Purchasing your first dream house via home loan comes with many benefits. You don’t have to spend a whole lot of amount in one go and at the same time you can also save ample amount money for later stages. Apart from this, you can also claim various tax exemptions under different sections of Income Tax act may be on principal amount or rate of interest.
However, deductions on interest rates can be claimed under two sections-Section 24 and Section 80EE. Both these sections offer different benefits. With this blog, lets us develop a brief understanding on the benefits of Section 80EE for First-time Homebuyers:
Section 80EE of IT Act
Under this section, a homebuyer can avail tax benefits of up to Rs 50,000 on the interest paid on Home loan. Till the time, you are paying EMIs of the home loan; you can claim deductions every year.
Section 80EE: Features
- Under this section, an individual can claim additional tax deduction up to Rs. 50,000. This is totally segregated from what is claimed under section 80 (C) and Section 24.
- The tax benefits can only be claimed by an individual home Buyer. So, if you have availed loan under HUF (Hindu undivided family) and AOP (association of persons) you cannot claim the exemptions.
- If the loan is taken jointly with the spouse, then the benefits can be claimed by both the borrower and the co-borrower. But remember, you can only avail the benefit once the possession process is completed.
- The additional benefits under section 80EE can only be claimed after the deduction on section 24 has been exhausted by the borrower.
(Note: The home loan must be sanctioned between 01.04.2016 to 31.03.2017.)
Section 80EE: Eligibility
- The individual must be a first time homebuyer and have taken home loan for the first time.
- The property price should be Rs 50 lakh or less than that.
- The home loan taken should be Rs 35 lakh or less than that.
- The loan taken must be from a nationalized bank or housing finance company.
- The individual must not own any other house at the time of loan sanction.
- You cannot avail tax benefit under this section on commercial properties.
Section 80EE: Claim Procedure
At the time of filing Income tax return, you can avail benefits under this section. The claimed amount can be calculated through following procedure:
- First, calculate the total amount on interest paid during a financial year on the home loan.
- After the total interest amount is determined, first claim deduction up to Rs 2,00,000 under Section 24 of Income Tax Act.
- Once the above amount is exhausted, the additional deductions up to Rs 50,000, can now be claimed under Section 80EE of Income Tax Act.