Section 80EE: Deduction for First Time Home Buyer

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By Hiral Vakil on March 7, 2019

How to claim deduction u/s 80EE?

A taxpayer can claim income tax deduction under this section on interest paid on a home loan taken for the first residential house. Although this deduction was first introduced only for FY 2013-14, it has been reintroduced with effect from FY 2016-17.

Who is eligible for deduction u/s 80EE?

Only individuals are eligible to claim deduction under section 80EE. Hindu Undivided Family (HUF) or company or partnership firm can not claim a deduction if they take a loan to acquire a residential house. Plus, only an interest component of home loan is eligible for deduction u/s 80EE and not the principal amount paid towards repayment.

What are the conditions to claim deduction u/s 80EE?

  • An individual is a first time home buyer.
  • Value of residential house should not exceed Rs. 50,00,000.
  • A loan has to be sanctioned between 1st April 2016 to 31st March 2017.
  • A loan must be sanctioned by Financial institutions or Housing Finance Company.
  • Sanctioned loan amount should not exceed Rs. 35,00,000.
  • A taxpayer should not own any other residential house on the date of a sanction of a loan.

What is the deduction limit u/s Section 80EE?

A deduction is allowed up to Rs. 50,000 for FY 2018-19 (AY 2019-20). There is no limit on a number of years for claiming this deduction if you meet above conditions. The only limit is that you can not claim deduction u/s 80EE for more than Rs. 50,000 in a single financial year.

The limit of Rs. 50,000 is over and above the deduction of Rs. 2,00,000 allowed for home loan interest u/s 24. So if you satisfy conditions for both section 24 and section 80EE, you can claim a cumulative deduction of Rs. 2,50,000 on interest paid on home loan.

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FAQs:

1. Can I claim deduction u/s 80EE for residential house given on rent?

Yes. As per income tax act, deduction u/s 80EE is allowed for loan taken to purchase first residential house property. Whether you use it for yourself or let it out on rent is irrelavent. In botht the cases, deduction amount will remain the same as Rs. 50,000

2. What are the douments required to claim deduction u/s 80EE?

Home loan repayment certificate/ Interest certificate from a bank is essential to claim deduction u/s 80EE while filing ITR.

3. Can I claim deduction u/s 80EE and 80GG simultaneously?

Yes, you can claim both deductions under section 80EE and section 80GG simultaneously. This would be possible only when:

  1. The assessee is living at rented premises and paying rent for the same.
  2. He does not receive any House Rent Allowance(HRA).
  3. He has taken a loan for the purchase of first residential house property.
  4. 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.