Section 80EE: The Ins and Outs of Purchasing Your First House

Buying your first home is a big step, and it also comes with certain tax benefits. Under Section 80EE of the Income Tax Act, 1961, first-time homebuyers can claim an extra tax deduction of up to ₹50,000 on home loan interest. This benefit is in addition to the ₹2 lakh limit under Section 24(b). However, it is only available for loans sanctioned between April 1, 2016 and March 31, 2017. For loans taken after this period, Section 80EEA can be applied instead. This page will serve as a reader’s guide to Section 80EE of the Income-tax Act, covering everything from who can claim it to how it works.

Purpose of Section 80EE: Section 80EE Income Tax Deduction on Home Loans

The interest component of a private house property loan obtained from any financial institution is eligible for income tax benefits under Section 80EE, interest on a loan taken for residential house property. This part allows you to claim a deduction of up to ₹50,000 per financial year. You can claim this deduction until the debt is completely paid off.

What is Section 80EE?

Section 80EE of the Income Tax Act, 1961, states that tax deductions can be claimed by first-time homebuyers on the interest paid on a home loan taken for a residential property. According to Section 80EE of the Income Tax Act, ₹50,000 is the maximum they can claim in tax deductions during the financial year. This benefit is in addition to the ₹2 lakh deduction available under Section 24(b).

One of the benefits is that you can continue to claim this deduction until you have fully repaid the loan. Section 80EE was introduced to make home ownership more affordable for first-time buyers by offering additional tax relief on home loan interest.

Section 80EE Conditions

In order to claim the tax deductions under section 80EE, one must make sure that the following terms and conditions are met.

• These tax deductions can only be claimed on the first house that is purchased by the taxpayer.
• The taxpayer must be an individual, not an HUF, AOP, or company.
• These deductions can only be claimed if the value of the house does not exceed ₹50,00,000.
• The deduction is not going to be available to claim if the home loan taken exceeds ₹35,00,000.
• This deduction is available to claim on the interest portion of the home loan
• It is necessary that the home loan be sanctioned by a recognized financial institution like a bank or a housing finance company, between April 1, 2016 and March 31, 2017.
• This deduction can only be used if the home loan is being used for residential properties, not commercial properties.

Additional tax benefits under Section 80EE

• Individuals are the only ones eligible for the deduction under this clause. This means that you cannot claim any advantage under sec 80ee of the income tax act if you are a HUF, AOP, corporation, or any other type of taxpayer.

• The deduction is limited to a maximum of ₹50,000. It exceeds the ₹2 lakh limit set forth in Section 24 of the Income Tax Act.
• The deduction can be claimed until the home loan is fully repaid, subject to eligibility.

• Other requirements: To be eligible for section 80ee of the income tax act, you must not own any other residential property on the date the loan is approved by a financial institution.

Eligibility Criteria for Claiming Deduction Under Section 80EE

The tax deduction criteria under Section 80EE eligibility include:

• The tax benefits of the act are only available for individuals and to Hindu Undivided Families, Association of Persons, companies, units and trusts, etc.
• This tax deduction is available to claim per person, not per property.
• This tax deduction can be claimed even on a property that the taxpayer is renting out.
• The property value must not exceed ₹50 lakh, and the home loan amount must not exceed ₹35 lakh.
• The loan must be sanctioned between April 1, 2016 and March 31, 2017, and obtained from a bank or a housing finance company.
• The deduction is allowed only on the interest component of the home loan
• If you take a joint home loan, each co-borrower can claim the deduction separately, provided both meet the eligibility conditions.

Section 80EE Deduction Eligibility Checklist

• First-time homebuyer.
• Individual taxpayer.
• Loan within ₹35 lakh.
• Property value within ₹50 lakh.
• Loan sanctioned during the specified period.
• Loan taken from a recognised financial institution.

What is the Deduction Limit Under Section 80EE? 

Under Section 80EE of the Income Tax Act, 1961, first-time homebuyers can claim a maximum deduction of ₹50,000 per financial year on the interest paid on a home loan. This Section 80EE deduction is over and above the ₹2 lakh limit under Section 24(b), meaning eligible taxpayers can claim a higher total deduction on home loan interest.

The benefit can be claimed every year until the home loan is fully repaid, provided all eligibility conditions are met.

Section 80EE only applies to loans sanctioned between April 1, 2016 and March 31, 2017, and is available only to individual taxpayers who do not own any other residential property at the time of loan sanction. For Affordable Housing loans meeting separate conditions, Section 80EEA offers a higher additional deduction of up to ₹1.5 lakh on home loan interest.

What is Section 24(b) in Home Loan Tax Deductions?

Before claiming benefits under Section 80EE, it is important to understand Section 24(b) of the Income Tax Act.

Section 24 of the Income Tax Act states that homeowners can claim a deduction of up to ₹2 lakhs or ₹1,50,000 on the interest paid on a home loan for a self-occupied property. For let-out properties, the entire interest paid is deductible, subject to set-off limits.

Section 80EE provides an additional deduction of up to ₹50,000, over and above the ₹2 lakh limit. This means eligible homebuyers can claim higher total deductions on Section 80EE housing loan interest.

According to Section 24, the taxpayer is offered a flat 30 per cent deduction on the net annual value of a property. This is ‘nil’ in the case of self-occupied properties as per the Income Tax Act, no matter the payment of municipal tax or not. 

To make it simpler, if a taxpayer purchased a property, by using his own resources itself, without the assistance of housing finance and is earning some amount of income by giving the property on rent, he could claim 30% of every 100% earned. However, if the same property is self-occupied, the owner cannot avail of any deductions under Section 24.

What is Section 80EEA?

Sec 80EEA of the Income Tax Act, 1961 provides an additional tax deduction on interest paid on home loans taken for affordable housing.

Under this section, eligible taxpayers can claim a deduction of up to ₹1.5 lakh per financial year on the interest component of a home loan. This benefit is in addition to the ₹2 lakh limit under Section 24(b).

Section 80EEA applies to home loans sanctioned between April 1, 2019 and March 31, 2022 and is available only to individual taxpayers who do not own any residential property at the time of loan sanction.

H3: Features of Section 80EEA of the Income Tax Act

• Additional deduction of up to ₹1.5 lakh per year on home loan interest.
• Available only to individual taxpayers.
• Applicable to affordable housing properties.
• Can be claimed over and above Section 24(b).
• Available only if the taxpayer is not claiming benefits under Section 80EE.
• Deduction applies only to the interest component of the loan.
• Can be claimed until the home loan is fully repaid, subject to conditions.

Conditions for Claiming the Deduction Under Section 80EEA of Income Tax Act

• The taxpayer must be an individual.
• The taxpayer should not own any residential property at the time of loan sanction.
• The home loan must be sanctioned between April 1, 2019 and March 31, 2022.
• The loan must be taken from a bank or housing finance company.
• The stamp duty value of the property must not exceed ₹45 lakh.
• The taxpayer must not claim a deduction under Section 80EE.
• The deduction is allowed only on the interest component of the home loan.
• The property must qualify as affordable housing.
• Carpet area conditions range from 60 sq. metres in metropolitan cities to 90 sq. metres in other cities and towns.

Eligibility Criteria for Claiming Under Section 80EEA

Introduced under the Housing for All initiative, the government provides an additional tax deduction on interest paid on home loans taken for affordable housing.

The criteria for section 80EEA are quite similar to that of 80EE but there are a few changes.

• It is necessary that the home loan be sanctioned by a recognised financial institution like a bank or a housing finance company.
• The stamp duty value of the house should not exceed rupees 45 lakhs.
• The taxpayer cannot be eligible if he/she is claiming a tax deduction under section 80EE.
• Carpet area should not exceed 60 square meters in metropolitan cities of Bengaluru, Chennai, Delhi National Capital Region (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad), Hyderabad, Kolkata and Mumbai (the whole of Mumbai Metropolitan Region)
• The carpet area of the house property should not exceed 90 square meters in any other cities or towns.

How Section 80EE and Section 24(b) Work Together?

Sections 24(b) and 80EE both provide tax deductions for home loan interest, but they serve different purposes.

Where Section 24(b) allows all eligible homeowners to claim a deduction of up to ₹2 lakh per financial year on interest paid for a self-occupied property, Section 80EE offers an additional deduction of up to ₹50,000 on home loan interest, but only for eligible first-time homebuyers. This benefit is over and above the limit under Section 24(b).

If you meet the conditions for both sections, you can claim deductions under both. However, the benefit under Section 80EE of the Income Tax Act can be claimed only after fully utilising the limit under Section 24(b).

Difference Between Section 80EE and Section 24(b)

Section 80EE and 80EEA Difference

Section 80EEA of the Income Tax Act was introduced in the Union Budget 2019 to extend tax benefits for affordable housing. While both Section 80EE and Section 80EEA provide deductions for home loan interest, they differ in eligibility, timelines, and deduction limits. The Section 80EE and 80EEA difference is as follows:

Claiming 80EE in Your ITR After Possession: Key Filing Rules First-Time Buyers Miss

Many first-time homebuyers assume they can start claiming deductions under Section 80EE of the Income Tax Act, 1961, immediately after taking a home loan. However, the timing of possession and how you file your Income Tax Return, especially after possession of the property, is important.

When Can You Start Claiming Section 80EE?

Only after you start paying interest on the loan

• For under-construction properties, interest paid before possession is treated as pre-construction interest.
• This pre-construction interest is not claimed immediately; it is allowed in 5 equal instalments after possession.

Key Filing Rules You Should Know

• Section 80EE deduction is linked to interest payment, not possession alone.
• You must first exhaust the ₹2 lakh limit under Section 24(b) before claiming under Section 80EE.
• A deduction can be claimed each year until the loan is repaid, subject to eligibility.
• Ensure your interest certificate from the lender clearly shows the breakup of interest.

Step-by-step Process to Claim Section 80EE in Your ITR

• Step 1: Obtain an interest certificate: Collect the annual interest certificate from your bank or housing finance company. This confirms the total interest paid during the financial year.
• Step 2: Verify eligibility limits: Ensure you meet all the conditions under Section 80EE, including first-time ownership, loan sanction period, and property value limits. Also, confirm that you have fully utilised the deductions under Section 24(b).
• Step 3: File ITR under the correct tax regime: Section 80EE can be claimed only under the old tax regime. If you opt for the new tax regime, this deduction will not be available. 
• Step 4: Report interest under ‘Income from House Property’: Enter the interest amount and claim up to ₹2 lakh under Section 24(b) for self-occupied property.
• Step 5: Claim deduction under Section 80EE: Go to the Chapter VI-A deductions section in your ITR form and enter the eligible amount up to ₹50,000 under Section 80EE.
• Step 6: Submit ITR: Verify all details carefully and submit your return. Ensure the figures match your interest certificate. 

What Happens After Your Home Loan Is Repaid? Ongoing Tax Implications

Your tax obligations do not end once your home loan is repaid. While you lose certain tax benefits on principal and interest, some tax implications continue to apply: 

• No deduction can be claimed under Section 24(b), Section 80EE, or Section 80EEA once the loan is fully repaid.
• The principal repayment deduction under Section 80C also ceases.
• If the property is let out, the rental income remains taxable under Income from House Property.
• A 30% standard deduction on rental income can still be claimed.
• For a self-occupied property, the Net Annual Value remains nil, so no income is taxed.
• If the property is sold within 5 years, previously claimed deductions under Section 80C can be reversed.
• Capital gains tax can still apply if the property is sold after repayment, depending on the holding period.

Easy Home Loan Approvals with NoBroker

Home loan applications and tax deductions, especially benefits under Section 80EE, can often feel complex for first-time homebuyers. With the right support, however, the process becomes much easier. From checking your home loan eligibility to comparing offers from leading lenders, platforms like NoBroker help make the entire process easy. Their legal assistance can guide you through documentation and help you correctly claim deductions under Section 80 EE of the Income Tax Act and other applicable provisions. With end-to-end legal support, NoBroker simplifies both home loan approvals and tax-saving opportunities for homebuyers in India.