Home loans and income tax benefits often go hand in hand. In fact, income tax benefits form one of the main reasons why availing a home loan works out effective for an individual.
There are many benefits that an individual can use for his benefits. The most commonly known benefits being
- Deduction of the principal amount repaid on a home loan in a year under section 80C
- Consideration of interest paid on a home loan as a loss and thus allowing for a deduction under section 24. This deduction is available for both self-occupied and non-self-occupied property (given on rent).
However, there is another benefit available to home loan borrowers under section 80EE of the Income Tax Act, which is relatively unknown. We bring you more information on how you could benefit from using this section in saving more tax.
As with Section 24, which provides benefits for the deduction for payment of interest on your home loan, Section 80EE also provides a similar kind of benefit to home loan borrowers.
This section allows for an additional deduction of Rs 50,000 towards the payment of interest of a home loan to an individual only. This benefit does not apply to Hindu Undivided Family, Association of Persons or any company.
This deduction of Rs 50,000 is over and above the deduction of Rs 200,000 available under Section 24.
As we have mentioned earlier, this deduction is available only for individuals. However, there are some other conditions to be met for availing this deduction. These include:
- You should not own any other house in your name as on the date of availing the loan
- The value of the property for which the loan is availed should not be more than Rs 50 Lakh
- The home loan availed does not exceed Rs 35 Lakh
- The loan has to be availed from a bank or a housing finance company
Initially, this benefit was announced in FY 2013-14, and a maximum of Rs 100,000 spread over two subsequent financial years was allowed. However, subsequently, this was extended to every year until the loan would be repaid.
In case of joint ownership of a property
The benefits under Section 80EE can be claimed even in case of joint ownership of property provided both the owners are also repaying the loan. So, with the inclusion of benefit under Section 80EE, the total amount of benefit for payment of interest by an individual can go up to Rs 2,50,000.
The benefit under Section 80EE can be utilised for a self-occupied property or a property that is rented or deemed to be rented out. Besides, this deduction is also available for NRIs.