Section 80EE - Home Loan Tax Benefit
Dec 12, 2023
Section 80EE of the Income Tax Act provides valuable advantages to individuals seeking to avail themselves of benefits related to home loan interest payments. This provision was introduced to offer an additional deduction exclusively for first-time homebuyers, aiming to ease the financial burden of interest repayments. Eligible taxpayers can claim an extra deduction under 80EE on the interest paid towards a home loan, complementing the existing deductions available under other sections. Section 80EE of the Income Tax Act serves as a beneficial avenue for individuals aspiring to own a home while maximizing their tax benefits within the stipulated boundaries.
What is Section 80EE?
Understanding what is 80 EE or Section 80EE of the Income Tax Act enables individual taxpayers to gain an extra deduction on interest paid for home loans. Specifically tailored for first-time homebuyers, this provision extends benefits beyond those available in Sections 24(b) and 80C. To qualify, the buyer should be a first-time purchaser, the loan amount must not exceed a specified limit, and the property's value must be below a certain threshold. 80 EE Deduction limits and criteria are subject to alterations by the prevailing tax laws and regulations, emphasizing the nuanced qualifications for availing of this beneficial tax provision.
Purpose of the Deduction Under Section 80EE
Section 80EE of the Income Tax Act allows individuals to tax benefits on interest from residential property loans. Aimed at enabling a INR 50,000 annual deduction, borrowers qualify until the loan is fully repaid, supporting homeowners with financial relief.
Characteristics of the Deduction Under Section 80EE
The characteristics of the deduction under Section 80EE are as follows:
| Eligibility Criteria |
Deduction Qualification |
| Eligible Entities |
Individuals only; HUFs, AOPs, companies, and other entities are ineligible. |
| Maximum Deduction |
INR 50,000 is allowed, exceeding Section 24's INR 2 lakh limit. Section 24 permits an INR 2,50,000 exemption. |
| Stamp Duty |
The house's stamp duty value should not exceed INR 50 lakhs. |
| Additional Conditions |
The taxpayer must not own any other residential property at the time of loan sanction and should be a first-time homeowner. |
Terms for Claiming Section 80EE Deductions
Conditions for claiming a deduction under Section 80EE of the Income Tax Act:
- Property Value: The property purchased should be under INR 50 lakhs, and the loan amount must not exceed INR 35 lakhs.
- Loan Sanction Period: Eligible loans must be sanctioned between April 1, 2016, and March 31, 2017.
- Deduction Availability: Applicable from the fiscal year 2016–17 onwards.
- Continuous Benefit: A deduction is available throughout the loan repayment period.
- Property Ownership: The taxpayer must not own any other residential property on the day the loan is sanctioned to claim this benefit.
Eligibility for Claiming Section 80EE Deductions
Eligibility for claiming 80EE income tax deductions requires adherence to these guidelines:
- Individual Taxpayer: Deductions apply to individuals purchasing properties singly or jointly, allowing spouses jointly paying the loan to claim individually.
- Non-Applicability: HUFs, AOPs, companies, trusts, etc., do not qualify for tax benefits under Section 80EE.
- First-time Homebuyers: Exclusive to first-time home purchasers availing loans from financial institutions for their initial residential property.
- Per Person Basis: Section 80EE applies per individual rather than per property.
- Residency Not Mandatory: Claimants need not reside on the property; even tenants can assert this deduction for their rented accommodations.
Claiming 80EE Tax Deductions
To claim a Section 80EE deduction during tax filing, follow these steps:
- Compute the total interest paid on the home loan within the fiscal year.
- Deduct up to INR 2,00,000 (as per Section 24 of the Income Tax Act, 1961) from the calculated interest amount.
- Claim the remaining balance, up to INR 50,000, under Section 80EE of the Income Tax Act, 1961, for an additional deduction.
Features of the Deduction
Section 80EE's key features are outlined below:
- Eligibility: Only individual taxpayers can claim deductions on properties bought singly or jointly, excluding HUFs, AOPs, companies, and trusts.
- Maximum Deduction: A maximum deduction of INR 50,000 per financial year is allowable under this section.
- Additional Deduction: This deduction is separate from the INR 2,00,000 limit set by Section 24 of the Income Tax Act.
- Property Type: Applies to both self-occupied and non-self-occupied properties, extending its benefit across different occupancy types.
Section 80EE and Section 24
Home loan interest deductions, capped at INR 2,00,000 in Section 24 of the Income Tax Act, apply when the owner or family resides; if rented, full interest is deductible. Meeting conditions in Sections 24 and 80EE allow extra benefits beyond the INR 2,00,000 limit in Section 24 via Section 80EE.
Conclusion
In conclusion, Section 80EE offers additional tax benefits on home loan interest, specifically aiding first-time homebuyers. As you embark on the journey of homeownership, it's crucial to consider every avenue that contributes to your financial well-being. In this context, exploring the home loan provided by SMFG Grihashakti can be a strategic move. By opting for our home loan solutions, you not only secure the financial support needed for your home purchase but also position yourself to leverage the tax advantages offered by Section 80EE
FAQ's
Can I claim tax exemption for a property in my wife’s name, for which I am paying full EMI since I am the deemed owner?
Tax exemptions can be claimed if you are the actual payer of the EMIs and considered the deemed owner despite the property being in your wife's name. However, it's crucial to provide proper documentation and evidence to substantiate your claim for tax benefits on the property.
Can I claim tax exemption on my second house?
Section 80C of the Income Tax Act allows a maximum deduction of Rs 1.5 lakh on principal repayment, applicable for both primary and secondary homes. However, the tax benefit varies based on the property's status, whether it's rented out or self-owned.
What is the amount of deduction available under section 80EE for A.Y. 2023-24, and onwards?
Section 80EE enabled a deduction of up to Rs. 50,000 on the interest paid for home loans, offering tax benefits to eligible individuals. This deduction feature can only be availed by individuals. Any company, HUF, or AOP cannot avail of this deduction.
Section 80EE states an additional tax benefit of Rs 50,000. Can I claim that every year or is it a one-time claim?
Section 80EE allows an annual tax benefit of Rs 50,000 on home loan interest. This deduction can be claimed every year as long as the eligibility criteria, such as being a first-time homebuyer and meeting specified loan and property value limits, are fulfilled.
Can I claim a tax benefit under both section 24 and section 80EE in a single year?
Tax benefits can be claimed under Sections 24 and 80EE in a year if eligibility criteria for each are met. Section 24 deals with home loan interest deductions, while Section 80EE provides an extra deduction. Meeting conditions for both sections allows claiming benefits under both.
Is Section 80EE of the Income Tax Act applicable to the construction of a house?
Section 80EE offers a deduction solely on the interest component of a housing loan, sanctioned by a Housing Finance institution or financial entity. However, this tax benefit doesn't apply to loans for commercial properties used in business endeavours.
What are the features of Section 80EE?
Here are the features:
- Section 80EE provides deductions solely on the interest portion of housing loans.
- Eligibility requires the loan to be sanctioned by a housing finance institution or financial entity.
- Tax benefits do not extend to loans for commercial properties used in business ventures.
How is Section 80EE different from Section 24?
Section 24 focuses on interest deductions for home loans up to Rs. 2 lakh, while Section 80EE offers an extra deduction up to Rs. 50,000 solely for home loan interest, applicable to first-time buyers meeting specified criteria.
Disclaimer: *Please note that this article is for your knowledge only. Loans are disbursed at the sole discretion of SMFG Grihashakti. Final approval, loan terms, disbursal process, foreclosure charges and foreclosure process will be subject to SMFG Grihashakti’s policy at the time of loan application. If you wish to know more about our products and services, please contact us.