Section 80EE: Deduction for Interest on Home Loan

Buying a house of your own is a dream shared by almost everyone. Regardless of the earnings, you undoubtedly save a substantial amount to buy a home. The decision to buy a house requires careful consideration, as it creates a long-term impact on your personal finances.  To ease the process of buying a house, a number of financial institutions offer loans so that you can make your dreams of owning a house come true without any financial constraints. Further, the government also understands the importance of owning a home and thus offers tax benefits on home loans under Section 80EE. 

Want to know more about tax savings on home loans, read through the section. This blog will help you understand how to make informed decisions and maximise the financial advantages offered under Income Tax Act of 1961. 

What is Section 80EE?

As per Section 80EE of the Income Tax Act of 1961, Indian taxpayers are given the benefit of saving taxes on home loans. So, if you have been paying taxes and don’t know how to save them, you can easily enjoy the benefits of tax savings under this section. Tax deductions on home loans are a much-needed advantage designed to ease the financial burden of owning a home and make it more accessible.

Conditions to Claim Under Section 80EE

There are different terms and conditions that you should be aware of before claiming tax savings under section 80EE:

• You must be buying a house for the first time
• The value of the house should be less than Rs. 50 lakhs and the loan taken should be less than Rs. 35 lakhs
• The deduction is only applicable on the interest that is paid toward the home loan
• The home loan should be financed by a recognised financial institution
• You should not have taken a loan for commercial purpose
• As per the date of loan sanction, the individual must not possess any other home in their name. Moreover, the loan must have been approved between  FY 2016-17 (AY 2017-18). 

Features of Section 80EE

Listed below are the salient features of section 80EE:

• The maximum deduction that can be claimed under Section 80EE is Rs. 50,000. The tax benefits offered under this should not be confused with other sections of the Income Tax Act that provide similar benefits.

• Any individual who has taken a home loan may or may not occupy it. Deductions are thus applicable for both self-occupied and non-self-occupied property.

• The tax benefit is only applicable to the interest amount that is paid towards a home loan. 

Benefits of Section 80EE

Section 80EE of the Income Tax Act in India offers valuable benefits, particularly for first-time homebuyers. This provision allows individuals to claim an additional deduction on the interest paid towards their home loans, along with that under section 24. The maximum deduction under Section 80EE is Rs. 50,000 per financial year. This section not only eases the financial burden on new homeowners by reducing their taxable income but also promotes owning a home among all. It is especially beneficial for all those of you who are taking their first steps towards property ownership while providing financial tax relief to them.

Eligibility to Claim Under Section 80EE

The eligibility criteria to claim under Section 80EE are as follows:

• It can only be availed on an individual basis and not a property basis
• In the case of joint ownership, the maximum dedication of each individual
• You need not stay in the property for which you have taken a loan to get tax benefits
• This benefit is not applicable to Hindu Unified Families, companies, or, trusts

What is the Process to Get Tax Benefits on House Loans?

The process to get tax benefit on home loans are as follows:

• Download the ITR form from the official website of Income Tax
• Next, fill out all the required details and mention section 80EE under which you will be claiming income tax returns
• You will have to enter necessary details such as principal loan amount, interest rate, and interest amount
• Then, verify all the details entered by you and then submit then successfully file your ITR
• Lastly, retail all the documents such as loan statements, loan certificates, in case those documents are needed for any income tax audit or any other purpose

Documents Required to Claim Under Section 80EE

Listed below are some of the documents required to claim under section 80EE of the Income Tax Act:

• Firstly, individuals need to furnish the loan sanction certificate from their financial institution, indicating the approval of the home loan. Any loan sanction approval from an unauthorised financial institution will not be considered a valid document. The loans must be sanctioned between FY 2016-17 (AY 2017-18).
• A copy of the property's agreement for sale is necessary to establish ownership. Proof of the loan amount and its utilisation, such as repayment statements and interest certificates, is crucial for validation.
• You also need to provide evidence of the property's value not exceeding Rs. 50 lakh and the loan amount falls within the Rs. 35 lakh limit. 

Comparing Section 80EE with Section 24

Many people often get confused between Section 80EE and Section 24 of the Income Tax Act as both of these offer tax benefits on home loans. The maximum deduction that can be claimed under Section 24 is Rs. 2 lakhs and under Section 80EE, you can claim up to Rs. 50,000. You can claim under both Section 80EE and Section 24 and save on interest paid towards the home loan.

Let us understand this with an example: Suppose you took a home loan of Rs. 30 lakh at an annual interest rate of 8%. In this case, the interest payable in the first year would be Rs. 2.4 lakhs. Now, under Section 80EE, the total deduction under Section 24 (standard deduction for home loan interest) would be Rs. 2 lakh. On the other hand, with Section 80EE, an additional deduction under Section 80EE would be Rs. 50,000. Therefore, the total deduction for the interest payment on the home loan for the first year would be Rs. 2 lakh (Section 24) + Rs. 50,000 (Section 80EE) = Rs. 2.5 lakh. This means that you can get maximum tax savings if you claim under both Section 80EE and Section 24.

Is Section 80EE the Same As Section 80EEA?

While the basic feature of both Section 80EE and Section 80EEA, there are some basic differences between the two which have been enumerated below:

Again, it is also crucial to verify the current tax regulations and consult with a tax professional to ensure you have the most accurate and up-to-date information regarding tax exemptions.

Conclusion

In conclusion, Section 80EE of the Income Tax Act is important for those who want to enjoy tax benefits associated with home loan interest payments. By adhering to the stipulated conditions and limits outlined in Section 80EE, taxpayers can do the right financial planning when it comes to saving taxes as well as buying their dream home.

FAQs

1. Is section 80EE the same as section 24?

While both section 80EE and section 24 provide an opportunity to save taxes on interest paid towards a home loan, the maximum amount differs in both. Under section 24, you can claim a maximum of Rs. 2 lakhs and under section 80EE, you can claim up to Rs. 50,000.

2. Can I file under both section 24 and section 80EE at the same time?

Yes, you can file under both section 24 and section 80EE at the same time.

3. Can I get tax benefits under section 80E if I already own a house?

No, the tax benefit is not applicable if you already own a house.

4. What are the documents required to claim under section 80EE?

To claim under section 80EE, you need documents such as a loan sanction paper from a recognized financial institution, a property agreement paper, etc. 

5. What is the maximum amount that can be claimed under section 80EE?

The maximum amount that can be claimed under section 80EE is Rs. 50,000.