A first-time home buyer has to go through a difficult procedure that starts with searching for an ideal home that suits their requirements and desires and it ends with much more difficult stages of applying for a home loan. Section 80EE of the Income Tax Act was introduced to offer relief on interest payments for home loans. This provision allows first-time homebuyers to avail an extra deduction on the interest paid for home loans taken between April 1, 2016, and March 31, 2017, amounting to a maximum of INR 50,000, provided they meet specific conditions.
What is Section 80EE?
Section 80EE of the Income Tax Act deals with deductions on interest that an individual pays on home loans while purchasing a property.
What are the Eligibility Criteria?
Only Individuals who are first-time homeowners are eligible to claim the Section 80EE deduction. If two individuals jointly own the home and they both are making loan payments then both of them will be eligible for the deduction.
HUF, or company, or a partnership firm can not claim a deduction under this section. Further, it is essential to note that the 80EE deduction is only available on the interest component of a home loan and not on the principal amount.
Conditions to Claim 80EE Deduction
- An individual should be a first-time home buyer.
- The value of residential houses should not exceed INR 50 lakh.
- The sanction date of the loan should be between 1st April 2016 to 31st March 2017.
- The loan must be sanctioned by Financial institutions or Housing Finance Companies.
- The loan amount should not exceed INR 35 lakh.
- A taxpayer should not own any other residential house on the date of sanction of a loan.
- The deduction is not available for loans taken for purchasing commercial property.
Deduction Limit for Section 80EE
Section 80EE was first introduced in the Budget 2014 only for 2 years (FY2013-14 & 2014-15) with a maximum deduction limit of INR 1 lakh.
However, this section was re-introduced in the Budget 2017. With effect from FY 2016-17 (AY 2017-2018) an individual can claim a deduction of up to INR 50,000 till the loan is repaid.
There is no limit on the number of years for claiming this deduction if you meet the above conditions. The only restriction is that you can claim a deduction of up to INR 50,000 in a single financial year.
Moreover, the limit of INR 50,000 is over and above the deduction of INR 2,00,000 allowed for home loan interest u/s 24. So if the taxpayer satisfies the conditions for both, then they can claim a cumulative deduction of INR 2,50,000 on interest paid on the home loan.
Section 80EE vs 80EEA
The below table states the major difference between 80EE & 80EEA deduction:
| PARAMETER | SECTION 80EE | SECTION 80EEA |
| Eligibility | Only Individual Taxpayers | Only Individual Taxpayers |
| Deduction Limit | INR 50,000 | INR 1,50,000 |
| Applicability of Section 24 | Can be claimed up to INR 2,50,000 (INR 2lakh + INR 50,000) | Can be claimed up to INR 3,50,000 (INR 2lakh + INR 150,000) |
| Date of Loan Sanctioned | Taxpayers get the deduction if their loans are sanctioned from 1st April 2016 to 31st March 2017 | Taxpayers get the deduction if their loans are sanctioned from 1st April 2019 to 31st March 2022 |
| Stamp Duty | The stamp duty value of the house should not exceed INR 50 Lakh | The stamp duty value of the house should not exceed INR 45 Lakh |
| Loan Amount | The amount of the loan should not exceed INR 35 Lakh | There is no such limit on loan amount |
| Condition | The taxpayer has to be a first-time home-buyer | The taxpayer has to be a first-time home buyer and shouldn’t have availed of any deductions under 80EE |
Difference between Section 80EE and Section 24(b)
Section 24(b) allows a deduction of INR 2 lakh for interest on a home loan of a self-occupied property. In the case of a let-out property, the entire interest is deductible.
Section 80EE is an additional deduction of up to INR 50,000. Hence, one can avail of this deduction after exhausting the limit of Section 24(b).
ITR Form Applicable for Section 80EE
The taxpayer can claim deductions u/s 80EE while filing ITR if the taxpayer fulfills all the conditions. Individuals can claim this deduction in any of the ITR forms, i.e., ITR 1, ITR 2, ITR 3, and ITR 4 depending upon their income sources.
Supporting Documents
- Home loan repayment certificate / Interest certificate
FAQs
Yes. As per the Income Tax Act, you can claim an 80EE deduction for a loan taken to purchase the first residential house property. Whether you use it for yourself or let it out on rent is irrelevant.
Yes, you can claim both deductions under section 80EE and section 80GG simultaneously. This would be possible only when:
a. The assessee is living at rented premises and paying rent for the same.
b. He does not receive any House Rent Allowance (HRA).
c. He has taken a loan for the purchase of the first residential house property.
d. The assessee is not occupying a residential house.
You cannot claim a deduction under the above scenario. Eligibility for the deduction exists only when you and your wife co-own the property.
Section 80EE deduction is available over and above the deductions available u/s 24. Hence, you can claim the deduction under both sections at the same time.
Section 80EE allows a deduction only for a home loan taken to acquire residential house property, not for constructing a house property.
Hey @sushil_verma
There are a wide range of deductions that you can claim. Apart from Section 80C tax deductions, you could claim deductions up to INR 25,000 (INR 50,000 for Senior Citizens) buying Mediclaim u/s 80D. You can claim a deduction of INR 50,000 on home loan interest under Section 80EE.
Hey @Dia_malhotra , there are many deductions that you can avail of. Your salary package may include different allowances like House Rent Allowance (HRA), conveyance, transport allowance, medical reimbursement, etc. Additionally, some of these allowances are exempt up to a certain limit under section 10 of the Income Tax Act.
For eg,
Tax on employment and entertainment allowance will also be allowed as a deduction from the salary income. Employment tax is deducted from your salary by your employer and then it is deposited to the state government.
The benefit Section 80EEB can be claimed by individuals only. An individual taxpayer can claim interest on loan of an electric vehicle of up to INR 1.5 lacs u/s 80EEB. However, if the electric vehicle is used for the purpose of business, the vehicle should be reported as an asset, loan should be reported as a liability and the interest on loan can be claimed as a business expense irrespective of the amount. (We have updated the article with the changes).
Thus, if you have a proprietorship business, you should claim interest amount as a business expense only if the vehicle is used for business purpose. However, if it is used for personal purpose, you can claim deduction of interest u/s 80EEB in your ITR since you would be reporting both personal and business income in the ITR (under your PAN).
As per the Income Tax Act, the deduction under Section 80EEB is applicable from 1st April 2020 i.e. FY 2020-21.
Hey @Sharath_thomas , we have updated the content according to the appropriate assessment year. Thanks for the feedback.
No issues. You’re welcome!
Hey @shindeonkar95
In case of capital gain income (LTCG/STCG), transfer expenses are allowed as deduction, except STT.
However, in case of business income (F&O, intraday), all expenses incurred for the business (including STT) are eligible to claim deduction in ITR.
Hope, it helps!
Hello,
Is it possible to claim deductions under S. 80CCF for Infra bonds bought in the secondary market and held to maturity?
There were a number of 10 year infra bonds issued in the 2010- 2013 period, which will start maturing soon. These are all listed on the exchanges (although hardly any liquidity or transactions in them). If I were to buy some of these bonds in the open markets and hold them in my demat to maturity (<3 years), is it possible to claim tax deductions (upto 20k per year) under 80CCF for buying?
I couldn’t find anything on this. Any help is appreciated.
Hello @Veejayy,
Yes you can claim deduction under 80CCF for investment made in specified infrastructure and other tax saving bonds bought in the secondary market and held to maturity.
Deduction under Section 80CCF can be availed only through investment in certain tax saving bonds, issued by banks or corporations after gaining permission from the government which shall be restricted upto 10,000 per year.
These bonds are generally long term bonds, having tenure of more than 5 years with a lock in period of 5 years in most of the cases. These bonds can be sold after the lock in period!
Also, interest earned on these bonds will be taxable.
Hope this helps!
Hi, I need to file my income tax for FY21, I am using Quicko platform for filing, I wanted to confirm if the ELSS investment amount for the FY21 is to be added in the section 80C, since I already the amount of Rs30,072 , should I add my ELSS amount to this existing amount and submit the total
Hey @Sheirsh_Saxena, yes, the investment amount needs to be added under 80C.