Income tax deduction for first time home buyers

NEW DELHI: If you are a first time home buyer, you can claim income tax benefit under Section 80EE of Income Tax Act. You can claim an income tax deduction on home loan interest paid. But the amount allowed for deduction is up to maximum Rs 50,000 per financial year under this Section. The deductions can be claimed until you have fully repaid the home loan.


The deduction under Section 80EE is available only to individuals. Other tax payers such as HUF, AOP, Company or any others can't claim the benefit under this section.

The deduction under Section 80EE is over and above the Rs 2 lakhs limit under the Section 24 of the Income Tax Act.

The government has set several conditions that you must satisfy before you go on to claim the benefit under Section 80EE, for example:

* It should be the first house you have purchased

* The value of house should be Rs 50 lakh or less

* Loan taken for the house should be Rs 35 lakh or less

* Loan should be sanctioned by a Financial Institution or a Housing Finance Company

* As on the date of sanction of loan no other house should be owned by you

1. How to claim tax benefits on a home loan?For joint loans, both individuals can claim a deduction for home loan interest up to Rs 2 lacs each and principal repayment u/s 80C up to Rs 1.5 lakh each in their individual tax returns. Also, for claim deduction, it is mandatory that loan borrowers should also be co-owners of the property taken on loan.
2. Are home loans subjected to tax deductions?Yes, the principal amount of home loan is a chunk of Section 80C of the Income Tax Act according to which, the tax deduction is done on the amount paid as repayment of the principal component on the housing loan. You can claim an amount up to Rs 1.5 lacs as tax deductions under Section 80C.
3. How to claim home loan interest in ITR?As per Section 80EE, you can claim a deduction of up to Rs 50,000 in a financial year on the interest of the residential house property loan, availed from any financial institution.
4. Is it possible to avail of two home loans?Yes, you can do so. Banks offer a second home loan even though the second loan will not be more than 75% of the value of your second home and the approval is also tough in these cases.