Buying a home is a major financial commitment that has a long-lasting impact. As property prices rise, many individuals opt for home loans as a common method to fund their homes. Yet, the interest portion of their mortgage can present a considerable financial challenge, especially for first-time home buyers. To help ease this financial strain, the government has implemented various tax benefits and deductions to support those purchasing a home.
One such deduction is permitted under Section 80EE of the Income Tax Act 1961. Throughout this comprehensive guide, we will cover all the essential aspects of Section 80EE. So, let’s delve into this valuable tax advantage to learn more about it!
What is Section 80EE in the Income Tax Act?
Section 80EE is part of the Income Tax Act of 1961, allowing individuals to subtract the interest they pay on their home loans. This provision offers an extra tax advantage for people purchasing their first homes and taking out home loans for a self-occupied house.
Individuals can lower their overall tax obligations by utilising the deduction offered by Section 80EE. This makes the repayment of home loans more manageable for them. This tax perk serves as an extra motivation for individuals to become homeowners, thereby promoting home ownership.
People who are buying their first homes qualify for the Income Tax Benefit on Interest on Home Loans under Section 80EE. This rule allows them to deduct up to INR 50,000 every Financial Year. This deduction can be claimed until the loan is fully paid off. If you want to know your eligibility for your first home loan, you can easily check it with a home loan eligibility checker.
Individuals Eligible for Deduction under Section 80EE
● The deduction provided by Section 80EE is exclusively for individuals purchasing their first homes and acquiring a home loan to buy a house they will live in.
● The loan amount should not exceed Rs. 35 lakhs.
● The value of the house property should not go beyond Rs. 50 lakhs.
● The highest deduction that can be claimed through Section 80EE is Rs. 50,000.
It’s crucial to understand that the deduction granted under Section 80EE is solely applicable to the interest payments on the home loan and cannot be applied to the principal repayment of the loan.
Furthermore, this deduction is separate from the Rs. 2 lakhs deduction available under Section 24 of the Income Tax Act for the interest paid on the home loan.
How to Apply for Deduction under Section 80EE?
If you’re aiming to secure the deduction under Section 80EE, follow these steps in an organised manner to maximise your benefits:
- Calculate Interest Paid: Begin by computing the total interest paid on your home loan during the fiscal year. You can obtain this information from your lender or review your bank statements.
- Complete Tax Return Form: Once you have the interest amount figured out, complete your tax return form. Enter the interest paid amount under Section 80EE. You’ll find a specific section in the form dedicated to claiming deductions for home loan interest.
- Provide Supporting Documents: Gather the necessary documents to support your claim after filling out the tax return form. These typically include a copy of the home loan sanction letter, an interest certificate from your lender, and your PAN Card. These documents substantiate your claim and ensure you qualify for the deduction under Section 80EE.
- Maintain Proper Records: Maintaining comprehensive records of all home loan-related transactions and interest payments is essential. These records serve as evidence in case your tax filing is reviewed, safeguarding against potential discrepancies.
Section 80EE in the Income Tax Act offers an important tax advantage tailored for those purchasing their first homes. Individuals can effectively reduce their taxable income and alleviate their overall tax load by claiming a deduction on the interest paid for their home loan.
Furthermore, this deduction encourages people to become homeowners, contributing positively to personal finances and the national economy. This creates a mutually beneficial scenario for individuals and the country. So if you want to benefit under this section, check if you are eligible for a home loan or not with a check home loan eligibility today!