About Section 80EE
Credit facilities such as Home Loans ensure several tax benefits for borrowers. They can claim deductions on both the principal and interest components of their loan every fiscal year. Further, in the case of first-time house owners, they are entitled to additional tax benefits, over and above the regular exemptions. Among these, they can obtain extra concessions on their house loan under Section 80 EE of the Income Tax Act, 1961. This benefit is extended on the Home Loan interest and restricted to Rs.50,000 which can be claimed each financial year. One can continue to secure 80 EE deductions until they have fully repaid the Home Loan.
Eligibility for Claiming Section 80EE Deductions
The exemptions in this section are available to individual taxpayers only. This means that if you are someone like an Association of Persons (AOP), a company, trust, partnership firm or any other kind of taxpayer, you cannot claim these rebates. Individuals who wish to secure this benefit should not own any other house property at the time of Home Loan sanction. Moreover, the loan must be approved by a reputed financial institution.
What are the Terms for Declaring Section 80EE Deductions?
Home Loan borrowers can claim Section 80EE exemptions subject to fulfilling certain conditions such as:
- This particular tax concession is only available for first-time homeowners.
- The market value of the property you seek to purchase with the loan funds should be less than Rs.50 lakh.
- You can obtain exemptions up to Rs.50,000. This is in addition to the rebate of Rs.2 lakh that one may claim on Home Loan interest deduction under Section 24 of the Income Tax Act.
- Only the interest component of the house loan qualifies for tax deduction claims.
- The loan amount sanctioned should not exceed Rs.35 lakh.
- A recognised financial institution such as a bank, housing finance company (HFC) or non-banking financing company (NBFC) must approve and disburse the loan.
- The loan must be sanctioned between 1st April 2016 and 31st March 2017.
- Borrowers need to furnish a declaration from their lender mentioning the loan amount paid as well as outstanding towards the loan interest and principal repayment in order to claim the deductions.
- Section 80 EE tax rebates are applicable on a per person basis and not on per property basis. Hence, if two individuals own a house and also avail of a Home Loan, each of them can enjoy the exemptions separately.
- One should obtain the loan only for purchasing a residential house and not for buying a commercial property.
- After declaring the tax benefits, the balance income of the borrower is liable to be taxed as per the appropriate Income Tax Slab rates.
Who can Claim the Deductions Under Section 80 EE?
Given below are the requirements for claiming housing loan interest exemptions under Section 80 EE:
- Borrowers can claim exemptions either individually or jointly. If you own a house with your spouse and repay a Home Loan together as co-applicants, both of you can obtain the rebates individually. This combined sum will double the tax benefits.
- One must be a first-time home buyer and hold no property in their name during the time of loan sanction.
- The property can be self-occupied or the owner may choose to rent it to someone else. For instance, if you have a property in Hyderabad and live in a rented flat in Chennai, you can still obtain the rebates.
How to Claim Tax Deductions Under Section 80 EE of the Income Tax Act?
To understand the tax deduction amount one can claim under Section 80 EE, just follow these simple steps:
- First and foremost, you need to calculate the total amount of interest paid on your Home Loan in a single financial year
- After that, you may proceed to claim the initial deductions up to Rs.2 lakh applicable under Section 24 (b) of the Income Tax Act
- The surplus sum can then be claimed up to Rs.50,000 under Section 80 EE of the ITA.
Section 80 EE v/s Section 80 EEA
Section 80 EEA is a relatively new introduction since the 2019 Union Budget. It proffers tax rebates on Home Loan interest up to a maximum limit of Rs.1.5 lakh if the loan has been availed for low-cost housing during the period of 1st April 2019 to 31st March 2022. The purchase of the house in question must be the first home registered in your name and you must not hold ownership over any other property. Moreover, if you have already claimed benefits under Section 80 EE, you will not be considered eligible for securing benefits under Section 80 EEA.
Also Read: Section 80 EE: Claim Deductions on the Home Loan Interest Paid
What is the Difference Between Sections 24, 80 EE and 80 EEA?
Sections 24, 80 EE and 80 EEA offer tax exemption on the interest outgo of a housing loan. Among them, there are distinct differences between Sections 80 EE and EEA although they may sound similar. The table below indicates a basic comparison chart:
| Features | Section 24 | Section 80 EE | Section 80 EEA |
|---|---|---|---|
| Value of property | Nil | Up to Rs.50 lakh | Up to Rs.45 lakh |
| Loan amount | Nil | Up to Rs.35 lakh | No upper limit |
| Maximum exemption limit | Up to Rs.2 lakh for a self-occupied property; no limit for a rented property | Up to Rs.50,000 | Up to Rs.1.5 lakh |
| Applicable duration/terms | Property construction should be completed within 5 years, otherwise, the deduction amount falls to Rs.30,000 | Home Loan should have been sanctioned between 1st April 2016 to 31st March 2017 | House loan must be sanctioned between 1st April 2019 to 31st March 2022 |
What will be the Total Tax Benefit Under Section 80 EE and Section 24?
Both Sections 24 and 80 EE provide tax benefits for the interest paid on a Home Loan. Borrowers can claim the exemptions together with a maximum ceiling of Rs.2.5 lakh as seen in the table below:
| Section 24 | Up to Rs.2 lakh |
| Section 80 EE | Up to Rs.50,000 |
| Total deduction | Up to Rs.2.5 lakh |
It must be noted that to avail the benefits under both these sections, you need to first utilise the available limit under Section 24 and thereafter, avail the additional tax concessions under Section 80 EE.
Section 80 EE v/s 80 C
Section 80 C of the Income Tax Act permits tax deductions on the principal repayment of the house loan up to Rs.1.5 lakh every year while Section 80 EE allows exemptions on the interest paid up to Rs.50,000 per year until you pay off the Home Loan in full. Secondly, Section 80 C tenders tax relief on a wide array of investments ranging from small savings instruments to housing loan repayment whereas Section 80 EE is exclusively meant for house loan repayments.
How to Claim Maximum Home Loan Benefits?
To claim maximum tax benefits on a Home Loan, it is crucial that you plan for the loan judiciously and avail the best possible deal. This will keep your cost of credit within a manageable range and also help you reap optimal benefits through the applicable tax deductions resulting in a cost-effective housing loan.
Before you apply for a Home Loan, research the different house loan options offered by various lenders. Compare their Home Loan interest rates and other essential factors such as Home Loan eligibility and documentation requirements, additional fees and charges associated with a housing loan and so on.
Furthermore, to get a clear picture of your expected loan, use a Home Loan EMI Calculator to evaluate the monthly EMI pay-outs over the course of the tenor. It will also let you adjust and customise the loan to suit your requirements and finances. This way, you can estimate the right loan principal amount, tenor and EMIs to enable comfortable repayments each month.
Also Read: Know about Tax Benefits on Second Home Loan
Section 80EE: FAQs
Individuals can claim a maximum amount of Rs.50,000 in the form of Section 80 EE deductions.
You cannot claim tax exemptions on a second house under Section 80 EE.
Yes. You can claim advantages of both Section 24 and 80 EE in the same financial year together. In this regard, you may do the following:
- Initially, claim the deductions of Rs.2 lakh for the exemptions available under Section 24
- After you use up this limit, first-time home buyers are entitled to secure an additional deduction for the amount of interest paid on their Home Loan under Section 80 EE, which is restricted to Rs.50,000.
Yes. You can claim the applicable rebate of Rs.50,000 every financial year. The interest outgo on a Home Loan availed for a residential property qualifies for income tax benefits under Section 80 EE until complete loan repayment.
Yes. Section 80EE can be claimed by individual taxpayers on properties purchased either singly or jointly. The only exceptions are Hindu Unified Families (HUF), Associations of Persons (AOP), companies, and trusts.
The maximum deduction that can be claimed under this section is up to Rs. 50,000 during a financial year. Although the maximum limit is set, it is not fixed and depends on the interest you pay on Home Loan. This amount can be claimed over and above the deductions of Rs. 2,00,000 (Section 24) and Rs. 1,50,000 (Section 80C).
Section 80EE of the Income Tax Act offers an extra under-construction property tax benefit of Rs.50,000 per financial year on Home Loan interest rates if the provided limit of Rs.2 Lakh under Section 24B has been exhausted.
The tax benefit applies to Home Loans availed in Financial Years 2013-14, 2014-15, 2015-16, and 2016-17.
For renovation and repair of a residential property, you can avail a maximum deduction of Rs.30,000 only.
Section 80EE cannot be used to claim deductions on let-out property. For that, there is section 24 where you can waive off the entire interest for a let-out property.
