Section 80EE – Tax Benefits on Home Loan Interest
Tax benefits on Home Loan interest are covered under Section 80EE of the Income Tax Act.These deductions are in addition to Section 24 for interest on Housing Loan.
Section 80EE was introduced for first time buyers during the Finance Budget, 2013. The deduction under Section 80EE is allowed for interest on home Loan availed from a financial institution for acquisition of Residential House Property.
The deduction for principal repayment of Home Loan is covered under Section 80C of the Income Tax Act.
Conditions to Claim Deduction under Section 80EE
An individual has to satisfy the following conditions in order to claim deduction under Section 80EE.
- The date of sanction of home loan should be on or after April 1, 2013, but before March 31, 2014.
- The amount of home loan sanctioned should be less than or equal to Rs. 25,00,000.
- The value of residential house property for which the home loan was availed should be less than or equal to Rs. 40,00,000.
- The individual should not be the owner of any other house property on the sanctioning date of loan. In other words, an individual should be a first time buyer of a house.
- The loan should be taken only for purchase of House Property. There is no deduction allowed if loan is availed for constructing or renovatingthe House Property.
- The loan should either be availed from a recognized Bank or a recognized Housing Finance Company.
Amount of Deduction under Section 80EE of Income Tax Act
The Tax benefits for home loan interest under section 80EE are only available for the financial years 2013-14 and 2014-2015. Most importantly, the total deduction allowed under Section 80EE is Rs. 1,00,000 for both years cumulatively.
Example
If Karthik has paid interest of Rs. 60,000 in financial year 2013-14 and Rs. 90,000 in financial year 2014-15, then Karthik is eligible to claim Rs. 60,000 in financial year 2013-14.Karthik has exhausted his eligible limit under Section 80EE to the tune of Rs. 60,000 from the overall limit of Rs. 1,00,000. So, Karthik can claim the balance eligible amount under the Section 80EE in future years which is Rs. 40,000 (Rs. 1,00,000 – Rs. 60,000).
In the next financial year, Karthik has paid Rs. 90,000 as interest but the balance eligible deduction under Section 80EE is Rs. 40,000. Therefore, in financial year 2014-15, Karthik is eligible only to claim Rs. 40,000 as deduction.
Hence, Karthik has claimed Rs. 1,00,000 as deduction under Section 80EE in Financial Year 2013-14 and 2014-15 which is the maximum limit allowed under Section 80EE.
Are Tax Benefits on Home Loan Interest under Section 80EE available if the Property is under Construction?
The money making aspect of Section 80EE is that if the construction of the property is not completed, it does not block the tax payers to claim tax benefits. This feature is unavailable while claiming deduction under Section 24. Therefore, an individual can claim deduction under Section 80EE even if the property is not constructed, provided that the Home Loan is availed only for purchase of property but not for construction.
Consider the following to claim deduction under section 80EE in various scenarios and cases:
| Scenario |
Case 1 |
Case 2 |
Case 3 |
Case 4 |
Case 5 |
| Status of Property |
Construction Completed |
Construction Completed |
Construction Completed |
Under- Construction |
Under- Construction |
| Housing loan Interest for Financial Year 2013-14 |
Rs. 60,000 |
Rs. 1,80,000 |
Rs. 2,80,000 |
Rs. 1,20,000 |
Rs. 70,000 |
| Deduction u/s 24 |
Rs. 60,000 |
Rs. 1,50,000 |
Rs. 1,50,000 |
Nil |
Nil |
| Deduction u/s 80EE |
Zero |
Rs. 30,000 |
Rs. 1,00,000 |
Rs. 1,00,000 |
Rs. 70,000 |
Case 1
The property is fully constructed and therefore, an individual can claim tax benefit under Section 24 and under Section 80EE. So, an individual should claim tax benefit under Section 24 and if there is surplus, remaining can be claimed under Section 80EE. Herein 60,000 is the housing loan interest. Hence, full amount Rs. 60,000 has been claimed under Section 24 and nothing can be claimed under Section 80EE.
Case 2
The property is constructed, hence an individual can claim tax benefits u/s 24.Therefore, an individual is allowed to avail Rs. 1,50,000 under Section 24 ( maximum limit in case the property is self-occupied) and the balance of Rs. 30,000 under Section 80EE.
Case 3
An individual is eligible to claim Rs. 1,50,000 under Section 24 (maximum limit provided in case the property is self-occupied) and Rs. 1,00,000 under Section 80EE (maximum limit provided under Section 80EE). Because, an individual has exhausted the full limit allowed according to the income tax rules, the individual will not be entitled for any further tax benefits for interest on home loan.
Case 4
The property is not constructed and therefore, the tax benefits under Section 24 are not available. But, the tax payer can benefit according to Section 80EE upto a maximum of Rs. 1,00,000.
Case 5
The property is not constructed and therefore, the tax benefits under Section 24 are not available. But, the tax payer can benefit according to Section 80EE upto a maximum of Rs. 70,000.
Use our Section 80EE Deduction Calculator to know your deductions on interest on housing loan under Section 80EE.
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