Section 80EE – Tax Deduction on Home Loan Interest
Section 80EE allows Income Tax benefits on the interest portion of the house property loan availed from any financial institution. The deduction allowed under this section is for the interest paid on a home loan for up to a maximum of Rs 50,000 per financial year. You can continue to claim this deduction until you have fully repaid the loan.
Features of the 80EE Deduction
The following are the feature of 80EE Deduction under Income Tax
- The deduction under this section is available only to individuals. This means, if you are a HUF, AOP, a company or any other kind of taxpayer, you cannot claim any benefit under this section.
- This deduction is over and above the Rs 2 lakh limit under section 24 of the income tax act. Read more about deduction of Rs 2 lakh on interest on home loan here.
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 only.
Eligibility for Claiming Section 80EE Deductions
To become eligible for claiming 80EE deductions, a taxpayer has to make sure of the following:
- Only individual taxpayers can claim deduction under Section 80EE on properties purchased either singly or jointly. If an individual has bought a property jointly with his or her spouse and they are both paying the instalments of the loan, then the two can individually claim this deduction.
- E-tax benefits are not applicable for Hindu Unified Families (HUF), Association of Persons (AOP), companies, trusts, etc.
- Tax benefits under Section 80EE can only be claimed by first-time home buyers. In order to claim this deduction, the individual must have taken the loan from a financial institution for buying his/her first residential house property.
- Section 80EE is applicable on a per person basis rather than a per property basis.
- To claim this benefit, it is not necessary for the taxpayer to reside in the property for which he or she is claiming this deduction. Borrowers living in rented homes can also claim this deduction.
Tax Benefits on Interest Paid
Under section 24 of the Income Tax Act, one can avail the deduction on Home Loan for payment of Interest tax benefit. The self-occupied property allows the deduction with the maximum limit of Rs. 2 lakh if it takes the completion within 5 years from the end of the Financial Year, otherwise Rs. 30,000.
From Assessment year 2018-19, the loss from house property that will be allowed to be set off from other heads of income will be restricted to Rs 2,00,000 in particular assessment year and the rest amount shall be carried forward for set-off in subsequent years.
Conditions for claiming Deduction
The following are the conditions for claiming Deduction u/s 80EE
- Value of this house should be Rs 50 lakhs or less
- Loan taken for this house must be Rs 35 lakhs or less
- The loan must be sanctioned by a Financial Institution or a Housing Finance Company
- The loan must be sanctioned between 01.04.2016 to 31.03.2017
- As on the date of the sanction of loan, no other house property must be owned by you.
The deduction can only be claimed by individuals for the house purchases jointly or singly. If a person jointly owns the house with her wife and they both are paying the instalments of the loan, then both of them can claim this deduction.
Tax Benefits on Principal Re-paid
Under section 80C of the Income Tax Act, the maximum deduction allowed for the repayment of the principal amount of home loan is Rs. 1.5 lakh. Deduction under section 80C also includes investments done in the PPF Account, Equity Oriented Mutual funds, Tax Saving Fixed Deposits, National Savings Certificate, etc. subject to the maximum of Rs. 1.5 lakhs.
Besides this, there are stamp duty and registration charges that one can claim under the aforementioned section. Though, the claim can only take place in the year in which the payment has been made.
There is a condition under which this repayment of the principal amount of housing loan is allowed. The deduction is only possible after the house gets entirely completed and there is a completion certificate for the same. Any under construction structure is not going to be a part of this section.
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