As he set out to file his income tax returns for the very first time, Rahul came across Section 80EE, something he had not heard of before. With a quick online search, he learnt that under this section, he could claim tax benefits on interest paid on a home loan. Bursting with questions, he approached his mother, Seema, a tax consultant, to find out more.
Deduction benefit for a first-time home buyer
Seema, who had purchased her first home several years ago, was happy to share her knowledge with her son- and even happier that he’d asked! She told him that Section 80EE allowed him, as a first-time home buyer, to claim deduction benefit on the interest paid on a home loan. This meant that if Rahul bought a house with a home loan, he could claim a tax deduction of up to Rs 50,000 on the interest that would be generated on the home loan. This would be over and above the benefits provided under other sections of the Income Tax Act.
Eligibility to claim benefits
Rahul learned that this tax deduction on home loan interest was only available for individuals, and could not be claimed as an Association of Persons or as a Hindu Undivided Family.
An individual would also be deemed ineligible if he or she formed a company and the house was purchased under the company’s name.
With his interest piqued, Rahul asked his mother for more information on this section.
Other conditions for claiming deductions under Section 80EE
· The value of the house must not be more than Rs 50 lakh
· The loan must not exceed Rs 35 lakh
· The loan must be sanctioned by a housing finance company or a financial institution
· As on the date the loan is sanctioned, the individual must not own any other property
· Most importantly, the loan should have been sanctioned between April 2016 and March 2017
From this, Rahul learnt that only those loans sanctioned between the financial year, April 1, 2016, to March 31, 2017, could avail this deduction.
Rahul wondered if the same eligibility criteria applied to both resident Indians and NRIs (Non-Residential Indians). So, he asked his mother if Jaya, one of her NRI friends who had availed a home loan in May 2016, would be eligible for the same.
Can NRIs claim deduction under Section 80EE?
To Rahul’s surprise, he learned that the deduction benefits of Section 80EE did not explicitly apply to only Resident Indians. Seema told Rahul that Jaya had taken a home loan from Tata Capital as they offer quick, hassle-free loans at an attractive interest rate of 9.25% with tenure up to 30 years.
Section 80EE and Section 24
Rahul wondered if any other sections provided tax benefits on property and if they could be claimed along with Section 80EE benefits.
Seema explained that Section 24 of the Income Tax Act was an umbrella term under which the Indian government offers tax benefits for house properties to compensate for soaring home loan EMIs. The deduction can go up to Rs 2 lakh, beyond which Section 80EE can be claimed for another Rs 50,000.
With his curiosity quelled, Rahul went back to filing his tax return forms, adequately equipped to understand the logistics of Section 80EE.
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