A Comprehensive guide on Home loan Interest deduction under Section 80EE

Purchasing your dream home can be thrilling, but it can also be challenging. To simplify, the Government offered an additional support to low-income earners and launched Section 80EE in the Union budget of 2013-14 as a tax relief for first-time buyers of a home if an approved loan is taken in the financial year 2016-17. Deduction up to 50,000 of the interest can be claimed in addition to the usual Rs. 2 lakh under Section 24(b).

This deduction is beneficial in lowering total taxable income, helping to save more money. This article is a guide on Section 80EE of Income Tax, explaining the conditions, applicability, and purpose. It also highlights key differences between Section 80EE and other sections that provide home loan deductions, along with how to claim the deduction under this section.

Meaning of Section 80EE of Income Tax

Section 80EE of Income Tax declares that if new home buyers avail a home loan from a bank or other financial organisation, they are provided a deduction, such as tax relief on the interest they pay towards a house loan. The limit of deduction allowed under this section is Rs 50,000 in a financial year, and this deduction is claimed annually till the home loan is paid fully.

Conditions for Section 80EE deduction

A resident or NRI individual taxpayer can avail an additional 50,000 deduction in home loan interest under section 80EE only when below conditions are fulfilled :

The home loan should be approved by a financial institution or bank in the financial year 2016-17
The deduction on the interest of a home loan under section 80EE must apply to residential properties only
The loan amount does not exceed ₹35,00,000.
The value of a residential house does not exceed ₹50,00,000.
At the time the loan was approved, the taxpayer did not own any residential house property

Applicability of Section 80EE deductions

The tax benefit given under section 80EE on home loans is not for everyone. Here is a list of who can and who cannot claim this tax benefit:

Who can claim this tax benefit?

It's for first-time buyers who take a home loan to buy their first residential house
Only an individual taxpayer (resident or NRI ) can claim the tax benefit
Co-owners or Co-borrowers can individually claim all the deductions if they meet all the conditions
It does not matter if the person lives in the house or rents it; the tax benefit still applies

Who can not claim this tax benefit?

Groups like HUFs (Hindu Undivided Families), AOPs (Association of Persons), BOIs (Body of Individuals), Firms or companies, and Trusts of any kind and other individual entities, like clubs or NGO

How does the Deduction Help?

The deduction helps in lowering total taxable income, which means paying less tax to the government, which saves money every year and also provides support to low-income individuals by giving them tax relief when they take home loans. Below is an illustration to explain how it helps in tax relief

Lets say Raj bought his first home in the financial year 2017 and he paid Rs 2,38,000 this year as home loan interest and satisfied all the conditions and criteria under section 80EE, he claimed ₹2,00,000 of the home loan interest as a regular tax deduction under section 24(b) and then claimed extra amount under section 80EE i.e 38,000 (max amount of deduction is 50,000)

Home loan tax deductions: Other Sections & differences

Apart from section 80EE, there are sections under the Income Tax Act that provide a deduction on home loans. The table below helps to understand these sections with their key differences

Section	What it covers(Principle/ interest)	Maximum deduction	Property value	Time & eligibility conditions
80C	Tax deductions on the principal part of the home loans EMI also include registration and stamp duty charges when buying a house	₹1.5 lakh per year	No specific limit	Property must not be sold within 5 years of possession, or before the tax benefit will be reversed
24 (b)	Deduction on the interest part of the home loan EMI when one buys, builds, repairs or renovates the house	₹2 lakh per year (self-occupied property); Entire interest for let-out property	No specific limit	Loan from 1 April 1999, and the maximum interest can be claimed if the construction is completed within 5 years
80EE	Extra deduction on home loans interest for first-time home buyers	Rs 50,000 per year	The house value must be ≤ ₹50 lakh	The loan must be approved in FY 2016–17.
80EEA	Extra deduction on home loan interest for a residential house (when not eligible for Section 80EE)	1.5 Lakh per year	The property’s stamp duty value ≤ ₹45 lakh.	The home loan must be approved between April 1 2019, and March 31 2021

Check out Swipe’s EMI calculator: Swipe portal

How to claim a deduction under Section 80EE?

Check eligibility for tax benefit: Make sure all the conditions are met under section 80EE before claiming the deduction, and make sure the property is in your name or a co-owner’s name (if any )
Get a loan interest certificate from the bank: Obtain a certificate from the bank or financial institution showing the home loan interest paid
Mention Deduction in Income Tax Return (ITR): While filling the Income Tax Return (ITR), mention the amount of home loan interest deduction you are claiming
Submit loan documents to the employer for TDS: In case you are given a salary, give your home loan documents to the employer so TDS can be adjusted in your salary
Keep Loan Statements Ready for Self-Employed Tax Filing: In case of self-employed, keep all the loan documents ready with you to show for filing the tax return

Suggested read on How to claim TDS in India

Conclusion

Section 80EE helps first time home buyers saves taxes on providing additional deduction on home loan interest under the criteria and the benefit is available only to eligible individual taxpayers, including co-owners or co-borrowers, as long as they meet all the specific conditions and it is exempt from entities like HUFs, trusts and NGO and to claim this benefit proper documentation required such as loan sanction letter and interest certificate from lender and by using this section properly, first-time home buyers can maximise their tax savings.

FAQs

1. How do Section 80EE and Section 80EEA differ from each other?

Section 80EE provides an additional deduction limited to Rs 50,000, while Section 80EEA provides an additional deduction limited to Rs 1.5 lakh, but only for those who do not come under the criteria of Section 80EE. Both have their own condition to get the tax benefit.

2. Am I eligible for tax benefits under both Section 80EE and Section 24(b)simultaneously?

Yes, you can get both tax benefits with the initial up to Rs 2 Lakh, as interest on home loans can be availed under section 24(b). If full interest is paid over Rs 2 Lakh and all the conditions are satisfied under Section 80EE, then an additional deduction of Rs 50,000 for first-time buyers can also be claimed.‍

3. What are the documents required to avail the tax benefit under Section 80EE?

Interest certificate issued by a bank or housing finance company, which clearly reflects the principal and interest figures for the financial year; a sanction letter for the home loan, the agreement of loan and a document of property indicating the value of the property does not cross Rs 50 lakh.‍