So, you are all set to invest in the house of your dreams. Among the many things you will have to consider, there is one that takes the top priority – especially if you are a first-time homeowner. You are entitled to certain benefits under the tax regime. A little research and a little thought into it can help maximize benefits.
What is Section 80EE of the IT Act?
Section 80EE deals with tax deductions under the Income Tax Act, 1961. Section 80EE that came into effect in FY 2013-2014 and applied to FY 2014-2015 allows first-time homebuyers to avail of tax benefits on interest paid on home loans. Aimed at assisting resident homeowners’ avail of income tax benefits on the interest paid on their home loans and was limited to a maximum value of 1 lakh. This Section was later upgraded to include FY 2016-2017 and allowed an individual borrower to claim tax deductions of up to Rs.50,000 per year until the end of the tenure. This implies that the deduction is granted for the loans made between April 2016 and March 2017.
Are you eligible?
There are certain conditions applicable to the homebuyer to enjoy the deductions. The deduction can be claimed by individual taxpayers on residential properties that are purchased either individually or jointly. If you take a joint home loan, with your spouse, to purchase the property and the installments are paid by both of you; then both parties can individually claim deductions under this act. Tax benefits under this section are not applicable for units such as Hindu Undivided Families or HUF, Association of Persons or AOP, trusts and companies, and so on. You have to be a first time home buyer who has taken a loan from a recognized financial institution to benefit from deductions under Income Tax Section 80EE. The deduction applies on per person basis as opposed to a per property basis. The benefit can be claimed irrespective of the fact that it is self-occupied by the taxpayer or rented out to someone else.
What is the scope of Section 80EE?
The benefits offered in Section 80EE are over and above the ones that are granted in Section 80C and Section 24. However, the borrower should note that they can only enjoy the benefits under Section 80EE after exhausting the waiver provided under Section 24. Section 80EE will only work for someone who is paying around Rs 2.25 lacs as interest on their home loan in a financial year for the first time.
If the property has not been handed over to the homeowner, then they can claim the deduction while living in the rented place since the Section 80EE does not specify that the property must be self- occupied. The deduction under this section can be claimed by both the residents and the non-residents of the country.
What is Section 80EEA
The union budget 2019 has introduced a new section 80EEA to extend the tax benefits of the interest deduction up to Rs 1,50,000 for housing loan taken for affordable housing during the period 1 April 2019 to 31 March 2020. The individual taxpayer should be a first-home buyer and should not be entitled to deduction under section 80EE.
The entire process can get intimidating and confusing if you are a first time home buyer. At Fortius Infra, we can introduce you to a professional consultant who can help guide you. They may charge a nominal fee for their services, but it will also ensure that the entire process will run smoothly.