Section 80EE of Income Tax Act

Section 80EE: A Quick Overview

What is section 80EE?

This Section of the Income Tax Act 1961 allows first-time homebuyers to claim a tax deduction for the interest they pay on home loans. The maximum deduction is Rs. 50,000 per year, in addition to Section 24 and Section 80C deductions, which are Rs. 2,00,000 and Rs. 1,50,000, respectively.

Introduced in FY 2013-14, This section initially offered a maximum deduction of Rs. 1,00,000 but was available for only two years (FY 2013-14 and FY 2014-15). It was reintroduced in FY 2016-17 with a reduced deduction limit of Rs. 50,000 for home loan interest.

Eligibility Criteria

To qualify for deductions, these conditions must be met:

  1. Individual taxpayers can claim benefits alone or jointly with their spouse if both repay the loan.
  2. Tax benefits are unavailable to entities like Associations of Persons (AOP), Hindu Undivided Families (HUF), Companies, Trusts, etc.
  3. Only first-time homebuyers are eligible, meaning the taxpayer owns no residential property when the loan is sanctioned.
  4. The loan must be obtained from a financial institution or housing finance company.
  5. The benefit is based on each person, not each property.
  6. The maximum deduction is Rs. 50,000, separate from the Rs. 2 lakh limit in Section 24(b).

Purpose of section 80ee

This Section was introduced to promote the purchase of affordable homes by first-time homebuyers in India, particularly benefiting migrant populations in major cities. It’s also a way to motivate builders to construct more affordable housing in India.

How to claim tax deduction under section 80EE?

A taxpayer can avail of Section 80EE when filing tax returns. Here’s how to determine the deductible amount:

  1. Calculate the total interest paid on a home loan during the financial year (FY).
  2. Claim a deduction of up to Rs. 2,00,000 under Section 24 based on the total interest paid.
  3. The remaining amount, up to Rs. 50,000, can be claimed under Section 80EE.

Please note:  After applying these deductions for tax benefits on a home loan, the remaining income is taxed according to the Income Tax Slab rates.

Difference between section 80ee and section 24

You can claim a deduction for home loan interest under Section 24, which also applies to HUF, with a limit of Rs. 2,00,000.

On the other hand, Section 80EE is specifically for first-time home buyers, while Section 24 applies to all property owners. However, you can only claim Section 80EE if you or your family live in the home.

Please note: If you meet the conditions for both Sections (Section 24 and Section 80EE), you can benefit from both. First, use the Section 24 limit (Rs. 2,00,000), and then claim the additional benefit under Section 80EE.

Is section 80ee applicable at construction of a house

Under this Section of the Income Tax Act, you can only get a deduction for the interest on a home loan if you have taken the loan to buy a house from a financial institution. It doesn’t apply if you are building a house.

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1. How much can you claim under Section 80EE?

Ans: You can claim a maximum deduction of Rs. 50,000 in a financial year. This is in addition to Section 24 (Rs. 2,00,000) and Section 80C (Rs. 1,50,000) deductions.

2. Who can claim 80EE deductions?

Ans: Any Indian citizen, whether an individual or not, can claim this deductions.

3. How does Section 24 work?

Ans: Section 24 of the Income-tax Act calculates property tax based on the property’s Net Annual Value, with further deductions applied.

4. Can I get a tax exemption for my second home?

Ans: Tax benefits under section 80EE are not applicable for a second house.