Extra Deduction Home Loan Interest Section 80EE: Section 80EE lets individuals avail tax benefits on the interest portion of the residential housing property loan. Both residents, as well as non-resident citizens, can get Rs. 50k deductions according to this section of the Income Tax Act. Borrowers living in lent houses can also claim this deduction as the section does not mention if the house should be self-occupied. An individual can get a benefit from the Rs. 50,000 deductions at the time of filing an ITR (Income Tax Return). Moreover, if an individual mutually owns the house with a partner and they both are paying the loan installments, then they both can claim this deduction. Read along to know more about the features, eligibility criteria, and conditions to claim deductions under the Section 80EE.
- What Does Section 80EE of the Income Tax Act Refer To?
- Tax Deduction Under Section 80EE of the Income Tax Act Features
- Conditions To Deduct Tax Under Section 80EE of the Income Tax Act
- Eligibility Norms To Get Deductions On Income Tax As Per Section 80EE
- How to Get Tax Deduction of Rs 50,000 As Per Section 80EE?
- What Makes Section 80EE different from that of Section 24?
- Remember Points While Claiming Tax Deduction As Per Section 80EE
What Does Section 80EE of the Income Tax Act Refer To?
Introduced in the financial year 2013-2014, Section 80EE of the Income Tax Act was mainly designed for individual taxpayers to avail tax deductions on home loan interest. The maximum deduction that an individual can claim was Rs 1,00,000. The benefit was accessible only for 2 years and then, it was reintroduced in the year 2016-2017. The deduction was reformed to Rs. 50,000 for the interest paid towards a home loan.
Therefore, under Section 80EE, first-time home purchasers can avail of an income tax deduction for the interest paid on a home loan. Moreover, the benefits under Section 80EEA were announced in the union budget 2019 to encompass the tax benefits of the interest deduction. An individual taxpayer can benefit from a deduction of about Rs 1,50,000 in favor of the home loan interest taken from a financial institution. A taxpayer appealing deduction under this section will not be able to get a deduction under Section 80EE while calculating the total taxable income.
Tax Deduction Under Section 80EE of the Income Tax Act Features
- An individual can claim the deductions under Section 80EE on properties purchased individually or mutually.
- The property of the residential house can be either self-occupied or non-self-occupied.
- The deduction allowed is maximum Rs. 50,000 for every financial year.
- For declaring the tax collection collectively, an individual would be likely to provide the declaration given by the bank displaying the amount due and paid towards interest.
- After declaring all the tax benefit deductions on a home loan, the balance income of an individual would be taxed according to Income Tax Slab rates.
Conditions To Deduct Tax Under Section 80EE of the Income Tax Act
An individual can claim Rs 50,000 deductions at the time of tax returns filing. Deduction under the Section 80EE is permissible only if some conditions are satisfied:
- The loan has been sanctioned for the residential house property attainment does not surpass Rs. 35 lakhs.
- The property value of the residential house is not more than Rs. 50 lakhs.
- The individual must have a taken a loan from a Housing Finance Company or Financial Institution.
- On the date of loan approval, the assessee does not hold any other residential house property.
Eligibility Norms To Get Deductions On Income Tax As Per Section 80EE
- Only individuals are eligible to get benefits from Section 80EE Deduction. It means that a company, Hindy Unified Families, Association Of Persons, or any other kind of taxpayer cannot get any benefit under this section.
- Individuals purchasing a home for the first time can avail benefits under this section. Moreover, the individual must have received a loan from a bank or a financial institution.
- This section is applicable on a basis of per person rather than on a per property basis.
- To claim the benefit of the Rs 50,000 deduction under Section 80EE, it is not essential for taxpayers to own the property. Individuals who are living in the rented residential homes can also get benefit from this deduction.
How to Get Tax Deduction of Rs 50,000 As Per Section 80EE?
An individual taxpayer can discover how much they can claim the deduction by:
- Estimating the total interest value specified during a financial year on the residential house loan.
- After determining the complete interest component paid, an individual can claim a deduction up to Rs 2,00,000 under Section 24 of the Income Tax Act.
- Now, an individual can claim the leftover amount, up to Rs 50,000 under the Section 80EE of the Income Tax Act.
What Makes Section 80EE different from that of Section 24?
Under section 24 of the Income Tax Act, the deduction is over and above the limit of Rs. 2 lakhs. This deduction can only be appealed if the house owner or his/her family members reside in the residential property.
If an individual is able to meet the conditions of both Section 80EE as well as Section 24, then he/she can get under two. The individual has to first meet the limit under Section 24 and then claim the extra benefit under Section 80EE. Hence, the deduction under Section 80EE of the Income Tax Act is in addition to the limit of Rs 2,00,000 under Section 24.
Remember Points While Claiming Tax Deduction As Per Section 80EE
- A taxpayer can claim a deduction of Rs 50,000 as per Section 80EE against home loan interest. It implies that the section is not valid for the construction of a house. However, one can claim it for the house construction under Section 24.
- While computing the total income for the assessment year, one can claim tax deduction under Section 80EE every year.
- The maximum amount that an individual taxpayer can claim as a deduction as per Section 80EE of the Income Tax Act is Rs 50,000.
Both sections- Section 24 and Section 80EE of the Income Tax Act introduce tax benefits to individual taxpayers against the home loan interest. The only difference lies is for the condition and the limit. Under Section 80EE, one can get a benefit of the Rs 50,000 deduction and under Section 24, one can get a Rs 2 lakh deduction. If the conditions are fulfilled under both sections, then a taxpayer can get a benefit from an interest amount under both sections of the Income Tax Act.