Buying a home for the first time can be a daunting process, but taking out a home loan can provide significant benefits to first-time buyers who are also taxpayers. The Income Tax Act of 1961, under Section 80EE, provides criteria that allow taxpayers to claim an additional income tax deduction of up to INR 50,000 on the interest paid on their home loan.

This deduction can be a significant financial advantage for first-time buyers who are also taxpayers and can help reduce their overall tax liability. By taking advantage of this benefit, first-time homebuyers can make the home-buying process more affordable and manageable, and enjoy the many benefits of homeownership.

The provision of Section 80EE allows for a deduction on the interest paid toward a home loan

Section 80EE of the Income Tax Act 1961 enables first-time home buyers to claim a tax deduction for the interest paid on their home loan. The upper limit of the income tax deduction that can be availed under this particular section is INR 50,000 within a given financial year. The sum in question may be claimed in excess of the deductions outlined in Section 24 and Section 80C, which are currently set at Rs. 2,00,000 and Rs. 1,50,000, respectively.

The introduction of Section 80EE in FY 2013-14 aimed to provide individual taxpayers with the opportunity to claim tax deductions on the interest paid for home loans. During that period, the highest allowable deduction that could be claimed was Rs. 1,00,000. The aforementioned tax benefit was exclusively accessible during a limited period of time, specifically the financial years of 2013-14 and 2014-15. In FY 2016-17, the aforementioned Section was reintroduced, with an altered deduction amount of Rs. 50,000 for interest payments made on home loans.

Criteria for Section 80EE Deductions

To claim an income tax deduction under Section 80EE for the interest portion of a home loan, there are several criteria that must be met.

• Firstly, the taxpayer must be purchasing their first house, and the value of the property cannot exceed Rs. 50 lakhs.
• In addition, the loan amount must not exceed Rs. 35 lakhs and must have been approved by a Housing Finance Company or Financial Institution.
• It is important to note that as of the date of the loan sanction, the individual cannot own any other property. The loan must also not have been availed for commercial properties.
• Finally, in order to claim the deduction, the loan must have been sanctioned between 01.04.16 to 31.03.17.

By fulfilling these criteria, individuals can avail of the deduction under Section 80EE for the interest portion of their home loan.

Under section 80EE, who is eligible to make a deduction?

A taxpayer must ensure the following conditions are met in order to be eligible to claim 80EE deductions:

• Both individual taxpayers and joint owners can claim benefits under Section 80EE.
• This tax benefit is not available to AOP, HUF, companies, trusts, etc.
• Only first-time homebuyers who do not own any residential property on the date of loan sanction can claim this deduction.
• The loan must be received from a financial institution or a housing finance company.
• The deduction limit is Rs. 50,000 per person.
• This tax deduction is separate from the limit of Rs. 2 lakh as per section 24(b).

To claim a deduction under Section 80EE while filing tax returns, a taxpayer needs to follow these steps:

• Calculate the total interest paid on the home loan during the financial year.
• Claim a deduction of up to Rs. 2,00,000 under Section 24 of the Income Tax Act, 1961, based on the total interest amount paid.
• Any balance amount up to Rs. 50,000 can be claimed as a deduction under Section 80EE of the Income Tax Act, 1961.

A final note on Section 80EE and Section 24

Under the Income Tax Act, of 1961, taxpayers can claim an income tax deduction for interest paid on a home loan. This deduction is available under Section 24 and is limited to Rs. 2,00,000. However, this deduction can only be claimed if the property is occupied by the owner or their family members. If the property is rented out, the entire interest paid can be claimed as a deduction.

If a taxpayer satisfies the conditions of both Section 24 and Section 80EE, they can claim benefits under both sections. To do this, the taxpayer must first claim the deduction under Section 24 up to the limit of Rs. 2,00,000, and then claim any additional benefit under Section 80EE. It is important to note that the deduction under Section 80EE is in addition to the limit of Rs. 2,00,000 under Section 24.