (HUFs), companies, trusts, and Association of Persons (AOP) cannot claim this deduction
Only first-time home buyers can claim the deductions
Deductions are available on a per-person basis, not per property basis

Can I claim Section 80EE deductions if I do not reside in the house for which I am claiming the benefit?

Yes, you can claim deductions under Section 80EE even if you do not reside in the same property.

What is the major difference between Section 24(b) and Section 80EE of the Income Tax Act?

Under Section 24(b), you can claim a ₹2 Lakh deduction for self-occupied property. Under Section 80EE, you benefit from an additional deduction of ₹50,000.

Can I claim a tax deduction under Section 80EE if I already own a house?

No, you are not eligible to claim these deductions since it is available only for first-time homebuyers.

Can I claim a tax deduction under Section 80EE every financial year or only a single time?

This section allows tax deductions on the interest component of a home loan for each financial year. These deductions will be available till you repay the home loan, provided that the sanction date falls within the financial year 2016-17.

Can I claim deductions under both Sections 80EE and 80C together?

Yes, you can claim Section 80EE deductions over and above the exemptions available under Section 80C.

Can I avail of Section 80EE tax benefits if I buy another residential property in the subsequent year?

To claim these deductions, you must not own a residential property at the time of loan sanction, i.e., during the FY 2016-17

What is the difference between Sections 80EE and 80EEA?

Individuals who have availed of a home loan during FY 2016-17 can avail of Section 80EE. However, Section 80EEA benefits on home loans with the sanction date falling between the beginning of FY 2019-20 and the end of FY 2021-22.

Moreover, the maximum exemption limit allowed under Sections 80EE and 80EEA is ₹50,000 and ₹1.5 Lakhs, respectively.

Who is eligible for the Section 80EE exemption?

Section 80EE exemption is available to first-time home buyers with loans sanctioned between 1st April 2016 and 31st March 2017. The property value should not exceed ₹50 lakh, and the loan amount must be less than ₹35 lakh.

Can I claim Section 80EE every year?

Yes, you can claim up to ₹50,000 per year under Section 80EE until your home loan is fully repaid. This is in addition to the ₹2 lakh limit under Section 24(b).