Section 80EE of the Income Tax Act

This provision, introduced in the 2013-14 Union Budget, applies only to residential properties purchased with a home loan by someone who does not own any other house at the time of sanction. The deduction can be claimed each financial year until the loan is repaid, offering substantial savings on tax.

Eligibility criteria to claim deduction u/s 80EE

To claim the deduction under Section 80EE, the following conditions must be met:

• The taxpayer must be a first-time homebuyer
• The home loan must be taken between April 1, 2013, and March 31, 2017
• The loan amount should not exceed Rs. 35 lakhs
• The value of the property should not exceed Rs. 50 lakhs
• The taxpayer should not own any other residential property on the date of sanction of the home loan

It is important to note that if the taxpayer is claiming deduction under this section, they cannot claim deduction under Section 24 of the Income Tax Act. The deduction under Section 80EE is available only for two financial years - the year in which the interest is paid and the subsequent year.

Deduction limit u/s 80EE

Under Section 80EE, you can claim a deduction of up to Rs. 50,000 each year on your home loan interest. This is in addition to the Rs. 2 lakh deduction allowed under Section 24. First, use the limit under Section 24. If your total interest goes beyond Rs. 2 lakh, you may then claim the extra Rs. 50,000 under Section 80EE, as long as you meet all the conditions.

To maximise your tax savings while keeping your EMIs affordable, choosing the right home loan is crucial. Bajaj Finserv offers home loans up to Rs. 15 crore* with flexible repayment tenures up to 32 years. Check your loan offers from Bajaj Finserv and discover how much you could save. You may already be eligible, find out by entering your mobile number and OTP.

Things to remember

This tax benefit is open to both Indian residents and Non-Resident Indians. You can claim it whether your home is self-occupied or rented out, as long as it is a residential property. Although the law does not say the property must be in India, it is understood that the benefit only applies to homes bought within the country. If you jointly own the home and both of you pay the loan, you can both claim this deduction separately, provided you meet all other rules under Section 80EE.

Documents required to claim deduction under Section 80EE

To claim deductions under Section 80EE, keep a few important documents ready. These include an interest certificate from your bank, which should show how much you paid in interest and principal. Also keep a copy of the loan sanction letter and loan agreement. You will need property papers to prove the home’s value is Rs. 50 lakhs or less. These documents may be asked for during tax filing or later, so it is best to store them safely in one place.

When applying for a home loan, having your documents organised can speed up the approval process significantly. Bajaj Finserv provides hassle-free application with doorstep document pickup and approval within 48 hours*. Check your eligibility for quick home loan approval from Bajaj Finserv. You may already be eligible, find out by entering your mobile number and OTP.

What are the features of the 80EE deduction

The 80EE deduction offers tax benefits specifically for first-time homebuyers. Here are the key features:

1. Interest deduction: It allows a deduction of up to Rs. 50,000 on home loan interest paid.
2. Eligibility: Available only for first-time homebuyers.
3. Loan criteria: The loan amount must not exceed Rs. 35 lakh, and the property value should be under Rs. 50 lakh.
4. Ownership condition: The property should be self-occupied.
5. No cap on loan tenure: There is no restriction on the loan tenure for claiming the deduction.
6. Additional benefit: This deduction is available in addition to other tax benefits like those under Section 80C.

The 80EE deduction helps ease the financial burden on first-time homebuyers by reducing their taxable income, making homeownership more affordable.

Conditions to claim the deduction under Section 80EE

To claim the deduction under Section 80EE, the following conditions must be met:

1. First-time homebuyer: The deduction is only available to individuals purchasing their first home.
2. Loan amount: The home loan should not exceed Rs. 35 lakh.
3. Property value: The value of the property must be Rs. 50 lakh or less.
4. Loan sanction date: The home loan must have been sanctioned between April 1, 2016, and March 31, 2017.
5. Self-occupied property: The property must be used as a residence by the buyer.
6. Interest deduction cap: A maximum deduction of Rs. 50,000 is allowed annually on the interest paid.

These conditions ensure that first-time homebuyers benefit from tax savings, making homeownership more affordable.

Section 80EE income tax deduction on home loans

Borrowers who take home loans from banks or non-banking finance companies like Bajaj Housing Finance Limited can use Section 80EE of the Income Tax Act to save on taxes. This section offers an extra deduction of Rs. 50,000 per year on interest paid, only for first-time home buyers. It applies throughout the loan period until full repayment. Only individuals can claim this deduction. It cannot be used by companies, firms, HUFs or other entities. Also, the house does not have to be self-occupied.

If you are planning to purchase your first home, getting a competitive home loan can help you maximise both your tax benefits and affordability. Bajaj Finserv offers home loans with low EMIs starting at just Rs. 722/lakh* with no foreclosure charges for individual borrowers. Check your loan offers from Bajaj Finserv to find the best deal for your first home. You may already be eligible, find out by entering your mobile number and OTP.

Here’s a quick comparison of the different sections offering home loan tax benefits:

Examples for deduction u/s 80EE

Let us look at different cases to understand who can and cannot claim deduction under Section 80EE:

• Case 1: Mr X took a loan from a family member to buy his first house and paid Rs. 1.8 lakhs in interest. He cannot claim the deduction because the loan was not from a bank or recognised housing finance company.
• Case 2: Mr X took a Rs. 50 lakh loan on 16 April 2016 for his first home and paid Rs. 1.8 lakhs in interest. He cannot claim deduction as the loan amount is more than Rs. 35 lakhs, which is the allowed limit.
• Case 3: Mr X took a Rs. 30 lakh loan, but the property value is Rs. 60 lakhs. He cannot claim deduction under Section 80EE because the home’s value is above Rs. 50 lakhs, even though the loan amount is within limit.
• Case 4: Mr X took a bank loan and claimed Rs. 1.8 lakhs under Section 24. He cannot claim the same amount again under Section 80EE, since the same interest amount cannot be claimed twice.

Section 80EE and Section 80EEA

Section 80EEA was introduced in Budget 2019 to expand tax benefits for affordable housing. While Section 80EE gives a deduction of Rs. 50,000 on home loan interest, Section 80EEA offers up to Rs. 1.5 lakhs. But both cannot be claimed together for the same loan.

Here is a comparison between the two:

To claim Section 80EEA, the individual must be a first-time home buyer and must not have claimed deduction under Section 80EE. The property should fall under affordable housing as per government guidelines.

Conclusion

Section 80EE helps first-time home buyers lower their tax burden by offering an extra deduction of up to Rs. 50,000 on the interest paid on a Home Loan. This is in addition to the existing deductions available under Section 24. However, this benefit is only for individuals and cannot be claimed by companies or other entities.

You can keep claiming this benefit each year until your loan is fully paid. If two people own the home jointly and both are paying the EMIs, they can claim separate deductions under Section 80EE, provided all conditions are met.

Do note, only interest payments are covered under Section 80EE – not the principal amount. Also, the home must be worth Rs. 50 lakhs or less, and the loan must not exceed Rs. 35 lakhs. These conditions must be met at the time of the loan approval.

Using Section 80EE can be a smart move if you’re a first-time home buyer. Make sure your loan and property value match the rules, and keep your documents ready when filing your returns.