In this post, we will look into Section 80EE of the Income Tax Act. Section 80EE is a tax benefit introduced for first-time home buyers.
We will cover the following topics in this post:
- What is Section 80EE of the Income Tax Act?
- Eligibility Criteria
- Purpose of Section 80EE
- How to claim tax deductions under Section 80EE?
- Difference between Section 80EE and Section 24
- Difference between Section 80EE and Section 80C
- Is Section 80EE applicable to the construction of a house?
What is Section 80EE of the Income Tax Act?
Section 80EE of the Income Tax Act is a tax benefit introduced in the 2013-14 Budget for the first-time home buyer. It is applicable for two FY (FY 2013-14 and FY 2014-15) and this deduction is only for individual buyers. Therefore, if you are a HUF, AOP, a company, or any other kind of taxpayer, you cannot claim it.
Arun Jaitley while declaring the Budget 2016 re-launched Section 80EE. The maximum deduction that can be claimed is Rs. 50,000 during an FY. The amount can be claimed over and beyond the deduction of Section 24 (limit amt. Rs. 2,00,000) and Section 80C (limit amt Rs. 1,50,000).
Under the section, a one-time rebate of Rs 1 lakh was offered to first-time buyers against home loan interest payment, if the worth of the property did not exceed Rs 40 lakhs and if the housing finance limit did not exceed Rs 25 lakhs.
However, as per the new Section 80EE, the deduction is available for A.Y 2017-18 and in subsequent years until the loan is repaid.
- The value of the house should be Rs 50 lakhs or less.
- Loan taken for the house must be Rs 35 lakhs or less.
- The loan should not be for commercial properties.
- A Financial Institution or a Housing Finance Company should sanction the loan.
- It must be sanctioned between 01.04.2016 to 31.03.2017
- The property can be either self-occupied or non-self-occupied.
- As on the date of the sanction of the loan, no other house property must be owned.
Section 80EE does not specify if you need to be a Resident to claim this benefit. Therefore, both Resident and Non-Resident Indians can claim this deduction.
The Section also does not specify if this house should be self-occupied to claim the deduction. So, borrowers living in rented houses can also claim it.
Section 80EE is applicable on a per-person basis not on a per-property basis. The deduction can only be claimed by individuals for the house purchased jointly or singly. If a person jointly owns the house with a spouse, and they both are paying the installments of the loan, then both of them can claim this deduction. However, they need to submit an interest certificate issued by his bank, to claim the deduction.
Purpose of Section 80EE
Section 80EE was introduced to encourage the purchase of affordable homes among first-time home buyer in India. Mainly targeted to benefit the migrant population in India’s big cities, this section also provides a boost for builders to develop more affordable homes in India.
How to claim tax deductions under Section 80EE?
A taxpayer can claim Section 80EE at the time of filing tax returns. You can see how much one can claim as a deduction below:
- Calculate the total amount of interest that is paid during an FY on home loan.
- Once the total interest amount paid is ascertained, claim deduction up to Rs. 2,00,000 (under Section 24).
- The balance amount, up to Rs. 50,000, can be claimed under Section 80EE.
After declaring the above deductions of tax benefit on home loan, the balance Income of a person is taxed as per the Income Tax Slab rates.
Difference between Section 80EE and Section 24
The deduction can be claimed for interest on home loan under Section 24. It is also applicable to HUF and the limit under Section 24 is Rs. 2,00,000.
Meanwhile, Section 80EE is only available to individuals who are first time home buyers but Section 24 is applicable for all house properties.
However, Section 80EE deduction can be claimed if only the owner or his family members are residing in the home.
If one meets the conditions of both Sections (Section 24 and Section 80EE), he can avail both benefits. For this, he needs to first exhaust the limit (limit of Rs. 2,00,000) under Section 24 and then claim the additional benefit under Section 80EE.
Difference between Section 80EE and Section 80C
Section 80C offers cumulative deduction on investments from small savings instruments to home loan interest repayment, but Section 80EE is only meant for home loan interest repayments on loans sanctioned in the FY 2013-14.
Is Section 80EE applicable to the construction of a house?
As per Section 80EE of the Income Tax Act, the deduction for interest on home loan can be claimed only if it is taken for the purchase of residential house property from any financial institution. Hence, it is not applicable to the construction of a house.
With that, we have come to an end of this post on Section 80EE of the Income Tax Act. Share with us your queries in the comment section below.