Section 80EE – Home Loan Interest Deduction
- Eligibility: First-time homebuyers with a loan sanctioned between 1 Apr 2016 – 31 Mar 2017; loan lesser than or equal to Rs. 35 lakh; property value lesser than or equal to Rs. 50 lakh.
- Deduction Limit: Up to Rs. 50,000 per year on home loan interest.
- Additional Details: Can be claimed along with Section 24(b); applicable only under the old tax regime.
- Not Available: For loans sanctioned after FY 2016–17.
Getting your first salary will be one of the most cherished days of your life. Isn't the excitement of getting your first pay cheque something unique? You feel like you are on top of the world and are eager to fulfil each of your aspirations one at a time. When you talk about dreams, one of the most common dreams for many would be to buy a house. Take Suman as an example. He is an engineer who recently got a well-paying job. His aim was to purchase a home as soon as he began making money. Thus, he started this wonderful journey by taking out a home loan.
However, you may become confused in a sea of intricate regulations as you delve more into the subject of taxes and finance. For those who are taking out home loans, Section 80EE of the Income Tax Act is very helpful. It provides some tax relief to aid in improved money management. What makes this meaningful to you? You might save some money and enjoy a smoother home loan application process if you are aware of Section 80EE.
Want to know more about it? Find out how you can benefit from this section by reading on!
What Is Section 80EE Of The Income Tax Act?
First-time homebuyers can take advantage of a great tax discount under Section 80EE of the Income Tax Act. It enables you to claim tax deductions on the interest you pay on the home loan. In particular, you are eligible for a deduction of up to Rs. 50,000 every fiscal year. The best part? This tax relief is something you may take advantage of every year until your house loan is paid off in full.
Features And Eligibility Criteria Of The 80EE Deduction
Let’s break it down for you -
Category
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Details
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Who Can Benefit
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Exclusively available to those buying their first home.
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Who Cannot
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This benefit doesn’t extend to Hindu Undivided Families (HUFs), companies, or factory buildings.
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Property Ownership Details
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You shouldn't own any other residential property at the time your loan is sanctioned except the one you are buying. The loan must be taken for a residential house.
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Who Can Apply
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Both salaried employees and self-employed individuals are eligible to claim this deduction.
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Maximum Deduction Limit
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You can claim up to Rs. 50,000 per financial year.
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Loan Amount Criteria
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Your home loan amount should not be more than Rs. 35 lakh.
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Extra Deduction Opportunity
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This deduction is over & above the Rs. 2 lakhs deduction available under the Section 24 of the Income Tax Act for home loan interest.
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Property Value Cap
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The value of the residential property should be within Rs. 50 lakh.
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Who Can Lend
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The loan must be secured from recognised financial institutions or housing finance companies.
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Tax Benefits for Joint Ownership
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If you and a co-owner both contribute to the loan repayments, you both can claim the deduction under Section 80EE.
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Purpose Of The Deduction Under Section 80EE
Section 80EE of the Income Tax Act is intended to provide people with significant tax advantages. It permits you to deduct the interest paid on a loan received from a financial institution for residential property up to a yearly maximum of Rs.50,000. By reducing their taxable income, this deduction primarily attempts to increase first-time purchasers' opportunity for homeownership. Even better, until your loan is entirely repaid, you are eligible to receive this benefit each fiscal year.
Conditions To Be Met For Claiming Deduction
You must fulfil the following requirements in order to be eligible for the deduction under Section 80EE of the Income Tax Act -
- The maximum value of the residential property you purchase should be Rs. 50 lakhs, and the total amount of your loan cannot be more than Rs. 35 lakhs.
- A reputable home finance firm or banking institution must approve your loan.
- For the duration that you are repaying the loan, you are eligible to claim this deduction.
- You should not own any other residential property at the time your loan is approved.
How Can You Claim Tax Deductions Under Section 80ee Of The Income Tax Act?
Using Section 80EE of the Income Tax Act, you can claim your deduction as follows -
- Get Your Documents Ready:
Gather the essential documentation, including the property sale deed, loan repayment statements that reflect the interest paid, and the letter of sanction for your home loan.
- File Your Tax Return:
When you are ready to submit your income tax return, use the relevant ITR form, which is usually ITR-2 or ITR-3.
- Input Loan Details:
Make sure you accurately complete the relevant area of the ITR form with the facts of your home loan interest payments.
- Stay Prepared:
Keep all supporting documentation available in case the tax authorities ask to see it. This will help you stay prepared.
How To Claim House Loan Interest In ITR?
You can follow this simple procedure -
- Collect All Required Loan Records
Arrange all of the necessary paperwork for your home financing first. This contains a complete statement that lists the principal and interest amounts paid throughout the financial year, your loan agreement, and the interest certificate issued by your lender. It is essential to have these records on hand for a precise and efficient filing procedure.
- Find Out Which Are Eligible Tax Deductions
You can deduct a sum of up to Rs. 2 lakh in interest that you paid on a self-occupied property each year under Section 24(b) of the Income Tax Act. There is an additional benefit if your property is rented out. The deduction for interest payments will not have a cap. To optimise your tax savings, make sure you appropriately compute and claim these deductions.
- Get The Proper Interest Documents
Verify that you have all the right documents in your hands. Your Form 16 will include information on the interest you paid on your home loan if you are a salaried individual. However, if you own your own business or are self-employed, you will need to ask your lender for an interest certificate. These records are crucial since they contain the numbers you require for your ITR.
- Choose And Complete The Correct ITR Form
It's now time to choose the appropriate ITR form according to your sources of income. ITR-1 or ITR-2 will be the case for the majority of people. After selecting the relevant form, carefully enter your financial and personal information on it. You can make sure that your return is accurate by taking the time to do this step.
- Report The Interest Paid In The Relevant Section
In your ITR form, you must enter the interest amount. Find the subsection under Section 24(b) that deals with housing loan interest deductions. Make sure the interest you paid during the fiscal year matches the amounts on your Form 16 or interest certificate when entering the amount. To optimise your tax benefits and accurately claim your deduction, this step is essential.
- Pre-Construction Interest Claim For Properties Under Construction
You are eligible for a significant bonus if you have taken out a loan for a property that is still under development. Pre-construction interest is allowable to be claimed in your ITR; however, it must be paid in five equal payments. Once your property is completed, you can begin to claim this deduction in that year.
- Utilising The E-Filing Portal, Submit Your ITR
The next step is to confirm every detail. Verify that all of the numbers are correct and that each section is finished. When you are prepared, use the Income Tax Department's electronic filing system to submit your ITR.
- Preserve All Necessary Documents
Lastly, it is imperative that you keep all of your supporting documentation. Your loan statements, interest certificates, and certificates of property possession are all included in this. Keeping these records on file is crucial for your records and will come in handy if you ever have to face an audit.
Categories Of Groups Or Persons Who Cannot Access Tax Benefits Under Section 80EE
It's critical to understand who is not qualified for the tax benefits provided under Section 80EE of the Income Tax Act. These deductions do not apply to trusts, Hindu Undivided Families (HUFs), or Associations of Persons (AOPs). Furthermore, you cannot claim the deduction if your spouse is the only owner of the property in question unless they are also a co-borrower or co-owner.
How Section 80EE Complements Section 24(b)?
First, let's understand the two sections correctly. They have different roles, but they're on the same team.
Section 24(b)
This is the deduction for home loan interest. If you've taken a loan for a house property, you can claim a deduction of up to Rs. 2,00,000 on the interest you pay every year, provided that the property is self occupied. It’s straightforward, reliable, and available to almost every homeowner with a loan. There’s no special "first-time" requirement here. And for a let-out property, there is no upper limit on interest deduction under Section 24(b).
Section 80EE
This one is specifically for first-time home buyers. It’s like a welcome gift from the tax department. But it has some specific rules: the home loan must be sanctioned between specific dates (April 1, 2016 to March 31, 2017), the value of the property should be below Rs. 50 lakh, and the loan amount should be under Rs. 35 lakh. If you tick these boxes, you get an additional deduction on your home loan interest. Remember that on the date of sanction, the buyer must not own any other residential property and the deduction is only available under the old tax regime.
So, how do they work together?
It’s simpler than you think. You don't have to choose one over the other. Section 80EE doesn't replace Section 24(b); it tops it up.
Here’s how:
- You first claim your deduction under Section 24(b). You use this to cover the bulk of your annual home loan interest, up to its limit of Rs. 2,00,000.
- If the interest you've paid exceeds what you've claimed under Section 24(b), you can then tap into Section 80EE.
Think of it like this: Section 24(b) is your main course, and Section 80EE is a delicious dessert you get to enjoy only if you meet the criteria.
How Much Deduction Can You Actually Claim?
Let's talk numbers and see how this combination plays out in real life. The most important thing to remember is the cap. The deduction under Section 80EE is capped at Rs. 50,000. And it's only for the interest component of your loan, not the principal.
Let’s look at an example to make it crystal clear:
Say you are a first-time home buyer. In a financial year, you paid Rs. 2,30,000 as interest on your home loan.
- Step 1: Claim Section 24(b)
You immediately claim the standard deduction of Rs. 2,00,000 under Section 24(b). This covers the first chunk of your interest.
- Step 2: Check the Balance
Now, you have Rs. 30,000 of interest remaining (Rs. 2,30,000 - Rs. 2,00,000 = Rs. 30,000).
- Step 3: Apply Section 80EE
Since you are eligible for Section 80EE, you can now claim this remaining Rs. 30,000 as an additional deduction. The Rs. 50,000 cap is more than enough to cover this.
Your Total Deduction:
Section 24(b): Rs. 2,00,000 + Section 80EE: Rs. 30,000 = Rs. 2,30,000
You have successfully deducted your entire interest payment from your taxable income! Now, what if your interest was even higher?
Let’s now take a look at another scenario:
- Your total annual interest is Rs. 2,70,000.
- Section 24(b): You claim Rs. 2,00,000.
- Remaining Interest: Rs. 70,000.
- Section 80EE: You can only claim up to its cap of Rs. 50,000.
Your Total Deduction:
Section 24(b): Rs. 2,00,000 + Section 80EE: Rs. 50,000 = Rs. 2,50,000
In this case, you can't claim the full Rs. 70,000 excess, but you still get a fantastic additional Rs. 50,000 deduction, bringing your total interest-based tax savings to Rs. 2.5 lakhs.
Difference Between Section 80EE And Section 24
Listed below are a few of the differentiations between the two sections -
Details
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Section 80EE
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Section 24(b)
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Purpose / What They Offer
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Provides an additional deduction on interest paid for first-time homebuyers. Maximum deduction: Rs. 50,000 per financial year (over and above Section 24(b)).
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Allows deduction of interest on housing loans for both self-occupied and let-out properties. For self-occupied: Rs. 2 lakh limit; for let-out: no upper limit (subject to actual interest paid).
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Eligibility / Who Can Claim
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Only individuals purchasing their first residential property, meeting loan and property value limits.
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Any owner of residential property, whether self-occupied or let-out. No “first-time” restriction.
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Deduction Limit
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Up to Rs. 50,000 per year (subject to actual interest paid).
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Up to Rs. 2 lakh per year for self-occupied property; no limit for let-out property.
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Key Criteria / Conditions
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Loan sanctioned between 1 Apr 2016 and 31 Mar 2017; loan amount lesser than or equal to Rs. 35 lakh; property value lesser than or equal to Rs. 50 lakh; borrower owns no other residential property on the date of sanction.
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No restriction on property value or loan amount; deduction depends on purpose (self-occupied vs. let-out).
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Who Benefits
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First-time homebuyers with eligible loans meeting the above conditions.
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All homeowners paying interest on a home loan (both new buyers and existing owners).
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Tax Regime Applicability
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Available only under the old tax regime.
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Available under both old and new tax regimes (since it falls under “Income from house property”).
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Difference Between Section 80EE And Section 80EEA
When it comes to tax benefits on home loans, Section 80EE and Section 80EEA are often mentioned together, but they serve different purposes.
Point of Difference
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Section 80EE
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Section 80EEA
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Overview / Purpose
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Provides an additional deduction for interest paid on home loans to first-time homebuyers. Maximum deduction: Rs. 50,000 per financial year (over and above Section 24(b)). Applies to loans sanctioned during FY 2016–17.
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Offers an additional deduction of up to Rs. 1,50,000 per financial year on interest paid for affordable housing loans, aimed at first-time homebuyers of lower-value properties. Applies to loans sanctioned between 1 April 2019 and 31 March 2022.
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Loan Amount Eligibility
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Loan amount must not exceed Rs. 35,00,000.
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No specific cap on loan amount, but the property’s value must fall within affordability criteria.
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Property Value Limit
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Property value must not exceed Rs. 50,00,000.
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Stamp duty value of the property must not exceed Rs. 45,00,000.
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Eligible Borrowers
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Only individuals purchasing their first residential property; must not own any other house on the date of sanction.
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Only individual individuals who are first-time buyers. They must not own any other residential property on the date of sanction.
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Carpet Area Limit
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Not specified under this section.
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Specified for affordable housing: Carpet area less than or equal to 60 sq. m (645 sq. ft) in metro cities and lesser than or equal to 90 sq. m (968 sq. ft) in non-metro areas.
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Deduction Limit
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Up to Rs. 50,000 per financial year (subject to actual interest paid).
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Up to Rs. 1,50,000 per financial year (subject to actual interest paid).
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Applicable Loan Sanction Period
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Loan must be sanctioned between 1 April 2016 and 31 March 2017.
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Loan must be sanctioned between 1 April 2019 and 31 March 2022.
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Eligible Entities
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Only individual taxpayers can claim. HUFs, AOPs, trusts, and companies are not eligible.
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Only individual taxpayers qualify; HUFs, AOPs, trusts, and companies are not eligible.
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Lock-In Period
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No lock-in period specified.
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No lock-in period specified.
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Overlap / Exclusivity
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Cannot be claimed together with Section 80EEA for the same property or loan.
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Cannot be claimed if Section 80EE deduction has already been claimed for the same property or loan.
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Tax Regime Applicability
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Available only under the old tax regime.
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Available only under the old tax regime.
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The Property & Loan Conditions
The government designed Section 80EE to boost affordable housing. That’s why the benefits aren't for high-end villas. The property and loan have to fit into a neat little box.
- The Property Value Cap: The stamp duty value of the house property at the time of completion must not exceed Rs. 50 lakh. Not the price you negotiated, but the official value.
- The Loan Amount Cap: The home loan you take from a financial institution (like a bank or an NBFC) must be for Rs. 35 lakh or less.
- The Critical Date Window: This is non-negotiable. The loan must have been sanctioned by the lender between April 1, 2016, and March 31, 2017.
Miss any one of these three conditions, and Section 80EE is, unfortunately, off the table.
Validity & The "Once-in-a-Lifetime" Clause
Here’s a common question we get: "Can I claim this Rs. 50,000 deduction every year until my loan is repaid?" The answer is no.
Section 80EE is not an annual recurring bonus. Section 80EE provides an additional interest deduction of up to Rs. 50,000 in a financial year for eligible first-time buyers. If the loan meets the 80EE conditions (loan sanctioned 1-Apr-2016 to 31-Mar-2017, loan lesser than or equal to Rs. 35L, property value lesser than or equal to Rs. 50L, no other residential property on sanction date), the assessee may claim up to Rs. 50,000 in each year while interest is payable, subject to the actual interest paid.
If your loan was sanctioned in FY 2016-17 and meets the other 80EE conditions, you can claim the Rs. 50,000 (per year) for every financial year while interest is payable. If the loan was not sanctioned in that FY, you cannot claim under 80EE. This "once-in-a-lifetime" nature makes it even more critical to ensure you claim it correctly when you are eligible.
The Overlap with Section 80EEA
This is where it can get a little confusing, but stick with us. There's another section called 80EEA that also offers an additional Rs. 1,50,000 deduction for interest on home loans for affordable housing.
The important thing to know is that you cannot claim deductions under both Section 80EE and Section 80EEA for the same loan or property. They are mutually exclusive. Section 80EEA is a separate provision for affordable housing. Its loan window is 1-Apr-2019 to 31-Mar-2022, the stamp-duty-value cap is Rs. 45,00,000 and the extra deduction limit is up to Rs. 1,50,000 per year. A taxpayer cannot claim both for the same loan; 80EEA is for those who do not qualify for 80EE.
How do you know which one applies to you?
It primarily comes down to the dates. Section 80EEA is for loans sanctioned between April 1, 2019, and March 31, 2022, for a property valued under Rs. 45 lakh. See the slight difference? If your property value is between Rs. 45 lakh and Rs. 50 lakh, Section 80EE is your go-to. If it's below Rs. 45 lakh, you might fall under 80EEA. A tax advisor can help you pick the right one.
Getting your finances right, especially with a big commitment like a home loan, is all about paying attention to the details. It’s a lot like how we at SMC Insurance view protection - the real value lies in understanding the terms thoroughly, so the safety net works perfectly when you need it most.
What Is Better Between Section 80EE And Section 80EEA?
Which is better, Section 80EEA or Section 80EE really depends on your specific needs -
Scenario
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Section 80EE
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Section 80EEA
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First-Time Homebuyers
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Offers tax benefits on home loan interest for existing property loans.
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Provides an additional deduction of up to Rs. 1.5 lakh for first-time buyers, helping boost savings.
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Existing Home Loans
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Allows income tax benefits on the interest component of a current home loan.
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Not applicable to existing home loans; intended for new affordable housing purchases.
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Best For
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Individuals with an ongoing residential property loan.
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First-time homebuyers seeking higher deductions on new affordable home loans.
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Decision Basis
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Depends on your personal circumstances and financial goals.
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Depends on your personal circumstances and financial goals.
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Let’s Wrap It Up!
For first-time homebuyers, Section 80EE of the Income Tax Act is like a key to unlocking savings, giving you that extra push to buy the house of your dreams. Envision receiving a small bonus from the government to assist you in reaching your ideal residence! This advantage makes the transition to homeownership a little simpler and more satisfying. Thus, as you move into your new house, keep in mind that Section 80EE was a tiny but important part of making it all happen!
If you are looking for more information about the other Sections like Section 206AB Of Income Tax Act, Section 115BAA Of Income Tax Act, etc., check out our website for more information.
FAQs
Only first-time homebuyers can claim this deduction. The home loan must have been sanctioned between April 1, 2016, and March 31, 2017, with the loan amount not exceeding Rs. 35 lakh and the property value not exceeding Rs. 50 lakh.
You can claim a maximum deduction of Rs. 50,000 per financial year on the interest paid for your home loan.
Yes, if both are co-owners of the property and co-borrowers of the home loan, and each individually meets the eligibility criteria, they can both claim the deduction separately.
Yes, you must first claim the interest deduction under Section 24(b) (up to Rs. 2 lakh for a self-occupied property). If your interest exceeds this limit, you can claim an additional Rs. 50,000 under Section 80EE, provided you are eligible.
No, Section 80EE applies only to loans sanctioned between April 1, 2016, and March 31, 2017. For newer loans, Section 80EEA is the applicable provision (for loans sanctioned between April 1, 2019, and March 31, 2022).
Section 80EE offers an additional deduction of up to Rs. 50,000, while Section 80EEA provides a higher deduction of up to Rs. 1.5 lakh for affordable housing. The two cannot be claimed for the same loan.
You will need a home loan sanction letter showing the approval date and loan amount. You must also provide an interest certificate from your lender detailing interest paid, proof of property ownership and purchase value (such as the sale deed or agreement) and PAN and ownership details if claiming jointly.