Does Section 80ee Allow You to Claim Tax Deduction on Home Loan Interest?

Home loans have forever been some of the most popular loans. Borrowers availing of home loans get several unparalleled benefits. A home loan allows them to access low-interest funds for constructing or purchasing a house. However, there is another reason why people apply for home loans - tax benefits.

A home loan allows you to claim tax benefits under Sections 80C, 24, and 80EE. While you can get plenty of information about Sections 80C and 24 on the Internet, details about Section 80EE are rarely found. 

This article takes up the least explored Section of the Income Tax Act - Section 80EE and tells you how you can benefit by using it. Remember to use a home loan calculator to calculate the net savings, though.

Section 80EE - A Primer

Any first-time homebuyer can use the provisions of Section 80EE of the Income Tax Act 1961 to claim a tax deduction on the interest component of a home loan. You may use a home loan calculator to figure out the actual loan cost after all deductions and apply for the right loan amount.

Section 80EE allows a borrower to claim a tax deduction of up to INR 50,000 in a financial year. This benefit is in addition to the deductions you can already claim under Section 80C and 24. Section 80C allows you to save up to INR 2 lac on the principal component, and Section 24 will enable you to save up to INR 1.5 lac on the interest component. 

Intelligent borrowers use all types of tax deductions offered by the Indian laws to bring down the effective home loan interest rate.

Section 80EE was included in the Income Tax Act in the Financial Year 2013-14. Initially, the deduction allowed was INR 1 lac. However, when it was reintroduced in the Financial Year 2016-17, the deduction limit was changed to INR 50,000.

Terms Governing Section 80EE Tax Deductions

While it's true that a home loan calculator can help you figure out the actual savings, you must follow these terms to get tax benefits under Section 80EE:

• You must be a first-time homebuyer
• The net house value must be less than INR 50 lac
• The home loan amount must be less than INR 35 lac
• You can claim tax deductions solely on the interest component
• You can get tax deductions only when the home loan has already been sanctioned by a Government-recognised lending institution or housing finance company. PNB Housing Finance provides industry-best home loan interest rates for first-time homebuyers. 
• As of the date of loan sanctioning, you must not own another house.
• You cannot claim a tax deduction under Section 80EE if the loan is for commercial property purchase.  
• You can only claim deductions under Section 80EE if your loan was sanctioned between 01.04.16 and 31.03.17.
• Only individual taxpayers can claim tax deductions under this Section. If your loan is a joint loan where both partners contribute to the EMI amount, both can claim tax benefits, but individually.

How To Claim a Tax Deduction Under Section 80EE 

A home loan calculator gives you an exact estimate of the loan principal and interest. You may use it to find the total interest amount. When the net interest amount is less than INR 2 lac, you may claim tax deductions under Section 24. However, when the amount exceeds INR 2 lac, you may use the provisions of Section 80EE to claim an additional tax deduction of INR 50,000.

Conclusion

A home loan calculator lets you identify the loan costs and be better prepared to claim tax deductions. Choose the best lender to get the lowest home loan interest rates.