Section 80EE - Home Loan Interest Deduction for First-Time Buyers

1. Price limit: The amount that can be deducted is up to Rs 50,000. It exceeds the Rs 2 lakh limit set forth in section 24 of the Income Tax Act.
2. Eligibility: This deduction feature can only be availed by individuals. Any company, HUF, or AOP cannot avail this deduction.
3. Other features: To be eligible for this deduction, you must not own any other residential property on the date the loan is approved by a financial institution.

Who May File a Section 80EE Deduction Claim?

You must fulfil the following eligibility criteria to claim deductions under Section 80EE:

1. You must be purchasing a house for the first time.
2. You must be an individual taxpayer.
3. The loan amount must be availed from a financial institution.

1. The loan amount must not exceed Rs.35 lakh.
2. The price of your residential property must not exceed Rs.50 lakh.
3. At the time of sanctioning of your loan, you must not own any other residential property.
4. The loan must be approved between particular financial years.

Can I Deduct Under Sections 24 and 80EE at the Same Time?

Yes, you can simultaneously claim deductions both under Section 24 and Section 80EE of the Income Tax Act where you can claim a deduction of up to Rs.2 lakh for the former and up to Rs.50,000 for the latter. 

Where in the ITR Do I Claim Section 24?

 You must fill out Schedule VI-A of the Income Tax Return (ITR) form in order to claim the deduction allowed by Section 24(b) of the tax code. In the area that applies to home loan interest, you can enter the deduction amount.

Difference between Section 80EE and Section 80EEA

Section 80EEA is an extension of Section 80EE and was introduced in the financial year 2019-20. However, there are some differences between the two. We will have a look at them below:

How to Claim Deduction on your Home Loan Interest?

You will have to keep the following points in mind while claiming deductions on your home loan interest:

1. Make sure you meet the requirements for eligibility listed in Section 80EE or Section 80EEA.
2. Collect all necessary paperwork, including the loan agreement, an interest certificate, and a certificate of builder completion.

1. Fill out the appropriate parts of the ITR form when filing your income tax return to include the specifics of your interest payments. 
2. Keep copies of all relevant documents as supporting documentation in case tax authorities conduct an audit.

What is better between Section 80EE and Section 80EEA?

Introduced under the budget of 2019, a fresh provision known as section 80EEA extended tax advantages for housing loan interest deductions up to Rs.1.5 lakh for affordable housing from 1 April 2019, to 31 March 2022. This provision specified that the individual must be a first-time homebuyer and ineligible for deductions under Section 80EE.

Your situation will determine whether you choose Section 80EE or Section 80EEA. It can be advantageous to apply for the deduction under provision 80EE if you're a first-time home buyer and the amount of your loan and property valuation meet the conditions of that provision. On the other hand, you might think about the benefits provided by Section 80EEA if you currently own a residential property or if your loan amount exceeds the restrictions of Section 80EE.

What is the process to claim Interest on House Loan in Income Tax Returns

Given below is the process to claim interest on house loan in income tax returns:

1. The necessary ITR form may be downloaded from the income tax e-filing website. 
2. Fill out the required financial and personal information. Locate the appropriate provision (either provision 24 or Section 80EE/80EEA) under ‘Deductions’ for home loan interest.
3. Enter the necessary details, such as the loan amount, interest payments, and other relevant information.
4. Verify each detail twice before submitting your ITR electronically.

Terms for Claiming Section 80EE Deductions

1. Home loans sanctioned within the time frame of 1st April 2016 to 31st March 2017 (FY 2016-17).
2. Loan amount limited to a maximum of Rs.35 lakhs can be used to claim deductions.
3. The overall value of the purchased residential property is capped at Rs.50 lakh or less.
4. The home loan in question pertains to the first house property owned by the applicant.
5. The amount of deduction is limited to Rs.50,000 on interest payments on home loans availed in the fiscal 2013-14.
6. Eligible taxpayers can claim the benefit only for the fiscal 2013-14.
7. If the interest payments are less than Rs.50,000 for FY 2016-17, the remaining deduction balance may be claimed in the next year, i.e., FY 2017-18.
8. Any balance of the deduction limit available after FY 2018-19 cannot be claimed as deductions.
9. The property in question can be either self-occupied or non-self-occupied.
10. The deductions under Section 80EE of the Income Tax Act is above and over the Rs.2 lakh limit set under the Section 24 of the Income Tax Act and over and above Rs.1.5 lakh set under Section 80C of the Income Tax Act.
11. The loan should be sanctioned by a housing finance company or a financial institute.
12. On the date of the sanctioning of the loan, you should not be owning any house under your name.

Eligibility for Claiming Section 80EE Deductions

To qualify for claiming deductions under Section 80EE, taxpayers must ensure adherence to the following criteria:

1. Individual taxpayers can avail benefits under this section either individually or jointly. In cases where a property is purchased jointly with a spouse and both contribute to loan payments, both individuals are eligible to claim the deduction.
2. Entities such as Association of Persons (AOP), Hindu Undivided Families (HUF), Companies, Trusts, etc., are not eligible for this tax benefit.
3. Only first-time homebuyers can avail tax benefits under Section 80EE, meaning the taxpayer does not own any residential property at the time of loan sanction. The loan must be obtained from a recognized financial institution or housing finance company.
4. The tax benefit under Section 80EE is applicable per individual rather than property.
5. Taxpayers can claim a maximum deduction of Rs.50,000 under this section.
6. This deduction of Rs. 50,000 is in addition to the existing limit of Rs.2 lakh specified under Section 24(b) of the Income Tax Act.

Section 80EE and 80C

Section 80C allows for tax deductions up to Rs.1.5 lakh per year while Section 80EE provides a one-time tax deduction of Rs.50,000 for FY 2016-17, with the balance deduction amount having the option of being claimed in the next fiscal year. Section 80C offers cumulative deduction on a wide range of investments ranging from small savings instruments to home loan interest repayment, whereas Section 80EE is exclusively meant for home loan interest repayments on loans sanctioned in the FY 2013-14.

Claiming 80EE Tax Deductions

To determine the deduction amount, follow these steps:

1. Calculate the total interest paid during a financial year on the home loan.
2. Claim a deduction of up to Rs.2 lakh under Section 24(b) of the Income Tax Act, 1961.
3. Any excess amount, up to Rs.50,000, can be claimed under Section 80EE of the Income Tax Act, 1961.

Difference between Section 80EE and Section 24