Section 80EE of the Income Tax Act provides an additional deduction of up to Rs. 50,000 on payment of interest on a home loan by first-time homebuyers. This deduction is available over and above the deductions under Section 24 of the Income Tax Act. Finance Act 2013 introduced Section 80EE to promote home ownership among first-time homebuyers and encourage them to take housing loans. Let us understand this section and its features in detail in this article.
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Section 80EE is a tax benefit provided under the Income Tax Act, which allows deductions of up to Rs. 50,000 annually on the interest paid to buy your first home.
The Section was introduced earlier for FY 2013-14 and FY 2014-2015 with overall deductions of up to Rs. 1 lakh.
In FY 2016-17, Section 80EE was reintroduced with the following modifications:
Rs. 50,000 annual tax deductions
Until the loan is repaid completely
In calculating capital gains from the sale of a residential property, the cost of property acquisition by the owner should not include the interest on home loan. It is the amount claimed as deductions during the overall property-holding period.
Here are the key features of Section 80EE of the Income Tax Act of 1961:
|Only first-time homebuyers
|HUF/ Company/ Factory building
|Available to both salaried and self-employed individuals
|Loan amount should not exceed Rs. 35 lakh
|Deduction u/ Section 80EE is in addition to the deduction of Rs. 2 lakhs available under Section 24 of the IT Act
|Deduction only on loans taken to buy a residential house property
|Value of the property should not exceed Rs. 50 lakh
|Loan Issuing Authority
|Tax Claim for Joint House Ownership
|If both owners pay joint ownership of the house and loan instalments: Both the joint owners can claim a deduction under Section 80EE
Listed below are the tax benefits available u/ Sec 80EE, Sec 80C, Sec 24 of the Income Tax Act:
|Deductions Available On
|Tax Deductions (in Rs.)
|Self-Occupied Residential Property
|Rental Residential Property
|Interest on Home Loan
|Rs. 2 Lakhs
|Principal Home Loan Amount
|Rs. 1.5 Lakhs
|Rs. 1.5 Lakhs
|Interest on Home Loan
Section 80EEA is a provision in the Income Tax Act that provides an additional deduction of up to Rs. 1.5 lakh for paid interest on home loans taken to buy first home.
The section was introduced in the Union Budget 2019-20 to boost the affordable housing sector.
This will encourage first-time homebuyers to purchase their first house.
The taxpayer should not be eligible for deductions u/ Section 80EE.
The deduction is available for loans sanctioned between 1st April 2019 and 31st March 2022.
The value of the property should not exceed Rs. 45 lakh.
The tax deduction claims should be made only for buying your first home.
Section 80EE of the Income Tax Act is a provision that aims to incentivize first-time homebuyers to invest in their dream homes by providing a tax benefit. This section is a well-intentioned provision that supports new homebuyers while contributing to economic growth.
Only individuals are eligible
HUFs (Hindu Undivided Families) and other entities are not eligible
First-time home buyers can only claim deduction
Loan amount should not exceed Rs. 35 lakhs
Value of the property purchased should not exceed Rs. 50 lakhs
Section 24 provides a deduction of up to Rs. 2 lakhs for the payment of interest on a home loan
Section 80EE provides an additional deduction of up to Rs. 50,000 for first-time homebuyers
Deduction u/ Section 80EE is over and above the deduction available u/ Sec 24
To claim the deduction under section 80EE, you must first exhaust the deduction available u/ Section 24
Section 80EE: Provides an additional deduction of up to Rs. 50,000 for first-time homebuyers who have not claimed any deduction for home loan interest paid in any previous year.
Section 80EEA: Provides a deduction of up to Rs. 1.5 lakhs for interest payment on home loan taken to purchase an affordable housing property.
However, there are some key differences between the two; they are:
|Applicable to all taxpayers who have taken a home loan
|Applicable only to first-time homebuyers
|Maximum Amount of Deduction
|Up to Rs. 2 lakhs for the interest payment on home loan
|additional deduction of up to Rs. 50,000 for the interest paid on a home loan
|No specific eligibility criteria other than the fact that the loan should have been taken for the purchase or construction of a property
|Taxpayer must be a first-time homebuyer who has not claimed any deduction for home loan interest payment in any previous year
*All savings are provided by the insurer as per the IRDAI approved insurance plan.
*Tax benefit is subject to changes in tax laws. Standard T&C Apply
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