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Section 80EE Deduction


Section 80EE Deduction

Section 80EE is a facility available in the Income Tax Act which provides relief for taxpayers who have obtained a home loan. The purpose of the section is to allow taxpayers to claim a deduction for payment of interest on home loans. The deduction is available for individuals and Hindu Undivided Families (HUFs). The section was first introduced in the Union Budget for Financial Year 2013-14 as a means to help first-time home-buyers through tax reliefs. 

The amount paid as repayment of the principal amount of home loan by an individual or HUF is already allowed as tax deduction under Section 80C of the Income Tax Act. The Government wished to introduce an additional provision in the Act which would also ensure the availability of deductions for interest payments on housing loans. Hence, Section 80EE was introduced in the Act. At the time of introduction, the amount of tax benefit available was restricted to fifty thousand rupees. However, the Government has proposed to enhance the facility during the subsequent assessment years. Taxpayers may note that the benefit under this section will be available exclusively if the assessee does not possess any other residential house property on the date of sanction of the loan. 

A person can claim this deduction while filing the income tax return form by specifying the amount of interest paid in the appropriate place. The required documents are the document from the lender specifying the interest and the principal amount paid. In addition, the taxpayer should produce a document from the lender concerning the statement of interest paid and principal amount on home loan as well as the amount paid to date.

Eligibility Criteria for Claiming Deduction

A deduction under Section 80EE can be claimed assessees who meet the prescribed conditions for eligibility. A tax deduction of fifty thousand rupees can be claimed for interest paid on a home loan. The deduction under Section 80EE is over and above the tax deduction of one lakh and fifty thousand rupees under Section 80C. However, not all taxpayers can claim a deduction under Section 80EE. To be eligible to claim deduction under Section 80EE, the taxpayer must satisfy the specified eligibility conditions. The specified conditions are the following:

  1. The taxpayer should be an individual assessee. However, the assessee may be a resident or non-resident.
  2. The deduction under this section is exclusively for individuals. Hindu Undivided Families (HUFs) or charitable trusts cannot make a claim under this section.
  3. The assessee has taken a loan for the purpose of purchasing or constructing a residential house property.
  4. The residential house property can be purchased by the assessee in the taxpayer’s own name or jointly.
  5. The loan should have been taken from a bank or housing finance company. The bank may be a nationalized bank or a bank that belongs to the private sector.
  6. The amount of funds borrowed should not exceed thirty-five lakh rupees.
  7. The value of the residential house property purchased should not exceed fifty lakh rupees.
  8. The assessee should not own any residential house property on the date on which the sanction of the loan was approved.
  9. The benefit conferred by the section applies from the financial year 2016-17 onwards.
  10. The deduction can be availed on home loans sanctioned between 1st April 2016 and 31st March 2017. However, the deadline has since been extended up to 31st March 2020.
  11. The tax benefit here can be claimed only till the time the repayment of the loan continues.
  12. Deductions are applicable only for home-loans paid for the first house property.
  13. The property in question may be either self-occupied, vacant, rented or deemed to be let-out.
  14. If the taxpayer claims a deduction under this section, then the person will not be eligible to claim any deduction under Section 24 again for the same amount of interest.
  15. Section 80EE is applicable on a per-person basis instead of a per property basis. So, suppose a person has purchased a property jointly with a spouse and they both are paying the installments of the loan, then both can individually make a claim under this section.
  16. It is not necessary to reside in the property for which one wants to claim this deduction. So, borrowers staying in rented accommodations can also claim this deduction.

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