Section 80EE: Tax Benefits For 1st Time Buyer on Home Loan Interest Paid

Those using borrowed capital to purchase their home have several advantages including tax benefits. While deductions on the principal component of a home loan is offered under only Section 80C of the Income Tax Act, deductions on the interest component are offered under two sections — Section 24 and Section 80EE.

In this article, we detail the benefits under Section 80EE of the Income Tax Act.

What does Section 80EE deal with?

Section 80EE deals with deduction with respect to the interest on loan taken for residential property under which a first-time homebuyer can get up to Rs 50,000 tax deduction in a financial year. This deduction is also applicable on loans granted between April 2016 and March 2022.

These benefits can be leveraged only when the:

1. Property value does not exceed Rs 50 lakh.
2. Loan amount does not exceed Rs 35 lakh.
3. Loan in this case is taken from a financial institution. It means relief cannot be claimed if the loan is taken from friends and family members.

Scope of Section 80EE

• The benefits offered in the Section 80EE are over and above the ones granted under Section 80C and Section 24. However, the borrower must be mindful that they can only claim the benefits under Section 80EE after exhausting the waiver provided under Section 24. So, the Section 80EE would work well only for someone who is paying around Rs 2.5 lakh as interest on their home loan in a financial year for their first home.
• Only individuals can avail of the benefits offered under this Section. However, spouses owning the property jointly or having taken loans together can also separately claim deductions under Section 80EE in proportion to their share in the property.
• Those who are not living in their acquired home as yet can claim the relief while living at a rented place since the Section 80EE nowhere specifies that the property must be self-occupied.
• Residents as well as Non-Resident Indians (NRIs) can claim deductions under Section 80EE.