What is Section 80EE of the Income Tax?Section 80EE allows Income Tax Benefit on Interest on Home Loan to first time buyers in the following events:-
- This deduction will be provided only if the cost of the property acquired is not more than Rs. 50 Lakhs and the amount of the loan taken is upto Rs. 35 Lakhs.
- The loan should be sanctioned between 1st April 2016 and 31st March 2017.
- The advantage of this deduction would be possible till the time the payment of the loan continues.
- This deduction would be accessible from the financial year 2016-17 and onwards.
|Particulars||Quantum of Deduction (Rs.)|
|Self-Occupied Property||Non-Self Occupied Property|
|Section 24 (interest)||2,00,000||No Limit|
|Section 80C (principal)||1,50,000||1,50,000|
|Section 80EE (interest)||50,000||50,000|
Points to Remember
- The earlier tax deductions are per person and not per home. So in case a taxpayer has acquired a property collectively and has taken a joint home loan, each person repaying the loan amount would be qualified to claim the deduction individually.
- For declaring the above tax deduction, a taxpayer would be expected to furnish the declaration provided by the bank clearly showing the amount owed and paid towards interest and principal.
- After declaring the above deductions of tax benefit on home loan, the balance Income of a person would be taxed as per the Income Tax Slab rates.
Why was the establishment of Section 80EE done?
Mr. Arun Jaitley while declaring the Budget 2016 re-launched Section 80EE which presents for additional deduction of Rs. 50,000 for interest on home loan. This consideration would be covering and above the tax deduction of Rs. 2,00,000 under Section 24 and Rs. 1,50,000 under Section 80C.
What are the terms for declaring Section 80EE deductions?The requirements associated to claim the deductions under Section 80EE are:
- The taxpayer should not own any residential house property on the date of loan sanction.
- The value of the house property should be upto Rs. 50 lakhs.
- The home loan taken should be upto Rs. 35 lakhs.
- Section 80EE provides deduction only for the interest portion of a house loan.
- The house loan must be approved by a Housing Finance organization or a financial institution.
- As on the day of the loan sanction, the person must not be holding another house property.
- The tax benefit is not available for loan on commercial property for commercial businesses.
- For claiming deductions under this section, the loan must have been sanctioned between 01.04.16 to 31.03.17.
Who can claim a deduction under section 80EE?To be qualified for declaring 80EE deductions, a taxpayer has to make certain of the points listed below:
- Individual taxpayers can claim benefits under this section either individually or jointly. If a person has purchased a property contemporaneously with his or her mate and they are both giving the payments of the loan, then both of them can claim this discount.
- The tax benefit is not available to
- Association of Persons (AOP),
- Hindu Undivided Families (HUF),
- Trusts, etc.
- Only first-time home buyers can claim tax benefits under Section 80EE i.e. the assessee does not own any residential house property on the date of sanction of loan. To claim this deduction, the person must have received the loan from a financial institution or bank.
- Section 80EE tax benefit is available on per person basis and not on the basis of per property.
- The maximum deduction of Rs 50,000 can be claimed under this section.
- This tax deduction is over and above the limit of Rs. 2 lakh as per section 24.
How to claim tax deduction under section 80EE of Income Tax Act?
To discover on how much one can claim the deduction, here is what requires to be performed:
- Estimate the total value of interest that is given during a financial year on the house loan.
- Once the complete interest component paid is determined, claim deduction up to Rs. 2,00,000 (under Section 24(b) of the Income Tax Act, 1961).
- The surplus amount, up to Rs. 50,000, can be claimed under Section 80EE of Income Tax Act, 1961.
What will be the total tax benefit under Section 80EE and Section 24?
Tax benefits under section 80EE and section 24 for interest paid on the home loan can be claimed together to the maximum cumulative limit of upto Rs 2,50,000. Which can be bifurcated as under
|Section 24||Upto Rs 2,00,000|
|Section 80EE||Upto Rs 50,000|
|Total Deduction||Upto Rs 2,50,000|
Also, for availing the tax benefit under both these sections you first need to use the limit available under section 24 and afterwards avail the tax benefit additionally available under section 80EE.
Frequently Asked Questions (FAQs)
Q - Should all co-borrowers take insurance on home loan? Does it cover full loan burden?
Yes, it is best if all co-borrowers take insurance while taking home loan as in the case of any untoward incident the other co-borrowers will get burdened with paying their share of the EMI too. A loan cover will take care of their EMIs. You can take insurance while completing the documentation formalities of your loan before disbursement. There are different kinds of loan insurance covers. While some safeguard your family or other co-borrowers from paying the outstanding loan amount, others safeguard you against damages to property or burglary. Based on your preferences you can choose an insurance policy.
Q - 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?
In this case, since the co-borrower is not a co-owner of the property, he cannot claim any tax exemption. The only solution to this is if your wife executes a sale deed or gift deed in your favour to include you as a co-owner in the property. To do this, she will need to take approval from the bank. Since you are a co-borrower, the bank should hopeful have no objections.
Q - Can I claim tax benefit for under-construction property?
According to Section 24(b) of the Income Tax Act, deduction for interest paid on home loan for under construction property can only be claimed in 5 equal installments after completion of such construction.
Q - Can I claim tax exemption on my second house?
The benefit on the second house is not available under section 80EE.
Q - What is the amount of deduction available under section 80EE for A.Y. 2020-21 and onwards?
The amount that can be claimed under section 80EE is Rs. 50000/- for A.Y. 2020-21 in respect of loans taken in FY 2016-17.
Q - Section 80EE states an additional tax benefit of Rs 50,000. Can I claim that every year or is it a one-time claim?
Ans: Section 80EE allows income tax benefits on the interest portion of the residential house property loan availed from any financial institution. You can claim a deduction of up to Rs. 50,000 per financial year as per this section. You can continue to claim this deduction until you have fully repaid the loan.
Q - Can I claim a tax benefit under both section 24 and section 80EE in a single year? I bought my first house last year.
Ans: Yes, You can claim a tax benefit under both section 24 and section 80EE in a single year. Tax deduction under Section 80EE of the Income Tax Act 1961, can be claimed by first-time home buyers for the amount they pay as interest on home loan. The maximum deduction that can be claimed under this section is Rs. 50,000 during a financial year. The amount can be claimed over and beyond the deduction of Section 24 which is Rs. 2,00,000.
Q - Is Section 80EE of the Income Tax Act applicable to the construction of a house?
Ans: As per section 80EE of the Income Tax Act, income tax deduction for interest on home loan can be claimed only in respect of home loan taken for acquisition of residential house property from any financial institution. Hence, section 80EE is not applicable in the construction of a house.
Q - I didn’t claim the deductions for FY 2016-17 even though I purchased a new property in August 2016. Can I claim the deduction now?
Ans: As per section 80EE , there is no such condition that if an assessee didn't claim deduction of interest on home loan in FY 2016-17, then he/she can't claim it in the subsequent years. Therefore, you can claim deduction now also provided your loan repayment is not completed.
Q - What are the features of Section 80EE?
Ans. This deduction is only available to individuals who does not own any other house property as on the date of loan sanction and threshold limit for this deduction is Rs. 50,000
- Deduction under Section 80EE is available only for individual taxpayers for either self occupied or other residential property.
- This deduction of Rs 50,000 can be claimed in addition to the deduction of Rs. 2,00,000 under Section 24.
Q - How is Section 80EE different from Section 24?
Ans. Section 80EE is only available to individuals, however Section 24 applies to HUF also.Section 80EE is only for those who are first time home buyers but section 24 is applicable for all house properties.
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