Section 80EE - Home Loan Tax Benefit

None of us likes paying taxes and we often try to minimise the taxable income. The only legal way to reduce your taxable income is to leverage and make the most out of the tax deductions and exemptions offered by the income tax department. Section 80EE is one of the popular provisions under which taxpayers can avail a deduction if they have an ongoing home loan.

This was introduced in the Union Budget of 2013-14 with an aim to provide tax relief to first-time home buyers. Hence, a home loan can benefit you from saving taxes availing deduction under Section 80EE, Section 80EEA, Section 24b etc. 

Here in this article, we will find out how you can avail a maximum housing loan tax benefit under Section 80EE of the Income Tax Act.

*The home loan must be sanctioned between 1st April, 2016, and 31st March, 2017.

Housing Loan Tax Benefit: Deduction Quantum Under Various Sections

By availing a home loan, you can benefit from tax deductions on both the principal repayment and the interest payment.

Under Section 80C, you can claim up to ₹1.5 lakh on principal repayment, while Section 24(b) allows deductions of up to ₹2 lakh on interest payment along with an additional deduction of ₹50,000.

Purpose of the Deduction Under Section 80EE

Individuals are eligible for income tax benefits under Section 80EE of Income Tax Act on the interest component of residential property loans obtained from any financial institution.

This section's primary goal is to make it possible for people to deduct a maximum of ₹50,000 per fiscal year. Until a borrower can repay the total amount of the loan, they can continue to claim the deduction.

Characteristics of the Deduction Under Sec 80EE of Income Tax Act

Here are the significant features of 80EE income tax deduction-

Conditions to Claim the Deduction Under Section 80EE

Here are some of the conditions to be fulfilled to claim a deduction under Section 80EE of the Income Tax Act-

• 80EE deduction will only be allowed if the property was purchased for less than ₹50 lakhs and the loan amount was up to must be ₹35 lakhs or less.
• The loan must be sanctioned between April 1, 2016, and March 31, 2017.
• This deduction would be available starting with the fiscal years 2016–17 and forward.
• The loan has to be sanctioned by a housing finance company or a financial institution.
• This housing loan tax benefit of this deduction would be available as long as the loan is still being paid.
• On the day a loan is sanctioned, a taxpayer cannot be the owner of another residential property.

Eligibility Criteria for Tax Deduction Under Section 80EE

To qualify for the deduction under Section 80EE of the Income Tax Act, you must meet the following criteria:

• First-Time Homebuyer: You should be purchasing your first residential property.

• Loan Amount: The home loan should be sanctioned between April 1, 2016, and March 31, 2017.

• Loan Amount Limit: The maximum loan amount should not exceed ₹35 lakh to be eligible for deduction.

• Property Value: The property’s value should not exceed ₹50 lakh.

• Ownership: You must be the sole owner or co-owner of the property.

Moreover, it is also important to understand who is specifically not eligible to claim a deduction under section 80EE. The entities that are not eligible to apply for this deduction include Hindu Undivided Families (HUFs), Association of Persons, Companies, Sole Proprietorships and Trusts.

To sum up, you can avail housing loan tax benefits on both the principal and the interest component of a home loan. You can avail tax deductions under Section 24b and Section 80EE for your contributions towards the payment of interest. 

In addition, you can avail a deduction of up to ₹50,000 in a financial year under Section 80EE. However, this is available only for loans which were sanctioned between 1st April, 2016, and 31st March, 2017. To avail these benefits, you can consult a chartered accountant or a tax expert and make an informed decision based on your current financial status.