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All about Section 80EE of the Income Tax Act

Taxation in India

All about Section 80EE of the Income Tax Act

Section 80EE is a tax benefit provided under the Income Tax Act, which allows deductions of up to Rs. 50,000 annually on the interest paid to buy your first home.

The Section was introduced earlier for FY 2013-14 and FY 2014-2015 with overall deductions of up to Rs. 1 lakh.

In FY 2016-17, Section 80EE was reintroduced with the following modifications:

  • 50,000 annual tax deductions
  • Until the loan is repaid completely

Budget 2023 on Section 80EE:

In calculating capital gains from the sale of a residential property, the cost of property acquisition by the owner should not include the interest on home loan. It is the amount claimed as deductions during the overall property-holding period.

Elements of Section 80EE

Here are the key elements of Section 80EE of the Income Tax Act of 1961:

ElementsDetails
EligibilityOnly first-time homebuyers
ExclusionsHUF/ Company/ Factory building
Property OwnershipOn the date of loan sanctioning, the taxpayer should not own any other house property except on which the home loan is takenThe taxpayer should own the residential house property on which the loan is taken
Employment StatusAvailable to both salaried and self-employed individuals
Maximum DeductionRs. 50,000
Loan AmountLoan amount should not exceed Rs. 35 lakh
Additional DeductionDeduction u/ Section 80EE is in addition to the deduction of Rs. 2 lakhs available under Section 24 of the IT Act
Loan AmountDeduction only on loans taken to buy a residential house property
Property ValueValue of the property should not exceed Rs. 50 lakh
Loan Issuing AuthorityFinancial Institutions Housing Finance Company
Tax Claim for Joint House OwnershipIf both owners pay joint ownership of the house and loan instalments: Both the joint owners can claim a deduction under Section 80EE

Tax Benefits under Section 80EE, Section 80C, and Section 24

Listed below are the tax benefits available u/ Sec 80EE, Sec 80C, Sec 24 of the Income Tax Act:

Section 80EESection 80CSection 24
Deduction of up to Rs. 50,000On the payment of home loan interest by first-time homebuyersIt is additional to the deductions of up to Rs. 2 lakhs u/ Sec 24Therefore, the deduction limit u/ Sec 24 should be exhausted first before claiming benefits under Section 80EEDeduction of up to Rs. 1.5 lakh On investments made in specific tax-saving Instruments Such as Public Provident Fund (PPF), Equity Linked Saving Schemes (ELSS), National Savings Certificate (NSC) Also Available On Life insurance premiums, child’s tuition fees, and principal repayment of home loanDeduction of up to Rs. 2 lakhsOn payment of interest on home loan taken to buy, construct, or renovate a residential house propertyDeduction limit only for self-occupied propertyNo deduction limit on residential rental property

Deductions under Section 80EE, Section 80C, and Section 24

ParticularsDeductions Available OnTax Deductions (in Rs.)
Self-Occupied  Residential PropertyRental Residential Property
Section 24Interest on Home LoanRs. 2 LakhsNo Limit
Section 80CPrincipal Home Loan AmountRs. 1.5 LakhsRs. 1.5 Lakhs
Section 80EEInterest on Home LoanRs. 50,000Rs. 50,000

Section 80EEA

Section 80EEA is a provision in the Income Tax Act that provides an additional deduction of up to Rs. 1.5 lakh for paid interest on home loans taken to buy first home.

Features of Section 80EEA:

  • The section was introduced in the Union Budget 2019-20 to boost the affordable housing sector.
  • This will encourage first-time homebuyers to purchase their first house.
  • The taxpayer should not be eligible for deductions u/ Section 80EE.
  • The deduction is available for loans sanctioned between 1st April 2019 and 31st March 2022.
  • The value of the property should not exceed Rs. 45 lakh.
  • The tax deduction claims should be made only for buying your first home.

 

FAQ

  • Who is eligible for section 80EE?The eligibility criteria for claiming housing loan interest deduction are:
    • Only individuals are eligible
    • HUFs (Hindu Undivided Families) and other entities are not eligible
    • First-time home buyers can only claim deduction
    • Loan amount should not exceed Rs. 35 lakhs
    • Value of the property purchased should not exceed Rs. 50 lakhs
  • How can I claim both sections 80EE and 24?Criteria to claim tax deductions under both Section 80EE and Section 24 of the Income Tax Act:
    • Section 24 provides a deduction of up to Rs. 2 lakhs for the payment of interest on a home loanSection 80EE provides an additional deduction of up to Rs. 50,000 for first-time homebuyers
    • Deduction u/ Section 80EE is over and above the deduction available u/ Sec 24
    • To claim the deduction under section 80EE, you must first exhaust the deduction available u/ Section 24
  • What is Sec 80EE or 80EEA?Section 80EE and section 80EEA of the Income Tax Act 1961, relate to the deduction of interest paid on a home loan.
    • Section 80EE:Provides an additional deduction of up to Rs. 50,000 for first-time homebuyers who have not claimed any deduction for home loan interest paid in any previous year.
    • Section 80EEA: Provides a deduction of up to Rs. 1.5 lakhs for interest payment on home loan taken to purchase an affordable housing property.

What is the difference between 24B and 80EE?

Section 24(B) and section 80EE of the Income Tax Act 1961 are related to deducting paid interest on home loans.

However, there are some key differences between the two; they are:

ParticularsSection 24(b)Section 80EE
ApplicabilityApplicable to all taxpayers who have taken a home loanApplicable only to first-time homebuyers
Maximum Amount of DeductionUp to Rs. 2 lakhs for the interest payment on home loanadditional deduction of up to Rs. 50,000 for the interest paid on a home loan
Eligibility criteriaNo specific eligibility criteria other than the fact that the loan should have been taken for the purchase or construction of a propertyTaxpayer must be a first-time homebuyer who has not claimed any deduction for home loan interest payment in any previous year

 

Disclaimer: This tax consultancy article is for educational purposes only. It does not constitute personalized tax advice. For specific tax situations, consult a qualified tax professional or contact Qualified Munim Team at qualifiedmunim@gmail.com or +91-74199-00446. Visit www.qualifiedmunim.com. We are not liable for any actions taken based on this information.

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