Section 80EE deals with tax deductions under the Income Tax Act, 1961. It allows first-time homebuyers to avail of tax benefits on interest paid on home loans. It came into effect in FY 2013-2014 and was applicable to FY 2014-2015. It was aimed at assisting resident homeowners’ avail of income tax benefits on the interest paid on their home loans and was limited to a maximum value of 1 lakh. This Section was later upgraded to include FY 2016-2017 and allowed an individual borrower to claim tax deductions of up to Rs.50,000 per year until the end of the tenure.

Eligibility

This tax deduction can only be claimed on properties bought individually or jointly with a family member. The tax benefit, however, does not apply to HUF (Hindu Unified Families), AOP (Association of Person), companies or trusts. To avail of this deduction, the borrower shouldn’t own any other residential property at the time of loan sanctioning.

Conditions

For Section 80EE to be applicable, the home loan should have been sanctioned between 1st April 2016 and 31st march 2017. The loan should have been sanctioned by a bank or an NBFC. Other conditions include that the value of the house should be up to a maximum of 50 lakhs or less; accordingly, the loan value paid against this property shouldn’t exceed 35 lakhs. As per this Section, this should be the taxpayer’s first house and he shouldn’t own any other house at the time of loan sanctioning. The person shouldn’t have taken the home loan to finance a house for commercial use either.

Maximum Deductions

To further boost the realty sector, the government has introduced a revised version of Section 80EE and this is known as 80EEA. This section extends the annual tax benefits on home loan interests paid to Rs. 1,50,000 for the affordable housing sector and is applicable until the end of the loan tenure. The effective period is FY 1st April to 31st March 2020. To be eligible, the borrower should be a first-time homebuyer and isn’t availing of Section 80EE.

Before availing of Section 80EE or 80EEA, the borrower can avail of deductibles under Section 24 to make maximal use of tax deductibles. If the borrower can fulfil the conditions of Section 24, he can claim tax deductions of up to Rs. 2 lakhs additional to the Rs. 1,50,000.

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