First-time homebuyers in India are frequently missing out on a significant tax break: a ₹50,000 additional deduction on home loan interest under Section 80EE of the Income Tax Act. This crucial benefit is often overlooked, with even banks and some financial advisors failing to highlight it.
This lesser-known provision can considerably reduce a buyer’s tax liability. While Section 24(b) already offers up to ₹2 lakh deduction on home loan interest, Section 80EE provides an extra ₹50,000, leading to substantial savings.
Who Qualifies for Section 80EE?
To be eligible for this deduction, first-time homebuyers must meet specific criteria:
- The home loan must have been sanctioned between April 1, 2016, and March 31, 2017.
- The property value should not exceed ₹50 lakh.
- The loan amount must be ₹35 lakh or less.
- The buyer must not have owned any other residential property at the time the loan was approved.
The impact of this oversight can be significant. As shared by CA Nitin Kaushik, one client who met all criteria had been unknowingly missing this deduction. After amending their Income Tax Return (ITR) to claim the ₹50,000 under 80EE, the client, being in the 30% tax bracket, instantly received ₹15,600 in tax savings. This highlights the urgent need for greater awareness and better communication from financial institutions and advisors.
Unlike some automatic deductions, Section 80EE must be manually claimed when filing income tax returns, increasing the risk of it being missed. The responsibility lies with taxpayers to be informed and proactive to secure these valuable savings, especially with rising EMIs and inflation impacting household budgets.
For those whose loans don’t fit Section 80EE, Section 80EEA offers an alternative. This provision applies to loans sanctioned from April 1, 2019, onwards, allowing deductions on properties valued up to ₹45 lakh. Despite these options, many first-time buyers remain unaware, leading to considerable financial losses over time.
Beyond these specific sections, homeowners can also leverage other deductions to strategically reduce their taxable income:
- Section 80C: Up to ₹1.5 lakh annually for principal repayments.
- Section 24(b): Up to ₹2 lakh on interest payments for self-occupied property (no limit for let-out property).
Tax advisors strongly recommend consulting with professionals to ensure all eligible deductions are claimed. “Don’t let tax savings go unclaimed just because no one told you,” advises Kaushik. Proactive financial planning and understanding these provisions are essential for maximizing savings and easing the financial burden of homeownership.