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What Is Section 80EE Of The Income Tax Act?

Section 80EE of the Income Tax Act enables income tax deductions on the interest paid on home loan.

What Are The Features of The Section 80EE Tax Deduction?

The salient features of the Section 80EE deductions are as follows:

  • The amount that can be deducted is capped at Rs. 50,000. It exceeds the Rs. 2 Lakhs limit set forth in Section 24 of the Income Tax Act.
  • Eligibility criteria: This tax deduction can be availed only by individuals. Any company, Hindu undivided family, or association of people cannot avail this deduction.
  • Other features: To avail this deduction, the individual should not have any property in his name on the date of the loan approval.

What Are The Terms And Conditions To Avail Deduction Under Section 80EE?

The tax deduction can be availed under the following conditions:

  • The maximum loan amount allowed is up to Rs. 35 Lakhs
  • The cost of property bought should not be more than 50 Lakhs.
  • The house should be the first property owned by the claimant.
  • The loan should be given by a housing finance company or a financial institute.
  • The deductions under Section 80EE is above the Rs. 2 Lakhs limit established under the section 24 of the Income tax Act and over Rs. 1.5 Lakhs set under Section 80C of the Income Tax Act.
  • You should not have any other house in your name when the home loan is approved.
  • This tax deduction cannot be availed for loan on commercial property for commercial businesses.
  • Section 80EE allows tax deduction only for the interest portion of a house loan.

Why Was Section 80EE Established?

The Section 80EE was re-launched in 2016 and it presented for an additional deduction of Rs. 50,000 for interest on home loan. This consideration would be encompassing and above the tax deduction of Rs. 2,00,000 for Section 24 and Rs. 1,50,000 for Section 80C.

What Are The Key Things To Keep In Mind About Section 80EE Deductions?

  • If a person has acquired a property collectively or if he has taken a joint home loan, then every individual involved in the acquisition of the property and who pays the interest on the home loan can claim tax benefits under Section 80EE.
  • Only individuals can claim deductions under this section. Trusts, companies, Association of people, and Hindu undivided families (HUFs) cannot claim tax deductions.
  • For claiming tax deduction under Section 80EE, a taxpayer should furnish the declaration provided by the bank regarding the amount paid towards the principal and interest.
  • After declaring the above deduction of tax benefits on home loan, the balance income of a person would be taxed according to the income tax slab rates.

How To Claim Tax Deduction Under Section 80EE Of Income Tax Act?

To find out how much deduction one can claim, here are the necessary things to be done.

  • Compute the total value of interest that is paid during a financial year on the home loan.
  • Once an estimate of the complete interest paid is made, you can claim a deduction amount up to Rs. 2,000,00 under Section 24 (b) of the Income Tax Act, 1961.
  • The surplus cash which is capped at Rs. 50,000 can be claimed under Section 80EE.

Section 24 and Section 80EE

Deduction for interest on home loan can be claimed under section 24 also. The maximum amount that can be claimed under this section is capped at Rs. 2 Lakhs. This deduction can be availed of only if the house owner or the family members stay in the house. If the individual satisfies the conditions of both Section 24 and Section 80EE, then he can claim tax deductions under both the sections. To do so, first the individual has to finish the limit under Section 24 and then claim the extra benefit under Section 80EE. Hence, the deduction under Section 80EE is a surplus to the deduction amount under section 24 capped at 2 Lakhs. Tax benefits under section 80EE and section 24 for interest paid on the home loan can be claimed to the maximum cumulative limit of up to Rs 2,50,000.

Section 80 EEA And Section 80EE

Those who claim deductions under Section 80EE cannot claim deductions under Section 80EEA. Here are some major differences between 80EE and 80EEA

  • The property value under Section 80EE can be up to Rs. 50 Lakhs and up to Rs. 45 Lakhs in the case of Section 80 EEA.
  • The Loan amount under Section 80EE is capped at Rs. 35 Lakhs, whereas the maximum loan amount is not mentioned under Section 80 EEA.
  • The maximum rebate under Section 80EE is Rs. 50,000, and it is Rs. 1.50 Lakhs under Section 80EEA.
  • There is no Lock-in period for tax deductions under both the sections.

Can You Apply Section 80EE To The Construction Of A House?

The individual can claim a deduction for interest paid towards home loan only when he buys a house. It cannot be used for construction of a house. However, you can claim tax benefits for house construction under Section 24 up to an amount of Rs. 2,00000.

Conclusion

Due to the deductions allowed under Section 80EE of the Income Tax Act, first time home buyers are now able to enjoy tax deductions on the interest paid towards home loans that they take. Buying a home involves a lot of expenditure, and this waiver under Section 80EE comes as a boon to first time home buyers. One should utilize this tax deduction. Homebuyers can benefit from this deduction for the entire period of the loan. If you are a first time home buyer, make sure to obtain a statement from the lender showing how much you have paid towards the principal and interest of the home loan. This is in order to enable you to claim the tax deductions under Section 80EE and other mentioned sections. If you are a first time home buyer or already have a home loan and are apprehensive about how you are going to take a home loan or how you are going to repay it, then remember these tax deductions and how they reduce your burden by providing tax deductions.

FAQS

1. Who is eligible for tax deduction under Section 80EE?

Only individual taxpayers are eligible for tax deductions under Section 80EE. If you have bought a home jointly with your spouse and both of you are paying interest towards your home loan, then both of you can claim tax deduction under Section 80EE individually.

2. Can I claim 80EE every year?

Section 80EE enables income tax benefits on the interest paid towards home loan availed from any financial institution. You can claim a deduction till the limit of Rs. 50,000 per financial year. You can continue to claim this deduction until you have repaid the loan fully.

3. How to claim Section 24 on my taxes?

Section 24 of the Income Tax Act enables house owners to claim deduction on the home loan interest if the house owner or his family reside in the home. The deduction amount is capped at Rs. 2 Lakhs (Rs. 1,50,000 if you are filing returns for the previous financial year). If the house is rented, then the entire interest is waived off as deduction.

4. Can I claim tax deductions on my electric bills?

When you work from home, you will be able to claim tax deductions on utilities such as gas, electricity, and water. However, you can make the claim based on the percentage of floor space used in your business. For example: if your home office makes up around 15% of your floor plan, then you can claim 15% of each bill.

5. What is Section 80EEB Deduction?

Under Section 80 EEB, one can claim a deduction for interest payments up to Rs. 1,50,000. An individual taxpayer may have an electric vehicle for personal utilization or for business purposes. If you have availed a vehicle loan and are paying interest towards it, then you can claim deduction on the interest paid under this section.

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