Section 80EE of Income Tax Act – A Complete Guide


Section 80EE of the Indian Income Tax law allows first-time home buyers to get tax deductions on the interest they need to pay on a Home Loan. You can claim a deduction of up to ₹50,000 per financial year as per this section. You can continue to claim this deduction until you have fully repaid the loan.

But where and how can you begin to benefit from these tax deductions? Read on to learn everything about tax benefits under Section 80EE.

Eligibility Criteria for Tax Deduction According to Section 80EE

Your property value should be ₹50 lacks and less.

You shouldn’t own another residential property as of the day when the loan is sanctioned.

Tax benefits under Section 80EE apply to the residential property alone.

The amount taken as a home loan should not exceed ₹35 lacks or less.

The loan must be sanctioned by a financial institution or a housing finance company

The loan must be sanctioned between 01.04.2016 to 31.03.2017

Must Read: What is Section 24 of the Income Tax Act?

Categories of Groups or Persons Who Can Access Tax Benefit Deductions Under Section 80EE

First-time home buyers with no other residential property who bought a home through a loan.

An individual taxpayer qualifies for tax deduction under Section 80EE

Co-borrowers individually qualify for tax deductions under Section 80EE.

People can qualify for tax benefits irrespective of whether they are residing in the bought house or if they rent it out.

Categories of Groups or Persons Who Cannot Access Tax Benefits Under Section 80EE

Tax benefits under Section 80EE do not apply to an association of persons, Hindu undivided families, or trusts of any kind.

You cannot claim a deduction on a house property that is owned by your spouse even if you take the loan; it can only be made if the spouse is a co-borrower or nominates as a co-owner.

Steps to Claim Tax Benefits on Your Home Loan

Prepare The Property and Home Loan Documents Required

If you co-own the property, ensure it bears your name and the co-owners as well. Both of you can claim tax deductions individually. However, both co-borrowers will need to pay EMIs for tax benefits.

Ensure you also get a certificate from your lender indicating your loan and interest details. Remember, your home loan should have been approved to qualify for tax benefits according to Section 80EE.

Submit Documents to Your Employer

When claiming tax deductions on your home loan:

Inform your employer once you buy or construct your home with a Home Loan. Your employer will then adjust TDS to reduce the amount deducted from your income for tax.

Wait till the end of the year, find tax liabilities, and make adjustments.

If you aren’t employed: don’t submit any documents.

Must Read: How to Claim Tax Benefits On Second Home Loan?

Conclusion

Section 80EE is an Income Tax law that assures tax benefits when you use a Home Loan to buy or build a residential home. When filing your taxes, you can deduct up to ₹50,000 in interest paid.

If the property is co-owned, the tax benefits can be claimed individually. However, the co-borrowers must pay EMIs and the property must be in both names to qualify for section 80EE deductions.

Section 80EE tax deductions are only available for paid interest, not principal.

To qualify for a tax deduction, the property purchased or built with a home loan must be worth less than ₹50 lacks. Furthermore, you should not own any other property by the time your Home Loan is approved.

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