Section 80EE Income Tax Deduction for Interest on Home Loan

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Section 80EE allows tax benefits for first time home buyers. An Income tax deduction can be claimed on your home loan interest towards your first house property. The deduction allowed under this section is for the interest paid on a home loan for up to a maximum of Rs 50,000 per financial year. You can continue to claim this deduction until you have fully repaid the loan.

  1. Features of the 80EE Deduction
  2. Conditions to be Met for Claiming Deduction
  3. Section 80EE and Section 24

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1. Features of the 80EE Deduction

  • The deduction under this section is available only to individuals. This means, if you are a HUF, AOP, a company or any other kind of taxpayer, you cannot claim any benefit under this section.
  • This deduction is over and above the Rs 2 lakh limit under section 24 of the income tax act. Read more about deduction of Rs 2 lakh on interest on home loan here.
To claim this deduction your loan must have been taken from a financial institution for purchasing your first residential house property.

2. Conditions to be Met for Claiming Deduction

  • This must be the 1st house that you purchase
  • Value of this house should be Rs 50 lakhs or less
  • Loan taken for this house must be Rs 35 lakhs or less
  • The loan must be sanctioned by a Financial Institution or a Housing Finance Company
  • The loan must be sanctioned between 01.04.2016 to 31.03.2017
  • As on the date of the sanction of loan no other house must be owned by you
Section 80EE came into effect from the financial year 2013-14. It was available for only 2 years, FY 2013-14 and FY 2014-15 . The deduction allowed earlier was limited to a maximum of Rs 1 lakh in total and was available for only 2 financial years. However, this section has been reintroduced, effective FY 2016-17 (Assessment Year 2017-18). Now the deduction is allowed for up to Rs 50,000 per year, starting from FY 2016-17 and subsequent years, until the loan is repaid.

The Section does not specify if you need to be a Resident to be able to claim this benefit. Therefore it can be concluded that both Resident and Non-Resident Indians can claim this deduction.

The Section also does not specify if this house should be self-occupied to claim the deduction. Borrowers living in rented houses can also claim this deduction.

Moreover, the deduction can only be claimed by individuals for the house purchases jointly or singly. If a person jointly owns the house with her wife and they both are paying the instalments of the loan, then both of them can claim this deduction.

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3. Section 80EE and Section 24

If you are able to satisfy the conditions of both Section 24 and Section 80EE, both the benefits shall apply to you. First, exhaust your limit under section 24 and then go on to claim the additional benefits under section 80EE. Therefore, this deduction is in addition to the Rs 2 lakh limit under section 24.

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