Section 80EE of the Income Tax Act allows individual taxpayers, who are first-time homebuyers, to claim a deduction of up to ₹50,000 on home loan interest. To be eligible, the loan must have been sanctioned between April 1, 2016, and March 31, 2017, for a property value of ₹50 lakh or less, with a loan amount not exceeding ₹35 lakh.
Section 80EE of the Indian Income Tax law allows first-time home buyers to get tax deductions on the interest they need to pay on a Home Loan. You can claim a deduction of up to ₹50,000 per financial year as per this section. You can continue to claim this deduction until you have fully repaid the loan.
To claim deductions under income tax section 80EE, individuals must meet specific conditions:
Section 80EE only applies to home loans sanctioned in the fiscal years 2013-2014, 2014-2015 and 2016-2017. Section 80EEA is applicable to home loans sanctioned during the fiscal years 2020-21 and 2021-22 only. The property value eligible for a deduction is up to ₹50 lakhs.
Eligibility Criteria
It is possible to claim Home Loan tax deductions under both Section 80C and 80EE of the Income Tax Act, 1961.
Once the complete interest component paid is determined, claim deduction up to Rs. 2,00,000 (under Section 24(b) of the Income Tax Act, 1961). The surplus amount, up to Rs. 50,000, can be claimed under Section 80EE of the Income Tax Act, 1961.
No, mortgage interest isn't always 100% deductible; it's subject to limits and conditions, primarily that the loan must be for buying, building, or improving your main or second home, and you must itemize deductions, with current limits at $750,000 of debt ($375k if married filing separately) for loans after December 15, 2017, while older loans have a $1 million limit, and you can only deduct the interest portion, not principal.
Documents Required for Claiming Section 80EE Deduction
Home mortgage deduction limit
The mortgage interest deduction limit is $750,000, or $375,000 if you're married filing separately. This means you can deduct mortgage interest on the first $750,000 or $375,000 of debt, respectively. As such, many homeowners are able to deduct 100% of their mortgage interest.
Tax benefit on home loan interest rate
Section 24 of the Income Tax Act allows deduction on interest paid for self-occupied property up to Rs. 2 lakh per financial year. This home loan exemption applies even to a second home that is vacant or used by family members.
Mortgage Interest Deductions
Your mortgage lender will provide you with an IRS Form 1098 at the end of each year that itemizes how much you paid in interest on your loan. You can deduct that amount from your taxable income in many cases.
After your tax bill is calculated a tax credit worth 20% of your mortgage interest payments is deducted from your final tax bill. If you have unused finance costs in a particular tax year it should be possible to carry this forward. You should seek advice from a professional financial adviser about the process.
Common Mistakes to Watch Out For
Typically, the only closing costs that are tax-deductible are payments toward mortgage interest, buying points, or property taxes. Other closing costs are not, such as: Abstract fees. Legal fees (including fees for the title search and preparation of the sales contract and deed)
Just log on to Personal Banking section of the Internet Banking site with your credentials and select the 'Home Loan Int. Cert (Prov)' link under 'Enquiries' tab. Then select the account for which you require a Home Loan Interest Certificate. The certificate can be viewed online, printed or downloaded in pdf.
No matter when the indebtedness was incurred, you can no longer deduct the interest from a loan secured by your home to the extent the loan proceeds weren't used to buy, build, or substantially improve your home.
The mortgage interest deduction (MID) is worth it only if your total itemized deductions (including mortgage interest, property taxes, and charitable giving) exceed the much higher standard deduction, which is rare for many due to tax law changes. It reduces taxable income, saving money for those who itemize, especially those with large mortgages and high interest rates early in their loan, but it requires extra paperwork (Form 1098) and effort.
Maximum Deduction: The Section 80EEA deduction eligibility is limited to a maximum amount of Rs. 1.5 lakh per financial year. Affordable Housing Property: The deduction is applicable to home loans taken for the purchase of affordable housing properties.
Hence, an individual who does not meet the criteria of Section 80EE shall now be eligible to claim deduction under Section 80EEA of up to Rs. 150,000 in addition to deduction under section 24(b). This deduction is available from Assessment Year 2020-21.
Common Mistakes While Claiming Section 24B
Filing a claim on loans from unapproved sources can lead to disallowance during assessment and may attract notices from the Income Tax Department. Another common error occurs when reporting interest without the proper certificates from banks or lenders.
No, the new tax regime does not provide exemptions for housing loan interest or principal repayments. Taxpayers opting for the new regime cannot claim these deductions, which are available under the old tax regime. How can I save taxes after taking a home loan?