Section 80EE of the Income Tax Act provides first time home buyers deductions on the interest payments of home loans. Tax deduction is up to Rs.1 lakh and is for home loans during the fiscal year 2013-2014.
Section 80EE is applicable for claiming deductions on home loan interest payments for first time home buyers only. This is a very exclusive scheme that was introduced by the then Finance Minister Mr P. Chidambaram in the national budget for FY 2013-14. The benefits of the scheme can only be claimed by first time home buyers who have purchased a property through a home loan in the fiscal 2013-14. The limit of this tax deduction is set at Rs.50,000 in the form of a one-time tax relief. The deductions u/s 80EE were introduced as a means to help home buyers in the lower income group through tax reliefs.
Terms for Claiming Section 80EE Deductions
- Home loans sanctioned within the time frame of 1st April 2016 to 31st March 2017 (FY 2016-17).
- Loan amount limited to a maximum of Rs.35 lakhs can be used to claim deductions.
- The overall value of the purchased residential property is capped at Rs.50 lakh or less.
- The home loan in question pertains to the first house property owned by the applicant.
- The amount of deduction is limited to Rs.50,000 on interest payments on home loans availed in the fiscal 2013-14.
- Eligible taxpayers can claim the benefit only for the fiscal 2013-14.
- 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.
- Any balance of the deduction limit available after FY 2018-19 cannot be claimed as deductions.
- The property in question can be either self-occupied or non self-occupied.
- 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.
- The loan should be sanctioned by a housing finance company or a financial institute.
- 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
The deductions under this section can be claimed only by individual taxpayers on properties purchased either singly or jointly. The deduction is not applicable for Hindu Unified Families (HUF), companies, trusts, Association of Persons (AOP) etc.
Points to Note:
- Section 80EE is applicable on a per person basis instead of a per property basis.
- Properties purchased jointly will be eligible for deductions to the tune of Rs.1 lakh per owner.
- You do not necessarily have to reside in the purchased property.
- Borrowers staying in a rented apartment can claim deductions under Sections 80EE, 80C and 24.
- Borrowers can claim 80EE deductions on top of the Rs.1.5 lakhs deductions applicable on self-owned properties.
Section 80EE and 80C
The Section 80C allows for tax deductions up to Rs.1.5 lakhs 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 claim the deductions under this section, you need to fill in the respective field in your IT returns form specifying the amount of interest paid in the fiscal 2016-17. In addition, you will have to furnish a document from the lender stating the interest and principal amounts on your home loan as well as the amount paid till date.
Suppose you were sanctioned a home loan of Rs.20 lakhs in FY 2013-14 towards a property valued at Rs.35 lakhs. If you pay an interest amount of Rs.25,000 for the same fiscal, you can claim the full amount as deduction u/s Section 80EE. The remaining Rs.25,000 of the deduction limit can be claimed for tax payments in the next year, i.e. FY 2017-18.
Frequently Asked Questions:
- What is the maximum amount that can be claimed as deductions u/s 80EE?
- I didn’t claim the deductions for FY 2013-14 even though I purchased a new property in August 2013. Can I claim the deduction now?
You can claim a maximum of Rs.50,000 as deductions under this section.
No, the deductions could have been claimed the latest by the end of FY 2014-15, i.e. by 31st March 2015.