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Section 80EE: Deduction for First Time Home Buyer

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Hiral Vakil

Chapter VI-A
Interest
Section 80EE
Last updated on July 19th, 2021

What is Deduction under section 80EE?

A taxpayer can claim income tax deduction under section 80EE of the Income Tax Act on interest paid on a home loan taken by a first-time homeowner. Although this deduction was first introduced only for FY 2013-14, it has been reintroduced with effect from FY 2016-17. The total dedication that is available under section 80EE is INR 50,000 per annurm.

Deduction under section 80EE is not allowed for Financial Year 2020-21 if the taxpayer opts for the new tax regime
Tip
Deduction under section 80EE is not allowed for Financial Year 2020-21 if the taxpayer opts for the new tax regime

Who is Eligible for Deduction Under Section 80EE of Income Tax Act?

Only individuals who are first-time homeowners are eligible to claim deduction under section 80EE. HUF or company or partnership firm can not claim a deduction if they take a loan to acquire a residential house. One needs to note that 80EE deductions can only be claimed on the interest component of home loan and not the principal amount paid towards repayment.

What are the Conditions to Claim Deduction Under Section 80EE?

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What is the Deduction Limit Under Section 80EE for a first-time Homeowner?

A deduction is allowed up to INR 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 the above conditions. The only limit is that you can not claim deduction u/s 80EE for more than INR 50,000 in a single financial year.

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 conditions for both section 24 and section 80EE, you can claim a cumulative deduction of INR 2,50,000 on interest paid on the home loan.

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Difference between Section 80EE and 80EEA

Sr. No. Parameter Under Section 80EE Under Section 80EEA
1. Eligibility All Taxpayers Only Individual Taxpayers
2. Deduction Amount INR 50,000 INR 1,50,000
3. Applicability of Section 24 Section 24 can be claimed to provide exemptions up to INR 2,50,000 Section 24 can be claimed to provide exemptions up to INR 3,50,000
4. Date of Loan Sanctioned Taxpayers get the deduction if their loans are sanctioned during the FY 16-17 Taxpayers get the deduction if their loans are sanctioned on and after FY 19-20
5. Stamp Duty Stamp duty value of the house should not be more than INR 50 Lakh Stamp duty value of the house should not exceed INR 45 Lakh
6. Loan Amount The amount of loan should not exceed INR 35 Lakh There is no such limit set
7. 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 taken any deductions under 80EE

ITR Form Applicable for Section 80EE

The taxpayer can claim deductions u/s 80EE while filing ITR if all the above-mentioned conditions are full-filled. Individuals/HUFs can claim 80EE in any of the ITR forms, i.e, ITR 1ITR 2ITR 3, and ITR 4 depending upon their income sources. The due date for filing ITR is 31st July of the next FY if the tax audit is not applicable.

Supporting Documents

The only document you would need to claim this deduction apart from the common documents such as Form 16, PAN, etc, is the document supporting Interest on Housing loan for first home

FAQs

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

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

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

A home loan repayment certificate/ Interest certificate from a bank is essential to claim this deduction while filing ITR.

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:
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.

Can I claim a deduction under section 80EE on a house property which is owned by my wife but the loan is taken by me?

No, under the above mentioned 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.

What is the deduction amount availabe u/s 80EE for AY 20-21?

For AY 20-21, INR 50,000 is the total dedication available u/s 80EE provided that the loan is taken in FY 16-17.

Is it possbile to calim deduction u/s 80EE and section 24 in simultaniousely?

Yes, one can claim deductions under both sections at the same time. The 80EE deduction is available over and above the deductions available under section 24.

Can 80EE deductions be claimed for construction of a house property?

No, deductions u/s 80EE can only be claimed on a home loan taken for acquisition of residential house property and not for the construction of a house property.

Got Questions? Ask Away!

  1. 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.

  2. 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,

    • Medical allowance is exempt up to INR 15,000 on a reimbursement basis.
    • Children education allowance is exempt up to Rs. 200 per child per month up to a maximum of two children.
    • Conveyance allowance is exempt up to a maximum of Rs. 1600 per month.

    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.

  3. 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.

  4. Hey @Sharath_thomas , we have updated the content according to the appropriate assessment year. Thanks for the feedback. :slight_smile:

  5. 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!

  6. 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.

  7. 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!

  8. 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

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