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Section 80EE allows income tax benefits on the interest portion of the residential house property loan availed from any financial institution. As per this section, you can claim a deduction of up to Rs 50,000 per financial year. You can continue to claim this deduction until you have fully repaid the loan.
Taxpayers can claim 80EE only if they had serviced a home loan between 1 April 2016 to 31 March 2017.
It is suggested in Budget 2023 that when calculating capital gains from the sale of a residential property, the cost of acquisition should not include any home loan interest claimed as an income tax deduction by the seller throughout the holding term.
Eligibility criteria: The deduction under this section is available only to individuals. This means, that if you are a HUF, AOP, a company or any other kind of taxpayer, you cannot claim the benefit under this section.
Amount limit: 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.
Read more about the deduction of Rs 2 lakh on interest on a home loan here.
Other conditions: To claim this deduction, you should not own any other house property on the date of the sanction of a loan from a financial institution.
Section 80EE came into effect in the financial year 2013-14. It was available for only two 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 two financial years.
However, this section has been reintroduced, effective FY 2016-17 (AY 2017-18). Now the deduction is allowed for up to Rs 50,000 per year until the loan is repaid.
The section does not specify if you need to be a resident 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. So, borrowers living in rented houses can also claim this deduction.
Moreover, individuals can claim the deduction for house purchases jointly or singly. If a person jointly owns the house with a spouse and they both are paying the instalments of the loan, then both of them can claim this deduction.
If you can satisfy the conditions of both Section 24 and Section 80EE of the Income Tax Act, be quick to claim the benefits.
Therefore, this deduction is in addition to the Rs 2 lakh limit allowed under Section 24.
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.
Rebate under Section 80EE is available only to those individual borrowers whose loan was sanctioned between 1 April 2016 and 31 March 2017.
As per the law, the deduction under Section 80EE is allowed to purchase residential house property for the first time. They should not possess any other house on the date of loan sanction from the financial institution. Hence, if another house is purchased subsequently, deduction under Section 80EE can be continued to be claimed on the first house.
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.
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 is allowed only after exhausting the limit of Section 24(b). It can be availed by individuals buying the house for the first time and loans sanctioned by financial institutions between 1 April 2016 and 31 March 2017.
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