Section 80EE: Deduction for Interest on Home Loan

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.

The above sections connecting to tax benefits on home loans have been abridged as under:

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.

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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.

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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.

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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.
  1. The tax benefit is not available to
  2. Association of Persons (AOP),
  3. Hindu Undivided Families (HUF),
  4. Companies,
  5. 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.

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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.

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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.

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