Section 80EE

Section 80EE – Deduction on Home Loan Interest

It is essential to research the different tax breaks you can avail before you take a significant financial obligation like a home loan. The Income Tax Department of India provides many tax exemptions you can claim if you have a home loan commitment. Moreover, if you are buying a house for the first time, section 80EE of the IT Act provides additional tax benefits provided you meet the required criteria. There are other tax deductions under sections 24 and 80C for home loan takers, but being a new home buyer, you get additional tax benefits under this section.

What is Section 80EE?

This section was created for the first time in the fiscal year 2013-14 to allow individual taxpayers who were buying a home for the first time to deduct tax on the interest on house loans. This deduction was above the tax exemptions allowed as per section 24 and was initially INR 1 lakh. Section 80EE of the Income Tax Act got restored in the fiscal year 2016-17, and the amount of tax benefit got reduced to INR 50000 for interest paid on a housing loan.

Terms for Availing Tax Benefits Under Section 80EE

Various criteria have to be met before qualifying for tax benefits under this section which are as follows:

  • Only an individual purchasing a house for the first time and does not have any home in their name can qualify for tax exemptions as per this section.
  • The date of availing the home loan should be within the stipulated fiscal year, which is 1st April 2013 to 31st March 2014 or 1st April 2016 to 31st March 2017.
  • To avail of section 80EE income tax exemption, the market valuation of the house should not exceed the value of INR 50 lakhs.
  • The home loan amount availed for purchasing the house should not be over INR 35 lakhs to qualify for tax benefits under this section.
  • You can claim tax benefits on only the interest amount paid on the home loan during the financial year of the claim.
  • Your home loan must be from a recognized bank, housing finance company, or a non-banking finance company to qualify for tax exemptions under this section.
  • The purchase of the house by a first-time buyer must be for the purpose of residential living and not any commercial activity to be eligible for an 80EE income tax exemption on the interest part of the loan.
  • You have to be an individual to claim benefits under this section of the Income Tax Act and not any Trust, Company, Hindu Undivided Family, Association of Persons, or any other group or organization.

Features of Section 80EE

Here are some features of this section that you should know about:

  • It is possible to claim tax deductions of up to INR 50000 on the interest paid on the home loan for one financial year.
  • You can claim the tax benefits under this section even if you rent out this property and not residing there.
  • Suppose you and another family member or individual have taken a home loan to purchase the house jointly. In that case, you are eligible to claim tax benefits under sec 80EE separately for an amount of up to INR 50000 each for that fiscal year.
  • The tax deductions under section 80EE for the amount INR 50000 are in addition to the tax benefit of INR 2 lakhs under section 24 of the Income Tax Act, which is on the interest amount of the housing loan.
  • This section applies based on per individual and not per house or property you own.

Summary

Knowing the income tax laws that apply to you can significantly benefit you in saving money by reducing tax obligations. These savings can help you to build your wealth in the long run. Moreover, home loans are a substantial financial obligation that goes out of your pocket every month on interest, and if you can save some extra money from it, it would benefit you. Section 80EE of the Income Tax Act is one additional benefit you get through which a lot of yearly savings can happen. Therefore, understand and utilize this section to get that extra boost to your savings.

By Michael Caine

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