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Deduction Under Section 80EE

26 September 2023

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Are you a first-time homeowner feeling the weight of your home loan interest? What if there was a way to lighten that load a bit, especially when it comes to your taxes? Enter Section 80EE of the Income Tax Act, a boon for first-time homebuyers in India. But what exactly is Section 80EE, and how can it benefit you? Let’s delve into the details and uncover how this section can help you save on taxes, making the dream of owning a home more affordable.

What is Section 80EE?

Section 80EE of the Income Tax Act 1961, is specifically designed to provide tax relief to first-time homebuyers. It allows for an additional deduction on the interest portion of the home loan taken for purchasing a house. This deduction is over and above the deduction you can claim under Section 24 for interest on home loans. The goal of Section 80EE is to make homeownership more financially accessible to first-time buyers by offering them an extra avenue to reduce their taxable income.

Features of the 80EE Deduction

The 80EE deduction comes with specific features that distinguish it from other tax-saving options related to home loans. Here are its key characteristics:

Eligibility: The deduction is available only to individuals purchasing their first house. The individual must not own any other residential house property within the territory of India as on the date of sanction of the loan.
Loan Amount and Property Value: The home loan must not exceed ₹35 lakhs, and the value of the property should not be more than ₹50 lakhs.
Deduction Limit: It allows for an additional deduction of up to ₹50,000 per financial year on the interest paid on the home loan.
Loan Sanction Date: The loan must have been sanctioned between certain specified dates set by the government, indicating the period during which this benefit applies.
Possession: The deduction is applicable for loans taken for purchasing a residential house property, and the benefit can be claimed starting the year in which the loan was taken.

This deduction is particularly beneficial for young professionals and families embarking on their journey to homeownership, providing some relief in the initial years, which are often financially challenging. Understanding and claiming the 80EE deduction can significantly affect your overall tax planning and savings.

What are the conditions that should be met for claiming Section 80EE deductions?

To avail of the benefits under Section 80EE, certain conditions need to be met to ensure that the deduction is claimed correctly and in compliance with the tax laws:

1. First-Time Homebuyer: The deduction is exclusively for individuals buying their first residential house property.

2. Loan Amount and Property Value: The value of the house property must not exceed ₹50 lakhs, and the loan taken for this purpose should not be more than ₹35 lakhs.

3. Loan Sanction Date: The home loan must have been sanctioned by a financial institution between specific dates defined by the Income Tax Act.

4. No Ownership of Other Property: At the time of loan sanction, the taxpayer should not own any other residential property in their name.

5. Possession of Property: The deduction under Section 80EE is applicable only for the interest portion of the home loan, and the claim can be made starting from the year in which the loan was sanctioned.

6. Loan from a Financial Institution: The loan should be taken from a financial institution or a housing finance company for purchasing a residential house property.

Eligibility for claiming a deduction under section 80EE?

Eligibility criteria for claiming a deduction under Section 80EE include:

The taxpayer must be an individual; this benefit is not available to companies or Hindu Undivided Families (HUFs).
The taxpayer must be a first-time homebuyer.
The taxpayer must be resident of India
The taxpayer should not own any residential house property at the time of loan sanction.
The home loan must have been sanctioned by a financial institution or a housing finance company.
The loan and property value restrictions must be met as specified under the conditions for Section 80EE.

Section 80EE vs Section 24: Understanding the Difference

Here’s a comparison between Section 80EE and Section 24 to understand the differences clearly:

Criteria	Section 80EE	Section 24
Purpose	Provides additional deduction for interest on home loans for first-time homebuyers.	Deduction on interest paid on home loan for any residential property.
Deduction Limit	Up to ₹50,000 per financial year.	Up to ₹2,00,000 per financial year for a self-occupied property. No limit for rented-out property, but the set-off limit against other heads of income is ₹2,00,000.
Eligibility	Only for individual taxpayers who are buying their first home.	All individuals and HUFs taking a loan for residential property.
Property Value	The value of the property should not exceed ₹50 lakhs.	No specified limit on the value of the property.
Loan Amount	The loan amount should not exceed ₹35 lakhs.	No specified limit on the loan amount.
Loan Sanction Date	Loans should be sanctioned between specific dates as defined by the Act.	No specific date requirement.
Other Conditions	The taxpayer should not own any other residential house property on the date of loan sanction.	Applicable regardless of the number of properties owned.

How to claim tax deductions under section 80EE of the Income Tax Act?

Claiming tax deductions under Section 80EE is straightforward, provided you meet the eligibility criteria. Here’s how you can claim this deduction:

1. Document Collection: Gather all necessary documents, including the home loan sanction letter from the bank or financial institution, interest payment certificates, and proof of ownership or registration of the property.

2. Compute Interest Payable: Determine the total interest paid on the home loan during the financial year. This information is usually available in the home loan statement provided by the lender. 3. Filing ITR: While filing your Income Tax Return (ITR), claim the deduction under Section 80EE for the interest paid on the home loan. Ensure you enter the correct amount up to the limit of ₹50,000 under the relevant section of the ITR form.

3. Filing ITR: While filing your Income Tax Return (ITR), claim the deduction under Section 80EE for the interest paid on the home loan. Ensure you enter the correct amount up to the limit of ₹50,000 under the relevant section of the ITR form.

4. Keep Documents Handy: Though not required to be submitted at the time of filing ITR, keep all relevant documents handy for any future reference or in case of scrutiny or query from the Income Tax Department.

How to Claim House Loan Interest in ITR?

To claim house loan interest in your Income Tax Return (ITR), follow these steps:

1. Interest Certificate: Obtain an interest certificate from your lender that specifies the amount of interest and principal repaid during the financial year.

2. ITR Form Selection: Choose the correct ITR form applicable to your income and situation. For most salaried individuals, this would be ITR-1 or ITR-2.

3. Deduction Under Section 24: Claim the deduction for interest on a house loan under Section 24 in the section provided for income from house property.

4. Deductions Under Section 80EE or 80EEA: If applicable, also claim deductions under Section 80EE or 80EEA by entering the interest amount paid under the respective sections of the ITR form.

5. Document Retention: Keep all relevant documents, such as the loan sanction letter and interest certificate safe for any future queries, if any from the Income Tax Department.

Difference Between Section 80EE and Section 80EEA

While Section 80EE provides benefits to first-time homebuyers, Section 80EEA offers additional benefits for affordable housing. Here’s a quick comparison:

Criteria	Section 80EE	Section 80EEA
Eligibility	First-time homebuyers.	Buyers of affordable housing (specific conditions apply).
Deduction Limit	Up to ₹50,000.	Up to ₹1,50,000 over and above Section 24 benefits.
Loan Sanction Date	Between specific dates as defined by the Act.	Loans sanctioned from 1st April 2019 to 31st March 2022.
Property Value	The value of the property should not exceed ₹50 lakhs.	The stamp duty value of the house should not exceed ₹45 lakhs.
Other Conditions	No other residential property should be owned on the loan sanction date.	The taxpayer should not own any residential house property on the date of sanction of the loan.

Conclusion

Understanding and claiming deductions under Sections 80EE and 80EEA can lead to substantial tax savings for those purchasing their first home or investing in affordable housing. By carefully navigating these sections, first-time homebuyers can lessen the financial burden of home loans through tax deductions. It’s essential to keep accurate records and remain informed about the latest tax laws to enjoy these benefits. Remember, these deductions are designed to encourage homeownership among a wider segment of the population, making it slightly easier to own a home in today's economy.

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FAQs-Section 80ee

Is the building of a home covered by Section 80EE of the Income Tax Act?

Section 80EE of the Income Tax Act states that only home loans from financial institutions to purchase residential real estate are eligible for an income tax deduction for interest paid on such loans. Therefore, section 80EE does not apply to the building of a dwelling.

Since I am the presumed owner of a home in my wife's name for which I am making total EMI payments, am I eligible to claim tax exemption?

Since the co-borrower, in this instance, is not a property co-owner, he cannot make a tax exemption claim. The only way to get around this is for your wife to sign a sale, gift deed, or both in your name so that you are listed as a co-owner of the property. She will want bank clearance to accomplish this. Considering that you are a co-borrower, the bank should have no issues.

Who qualifies for a Section 80EE tax deduction?

Section 80EE only allows individual taxpayers to deduct certain expenses from their taxes. If you and your spouse jointly purchased a property and made interest payments on your mortgage, you may claim a tax deduction under Section 80EE.

May I file Form 80EE annually?

Income tax advantages are available under Section 80EE for any financial institution's interest paid on house loans. A deduction is allowed up to a maximum of Rs. 50,000 annually. Until the debt has been entirely returned, you may keep claiming this deduction.

How can I file a Section 24 claim?

By Section 24 of the Income Tax Act, homeowners who live in the property with their families are eligible to deduct the interest paid on their mortgage. The maximum deduction is Rs. 2 Lakhs (Rs. 1,50,000 if you file returns for the previous financial year). The whole amount of interest is not deductible if the home is leased.

Can I deduct my power expenditures from my taxes?

You may deduct the cost of utilities like gas, electricity, and water when you work from home. However, you might base your assertion on the proportion of floor area that your company uses. For instance, you may deduct 15% of each expense if your home office occupies around 15% of your floor space.

What exactly is the Section 80EEB Deduction?

One may deduct interest payments up to Rs. 1,50,000 under Section 80 EEB. An individual taxpayer can own an electric car for personal or professional use. You may remove the interest paid under this section if you have taken out a car loan and are paying back the loan's interest.

Is the interest on mortgage loans tax-exempt?

In a manner, interest on mortgage loans is tax deductible. A taxpayer may deduct up to Rs. 2 lakh ($38,000) from the interest on a home loan under section 24 and up to Rs. 50 000 ($18,000) under section 80 EE. If the requirements are met, you may also claim a deduction under Section 80 EEA, although in this case, neither Section 24 nor Section 80EE will apply or be accessible.

What distinguishes Section 24 from Section 80EE?

In contrast to section 80EE, which allows for claims of interest up to $50,000, section 24 of the Income Tax Act provides for declarations of interest up to $2 lakh on house loan interest. If both sections' requirements are met, it is crucial that the applicant first uses up Section 24's deduction benefit cap before requesting an extra 50,000 in deductions.

Describe Section 80EE.

First-time home buyers are eligible for an income tax deduction under Section 80EE of the Income Tax Act of 1961 for the amount they pay in mortgage interest. The most that may be deducted under this clause in a fiscal year is Rs. 50,000. The amount may be claimed in addition to the Section 24 and Section 80C deductions, each worth Rs. 2,00,000 and Rs. 1,50,000.

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