Section 80EE: The Ultimate Guide to Income Tax Deduction For Home Loan Interest
Taxation Services
Buying a home is a lifetime investment, and with the rise in property prices, home loans have become a popular mode of financing.
But for first-time buyers in particular, the interest portion of a mortgage may be a considerable financial hardship.
To provide relief to homebuyers, the government has introduced various tax benefits and deductions.
Under Section 80EE of the Income Tax Act of 1961, one such deduction is allowed.
In this comprehensive guide, we will explore all the important aspects of Section 80EE, including eligibility criteria, the amount of deduction, how to claim the deduction, and the benefits of availing of the deduction.
Whether you are a first-time homebuyer or an existing home loan borrower, this guide will help you understand how you can save on your tax liability by availing of the tax deduction under Section 80EE.
So let's get started and discover more about this valuable tax benefit!
What is Section 80EE of the Income Tax Act?
- The Income Tax Act of 1961 contains a provision known as Section 80EE that enables individuals to deduct the interest they pay on their mortgages. This section provides an additional tax benefit to first-time homebuyers who have taken a home loan to purchase a self-occupied house property.
- The main objective behind introducing this section is to provide a financial boost to first-time homebuyers, who often have to bear a significant burden in the form of high home loan interest rates.
- By availing of the deduction under Section 80EE, individuals can reduce their overall tax liability, making it easier for them to repay their home loans. This tax benefit acts as an additional incentive for people to own a house and, thus, encourages homeownership.
Eligibility Criteria for availing the deduction under Section 80EE
The eligibility criteria for availing of the deduction under Section 80EE of the Income Tax Act are as follows:
- First-time homebuyers: The deduction under Section 80EE is available only for first-time homebuyers who have taken a home loan to purchase a self-occupied house property.
- Loan Amount: The loan should be at most Rs. 35 lakhs.
- Loan Sanctioned: The loan should have been sanctioned by a financial institution such as a bank, housing finance company, or any other entity notified by the government.
- Loan sanctioned in the financial year: The loan should have been sanctioned between 1st April 2016 and 31st March 2017.
- House Property Value: The value of the house property should not exceed Rs. 50 lakhs.
- Maximum Deduction: The maximum deduction that can be claimed under Section 80EE is Rs. 50,000.
It is important to note that the deduction under Section 80EE can only be claimed for the interest paid on the home loan and cannot be claimed for the principal repayment of the loan.
Additionally, the deduction under Section 80EE is in addition to the deduction of Rs. 2 lakhs available under Section 24 of the Income Tax Act for the interest paid on the home loan.
In case you are a first-time homebuyer and have taken a home loan for the purchase of a self-occupied house property, you may be eligible for the deduction under Section 80EE.
Amount of Deduction under Section 80EE
Section 80EE of the Income Tax Act places a cap on the amount that may be deducted at Rs. 50,000.
This means that an individual can claim a deduction of up to Rs. 50,000 for the interest paid on the home loan taken for the purchase of a self-occupied house property.
The deduction under Section 80EE is in addition to the Rs. 2 lakh deduction allowed under Section 24 of the Income Tax Act for the interest paid on the mortgage, which is an essential point to remember.
Only the first year of the loan can be written off under Section 80EE, and this can be done in the fiscal year in which the loan was approved.
The deduction under Section 80EE can only be claimed for the interest paid on the home loan and cannot be claimed for the principal repayment of the loan.
In order to claim the deduction under Section 80EE, the individual must furnish the required details in the income tax return and attach the relevant documents.
It is advisable to keep all the relevant documents related to the home loan handy to avoid any discrepancies while claiming the deduction under Section 80EE.
How to Claim Deduction under Section 80EE?
To claim a deduction under Section 80EE, you must follow these steps systematically to ensure you receive the maximum benefits.
- Computation of Interest Paid: The initial step in taking the deduction under Section 80EE is to figure out the entire amount of interest paid on your mortgage throughout the fiscal year. Either your lender or your bank statements can provide you with this information.
- Filling Out Tax Return Form: Once you have calculated the total amount of interest paid, you need to fill out your tax return form and mention the amount of interest paid under Section 80EE. This information can be found in the tax return form under the section for claiming deductions on interest paid on home loans.
- Submission of Supporting Documents: After filling out your tax return form, you must submit the required documents, such as a copy of the home loan sanction letter, an Interest certificate from the lender, and a PAN Card to support your claim. These documents are important to verify the information in your tax return form and ensure you receive the deduction under Section 80EE.
- Proper Documentation: It is important to keep adequate documentation of all the transactions related to your home loan and the interest paid on it. This documentation can be used as proof in case of any tax scrutiny in the future.
Benefits of availing Deduction under Section 80EE
First-time homeowners get a number of advantages by utilizing the deduction provided by Section 80EE of the Income Tax Act. Some of the key benefits of claiming the deduction are as follows:
- Reduced Taxable Income: By claiming the deduction under Section 80EE, the individual's taxable income is reduced, ultimately reducing their overall tax liability.
- Lower Tax Burden: The deduction under Section 80EE helps lower the individual's tax burden, allowing them to save money and make the most of their hard-earned income.
- Encourages Home Ownership: The tax deduction under Section 80EE encourages individuals to become homeowners, promoting the growth of the real estate sector and boosting the economy.
- Increased Savings: People can save more money due to the reduced tax burden, which may then be utilized for other investments or expenses.
- Simplified Process: Claiming the deduction under Section 80EE is simple and can be done easily by following the steps mentioned in this blog.
- Expert Assistance: Especia assists individuals in claiming the deduction under Section 80EE and other tax benefits on home loans. Our experts have extensive knowledge and experience in tax laws and can help you make the most of the available tax benefits.
- No Limit on Total Deduction: The deduction amount under Section 80EE is in addition to the deduction available under Section 24(b) of the Income Tax Act, which means there is no limit on the total amount of deduction that you can avail.
Read More,
Conclusion
In conclusion, Section 80EE of the Income Tax Act provides a valuable tax benefit to first-time homebuyers.
Individuals can reduce their taxable income and lower their overall tax burden by claiming the deduction on the interest paid on their home loan.
The procedure for requesting the deduction is straightforward and is made easier with the aid of tax experts or Especia.
Availing of the deduction under Section 80EE provides several benefits to individuals, including reduced taxable income, lower tax burden, increased savings, and more.
It also promotes home ownership and boosts the economy, making it a win-win situation for both individuals and the country.
At Especia, we understand the importance of tax benefits in maximising your hard-earned income.
Our experts have extensive knowledge and experience in tax laws and can help you claim the deduction under Section 80EE and other tax benefits on home loans.
In conclusion, if you are a first-time homebuyer, we recommend contacting Especia to claim the deduction under Section 80EE and make the most of the available tax benefits.
Our crew is always accessible to serve you and is willing to do so however they can.
FAQ’s Related to Section 80EE Income Tax Deduction for Interest on Home Loan
1. Is the deduction under Section 80EE available for the entire loan tenure?
No, the deduction under Section 80EE is available only for the first year in which the loan was taken.
2. Can the deduction under Section 80EE be availed for a joint home loan?
Yes, the deduction under Section 80EE is available for a joint home loan taken in the name of both individuals.
3. Can the deduction under Section 80EE be availed for a home loan taken to purchase a second home?
No, the deduction under Section 80EE is available only for first-time homebuyers for the purchase of a self-occupied house property.
4. Can the deduction under Section 80EE be claimed for a home loan taken for the construction or renovation of a house?
No, the deduction under Section 80EE is available only for the interest paid on the home loan taken for the purchase of a self-occupied house property.
5. Can the deduction under Section 80EE be claimed for a home loan taken from a non-financial institution?
No, the loan should have been sanctioned by a financial institution such as a bank, housing finance company, or any other entity notified by the government to avail of the deduction under Section 80EE.
Contact Us for Taxation Services, Bookkeeping Services, Outsource Accounting Services, CFO Services, ESOP Services in Delhi, Noida, Gurgaon, and all across India: write to us at accounts@especia.co.in. Or Call On :(+91)-9711021268 +91-9310165114
