What is Section 80EE under the Income Tax Act? and Entity’s that are eligible to claim deduction under Section 80EE of the Income Tax Act

Introduction

Interest paid on loans taken by an assessee, who is an individual, and taken loan from any financial institution for acquiring a residential property, shall be subtracted from his total income in line with and subject to the rules of Section 80EE of the Income Tax Act. In this article information on “What is Section 80EE under the Income Tax Act?” and other information on Section 80EE is mentioned.

What is Section 80EE under the Income Tax Act?

First-time purchasers are eligible for the Income Tax Benefit on Interest on Home Loan under Section 80EE. According to this provision, you may deduct up to INR 50,000 each FY (Financial Year). Taxpayer can deduct this amount until the loan is completely repaid.

Entity’s that are eligible to claim deduction under Section 80EE of the Income Tax Act

• Individual taxpayer can claim benefits under this section.
• Only first-time home buyers, or those who do not own any residential real estate on the date the loan is approved, are eligible to claim tax benefits under Section 80EE. The borrower must have obtained the loan from a bank or financial institution in order to be eligible for this deduction.
• The tax credit under Section 80EE is available on a per-person basis, not a per-property basis.
• Under this clause, a maximum deduction of INR 50,000 may be requested.
• The section 24 limit of INR 2 lakh is exceeded by Section 80EE tax deduction.

Entity that cannot claim deduction under Section 80EE

• HUF (Hindu Undivided Family)
• Companies
• AOP (Association of Persons)
• Trust

Prerequisites for obtaining a deduction under Section 80EE

• The house should be worth no more than INR 50 lakh.
• The mortgage must be for little more than INR 35 lakh.
• A financial institution or a housing financing firm must approve the loan.
• You cannot own any other residential property as of the loan’s sanction date.

Essential points for Section 80EE under Income Tax Act

• Instead of being applied per property, Section 80EE is applied per person.
• Jointly purchased properties are eligible for deductions of up to INR 1 lakh for each owner.
• You are not required to live in the property you have purchased.
• Borrowers may deduct expenses under Sections 80EE, 80C, and 24 while residing in a rental flat.
• In addition to the INR 1.5 lakhs in deductions allowed for properties owned by the borrower, there are also 80EE deductions available.

FAQs on Section 80EE under Income Tax Act

1. My house loan was used to buy a property that is still being built. Can I make a tax benefit claim?

Tax deductions are not allowed until the construction is finished. When it is finished, you can claim the total interest that was paid for the time before the year you took possession. This can be claimed over five equal payments starting with the year that construction is finished.

2. Is it still possible to claim a deduction under Section 80EE if a second residential property is bought in the year after the first one?

The statute allows for the first-time acquisition of residential real estate to qualify for the Section 80EE deduction. On the day the financial institution approves their loan, they should not own any other homes. As a result, if a second home is bought later, the deduction allowed under Section 80EE can still be used for the first home.

3. What distinguishes the Income Tax Act’s Sections 80EE and 24(b) from one another?

For self-occupied property, a deduction of INR 2 lakh is permitted under Section 24, while for property that is rented out, the entire interest is deductible. However, Section 80EE only permits an additional deduction of INR 50,000 once the Section 24 limit has been reached.

4. What is the highest amount that can be deducted under Section 80EE?

The most that can be deducted under this clause in a FY (Financial Year) is INR 50,000. The amount can be claimed in addition to the Section 24 and Section 80C deductions, which are each worth INR 2,00,000 and INR 1,50,000.