Section 80EE Income Tax Deductions For Interest On Home Loan

WHAT IS SECTION 80EE?

Under section 80EE, an individual can claim deduction on the interest portion of the home loan taken from any financial institution or a housing finance company. The maximum deduction allowed under this section is up to Rs.50000 annually. An individual is allowed to claim deduction until the full loan is repaid.

FEATURES OF SECTION 80EE DEDUCTION

  1. Only individuals are entitled to claim deduction under this section.
  2. HUF (Hindu undivided family), Company, trusts, AOP (Association of persons) etc. are not allowed to claim deduction under this section.
  3. Property can be either self-occupied or rented to claim the deduction under this section.
  4. The maximum deduction allowed under this section is Rs.50000 annually.
  5. The deduction of above & beyond the limit of Rs.200000 can be claimed under section 24 of the income tax act, 1961.

CONDITIONS TO BE MET UNDER SECTION 80EE TO CLAIM DEDUCTION

To claim deductions under section 80EE, an individual has to meet the following conditions –

  1. Section 80EE allows deduction only on the interest portion of the home loan.
  2. It is only applicable on the first house purchased by an individual.
  3. The home loan should be sanctioned between 1.04.2016 to 31.03.2017.
  4. The home loan should not be taken for commercial properties.
  5. The value of the house should be Rs.50 Lakhs or less.
  6. The amount of home loan taken should be Rs.35 Lakhs or less.
  7. The home loan must be sanctioned by a financial institution or a housing finance company.
  8. No other house property should be owned by an individual at the time of the loan sanctioning.
  9. The tax benefit can be claimed till the repayment of loan continues.
  10. If an individual already claimed deduction under this section, then that person is not eligible to claim the deduction under section 24 again for the same amount of interest.  

ELIGIBLE CRITERIA FOR CLAIMING DEDUCTION UNDER SECTION 80EE

  1. Under section 80EE, deduction can be claimed only by individual taxpayers on house properties purchased either singly or jointly.
  2. Only first time home buyers can claim deduction under this section.
  3. HUF (Hindu undivided family), Trusts, Companies, AOP (Association of persons) etc. are not allowed to claim deduction under this section.
  4. Section 80EE is applicable on per person basis rather than per property basis. If an individual bought a house jointly with his or her spouse and they both are paying the installments of a loan. Both of them can individually claim the deduction.   
  5. It is not necessary to reside in the house property for which you are claiming the deduction. Loan Borrowers living in rented homes can also claim the deduction.

HOW TO FIND THE AMOUNT OF CLAIM UNDER SECTION 80EE

To calculate that how much an individual can claim as a deduction under section 80 EE, you have to do the following –

  1. Firstly, calculate the total amount of interest you paid on the home loan in a financial year.
  2. After calculating the interest amount, claim deduction up to Rs.200000 under section 24 of income tax amount, 1961.
  3. The balance amount of interest up to Rs.50000 can be claimed under section 80EE of income tax act, 1961.

SECTION 80EE & SECTION 24

An individual can claim deduction on interest of home loan under section 24 of income tax act, 1961. The maximum limit prescribed under this section is Rs.200000. This deduction can only be claimed in case the owner or his or her family resides in the house property. In case the house is rented, the entire amount of interest will be waived off as a deduction.

If an individual meets all the conditions specified under both sections i.e. Section 24 and section 80EE, the individual can claim the benefits under both the sections. To avail benefits under both the sections, individual firstly need to exhaust the limit of Rs.200000 under section 24 and then claim the additional benefit of Rs.50000 under section 80EE of income tax act, 1961.

 

Rupa Sharma 
on 01 March 2019
Published in Taxation
Views : 272
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