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. To provide relief on interest on home loan, Section 80EE of income tax act was implemented which enables first-time home buyers to claim an additional deduction of the interest paid on the home loan of up to INR 50,000 if they fulfill certain conditions.
- What is Section 80EE of Income Tax Act?
- What are the Eligibility Criteria?
- What are the Conditions to Claim 80EE Deduction?
- What is 80EE Deduction Limit for a first-time Homeowner?
- Section 80EE vs 80EEA
- What is the Difference between Section 80EE and Section 24(b)?
- ITR Form Applicable for Section 80EE
What is Section 80EE of Income Tax Act?
Section 80EE of income tax act deals with income tax 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 if they take a loan to acquire a residential house. Further, it is essential to note that 80EE deductions can only be claimed on the interest component of a home loan and not the principal amount paid towards repayment.
What are the Conditions to Claim 80EE Deduction?
- An individual is a first-time home buyer.
- The value of residential houses should not exceed INR 50 lakh.
- The sanction date of the loan is between 1st April 2016 to 31st March 2017.
- Financial institutions or Housing Finance Companies must sanction the loan.
- Sanctioned 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.
What is 80EE Deduction Limit for a first-time Homeowner?
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 not claim 80EE deduction of more than 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 you satisfy the conditions for both, you 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|
What is the 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 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 all the above-mentioned conditions are fulfilled. 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.
- Home loan repayment certificate / Interest certificate
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. A residential house is treated as let out for the purpose of calculating income from house property.
No, under the above scenario, you cannot claim a deduction. A deduction can be claimed only if the wife is a co-borrower in the loan or if your wife makes you the co-owner of the house.
Yes, one can claim deductions under both sections at the same time as the 80EE deduction is available over and above the deductions available under section 24.
No, deductions u/s 80EE can only be claimed on a home loan taken for the acquisition of residential house property and not for the construction of a house property.