Purchasing a home is a significant financial milestone for most of the tax payers. Section 80 EE provides additional tax benefits for first time home buyers. On satisfaction of certain conditions, a deduction of up to Rs 50,000 can be claimed under this section. This article explains in detail about meaning, eligibility criteria, exemption limit and documents required to claim deduction under section 80EE.
What is Section 80EE Deduction?
Section 80EE was introduced to provide tax benefits to first time home buyers.
This deduction is over and above interest deduction provided under section 24 of the act.
Eligibility Criteria to Claim Deduction u/s 80EE
The deduction under this section is available only to individuals.HUF, AOP, a company, or any other taxpayer cannot claim section 80EE deduction.
Deduction u/s 80EE is available only for the purchase of first residential property.
The loan must be sanctioned by a financial institution or a housing finance company
The loan should have been availed between April 1 2016 to 31st March 2017.
The value of residential property should not exceed Rs 50 lakhs.
The amount of loan sanctioned should not exceed Rs 35 lakhs
This deduction can be claimed only when the assessee has opted for old tax regime.
Deduction Limit u/s 80EE
The deduction is up to Rs 50,000.
It is over and above the Rs 2 lakh limit under Section 24 of the Income Tax Act.
Note: If you can satisfy the conditions of both Section 24 and Section 80EE of the Income Tax Act,
First, exhaust your deductible limit under Section 24, Rs 2 lakh.
Then go on to claim the additional benefits under Section 80EE.
Things to Remember
Even Non-Resident Individuals can claim deduction under this section.
Deduction can be claimed for both self occupied and let out property as long as it is residential.
It is nowhere explicitly mentioned that residential property should be purchased in India. But considering the intent of introducing this section, it is allowed only when the residential property is purchased in India.
If a person jointly owns the house with a someone else and they both are paying the instalments of the loan, then both of them can claim this deduction.
Documents Required to Claim Deduction under Section 80EE
To claim a deduction under Section 80EE, it is advisable to retain the following supporting documents for verification purposes.
Interest certificate for the year, clearly specifying the principal and interest components of the financial year.
Home loan sanction letter obtained from the bank.
Loan agreement
Property documents, confirming the value of property does not exceed Rs 50 lakhs.
Housing Loan Tax Benefits: Deduction Limits Across Different Sections
Taking a home loan offers tax benefits on both principal and interest payments.
Let’s explore the deductions you can claim on your home loan and the benefits they offer.
Particulars
Limit of Deduction for Self-Occupied Property
Limit of Deduction for Let-out Property
Section 80C (Principal)
1,50,000
1,50,000
Section 24(b) (Interest)
2,00,000
No Limit
Section 80EE (Interest)
50,000
50,000
Section 80EEA
1,50,000
Not Applicable (NA)
Examples for Deduction u/s 80EE
Mr A has purchased his first house property on 16th April, 2016, for which he obtained loan from his relative. He paid an interest of Rs. 1.8 lakhs for the financial year.
In this case, he cannot claim deduction as he did not receive loan from a banking company or a housing finance company.
Mr A has received a loan of Rs. 50 lakhs for purchase of his first home on 16th April, 2016. He paid an interest of Rs. 1.8 lakhs for the financial year.
Since the amount of loan here exceeds Rs 35 lakhs, he cannot claim deduction under this section.
Mr A has received a loan of Rs. 30 lakhs for purchase of his first home on 16th April, 2016. The value of house property is Rs. 60 lakh. He paid an interest of Rs. 1.8 lakhs for the financial year.
Since the value of the house property exceeds Rs 50 lakhs, he cannot claim deduction under this section though the amount of loan is within the limit.
Mr A has purchased his first house property on 16th April, 2016, for which he obtained loan from a banking company. He paid an interest of Rs. 1.8 lakhs for the financial year. He already claimed deduction for the full amount under section 24.
Since he already claimed deduction u/s 24, the same interest cannot be claimed under section 80EE.
Section 80EE and Section 80EEA
The Union Budget 2019 has introduced a new Section 80EEA to extend the tax benefits of the interest deduction up to Rs 1,50,000 for housing loans taken for affordable housing during the period 1 April 2019 to 31 March 2022. The individual taxpayer should be a first-home buyer and should not be entitled to a deduction under Section 80EE.
The difference between Section 80EE & section 80EEA can be understood with the help of the below table:
Basis of difference
Section 80EE
Section 80EEA
Loan sanction period*
01-04-2016 to 31-03-2017
01-04-2019 to 31-03-2022
Deduction allowed on interest paid
Rs. 50,000
Rs.1,50,000
Loan amount limit
Rs. 35,00,000
No limit
Value of the house
Rs. 50,00,000 (Actual Value)
Rs. 45,00,000 (Stamp duty value)
*Deduction is allowed only if the loan was borrowed during the said periods.
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Can I claim Section 80EE benefits if the home loan is taken now?
No. Deduction under Section 80EE is available only to those individual borrowers whose loan was sanctioned between 1 April 2016 and 31 March 2017.
If another residential house property is purchased in the subsequent year of purchase of the first house, can deduction under Section 80EE be continued to be claimed?
As per the law, the deduction under Section 80EE is allowed for purchase of first residential property. Irrespective of another house is purchased subsequently, deduction under Section 80EE can be continued to be claimed on the first house.
Can the borrower claim deduction under Section 80EE if he is not residing in the house for which benefit is availed?
For claiming deduction under Section 80EE, it is not required to reside in the same property on which the benefit is availed. The borrower can claim the deduction even if he stays in a rented house.
What is the difference between Section 80EE and Section 24(b) of the Income Tax Act?
Under Section 24(b), a deduction of Rs 2 lakh is allowed for self-occupied property, and the entire interest is deductible for let out property. However, under Section 80EE, an additional deduction of Rs 50,000 can be claimed by individuals buying the house for the first time and loans sanctioned by financial institutions between 1 April 2016 and 31 March 2017.
Can an assessee avail tax benefit under Section 80EE along with Section 80EEA at the same time?
No. An individual taxpayer can avail either the deduction provided under Section 80EE or Section 80EEA as per the respective eligibility criteria.
Is the deduction under section 80EE allowed over & above the deduction limit of Rs. 2,00,000 that is provided under Section 24(b)?
Yes. Deduction of Rs.50,000 can be availed along with the deduction that is allowed under Section 24(b) of Rs. 2,00,000.
Can deduction under Section 80EE be claimed if opted for the new tax regime?
No, deduction under Section 80EE cannot be claimed if the taxpayer opts for the new tax regime.
Can I claim deduction u/s 80EE if I have not paid interest for the year?
Yes. Deduction under section 80EE can be claimed when the interest is due, irrespective of whether the interest is paid or not.
About the Author
CA Mohammed S Chokhawala
Content Writer
I'm a chartered accountant, well-versed in the ins and outs of income tax, GST, and keeping the books balanced. Numbers are my thing, I can sift through financial statements and tax codes with the best of them. But there's another side to me – a side that thrives on words, not figures. Read more
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