Deduction for Interest on Home Loan: Section 80EE

Introduction

Thinking to purchase a house property? Then here is something for you to be aware of.

The Income Tax, 1961 under Section 80EE allows a person to claim a deduction of Rs. 50,000/- per financial year, if you own a house property. It is over and above the Rs. 2 Lakh limit under Section 24 of the Income Tax Act.

Continue reading to know everything about Deduction for interest on home loan as provided under Section 80EE of the IT Act.

What is Section 80EE about?

Section 80EE of the Income Tax Act allow taxpayer various Income Tax Benefits on home loan to first-time buyers. The deduction under Section 80EE can be claimed, in the following case:-

Case 1: If the cost of the property you are planning to acquire is not more than Rs. 50 Lakh and amount of home loan are up to Rs. 35 Lakhs.

Case 2: The home loan must be sanctioned between 1^st April 2016 and 31^st March 2017.

Case 3: The advantage of the deduction can only be availed till the time the payment of the loan is being continued.

Case 4: The deduction would be accessible from the financial year 2016-17 and onwards.

NOTE:- Deduction under Section 8EE is provided only for the interest portion of a house loan

Conditions to claim deduction under Section 80EE

All the below-mentioned taxpayers are eligible to claim deduction under Section 80EE, namely:-

• The taxpayer must not own any residential house property on the date of sanction of loan
• The value of the house property should be upto Rs. 50 Lakhs
• The home loan must be up to Rs. 35 Lakhs
• The home loan must be approved by a Housing Finance Organization or a financial institution
• When sanctioning a home loan, one must not hold another house property.
• The tax benefit is not available for loan taken on commercial property for commercial business
• The day of the sanction of loan must be between 01.04.2016 to 31.03.2017.

Who can claim Deduction under Section 80EE?

1. An individual taxpayer is eligible to claim section 80EE deduction either individually or jointly and where jointly purchased then, both the persons are eligible to claim deduction.
2. The taxpayer must have an approved home loan that is granted by a known financial institution or bank.
3. Only the first-time buyers are allowed to claim a deduction for interest on home loan.
4. Section 80EE deduction is available per person basis and not on the basis of the property purchased.

Following are the ones who are not eligible to claim this deduction are:-

• AOP ( Association of Person)
• HUFs (Hindu Undivided Family)
• Companies
• Trust etc.

Conclusion

The emergence of this Act came into 2013-14 which was available for two years 2013-14 and 2014-15 and provided deduction that was limited to a maximum of Rs. 1 lakh in total. In the financial year 2016-17, it was reintroduced and allowed a deduction of Rs. 50 Lakh per year until the loan is repaid.  In total, the first-time buyer can claim to the maximum cumulative limit of up to Rs. 2,50,000 which is bifurcated as under:
Section 24: Upto Rs. 2,00,000
Section 80EE: Upto Rs. 50,000
Total Deduction: Upto Rs. 2,50,000

One must not forget that, for availing tax benefit under both these sections, you must first need to utilize the limit available under Section 24 and afterward avail the tax benefit additionally available under section 80EE.