The Indian government provides a number of tax incentives for promoting home ownership, particularly through interest deductions on home loans. Two of the most widely discussed sections of the Income Tax Act for this reason are Section 24(b) and Section 80EE. Although both permit you to claim interest paid towards a home loan as deductions, they have different rules and are not interchangeable.
This blog post examines the principal variations between Sections 24 and 80EE, including conditions, limit on deductions, and the way both can benefit taxpayers.
Introduction
House buying is not simply an individual’s success; it’s a money decision with broad implications. And to help home buyers, particularly those who purchase houses on loan to fund their purchase, the Income Tax Act provides them with some relief. Among them, Section 24(b) and Section 80EE are the most relevant to reduce the tax burden on payables of interest.
Though both sections address deductions on home loan interest, their scope, eligibility criteria, limits, and applicability are different. One is more general and widely used, and the other is targeted at first-time home buyers. Knowing how each works and where they intersect is crucial for anyone intending to purchase or already repaying a home loan.
What is Section 24(b)?
Section 24(b) of the Income Tax Act provides a deduction on interest on a housing loan availed to buy, build, repair, or renovate a house property. It is applicable to both let-out and self-occupied properties, so it comes into play for a large number of taxpayers.
For self-residential properties, the maximum allowable deduction under Section 24(b) is Rs 2 lakh in a year. When the property is let out or is treated to be let out, all of the interest expenditure can be claimed as a deduction, subject, however, to a set-off limit of Rs 2 lakh for the computation of total income.
This deduction can be claimed even if it’s not a first-time home and there is no limit on the property value or loan. The only requirement is that the construction should be finished within five years of the close of the financial year in which the loan has been availed. Otherwise, the limit for deduction goes down to Rs 30,000.
What is Section 80EE?
Section 80EE is a special, extra deduction on interest on a home loan, brought specifically to help first-time home buyers. It lets eligible taxpayers claim up to Rs 50,000 annually over and above the Rs 2 lakh covered under Section 24(b).
But Section 80EE can be claimed only under certain circumstances-
- The loan should have been sanctioned between 1st April 2016 and 31st March 2017.
- The loan should not be more than Rs 35 lakh.
- The property value should not be more than Rs 50 lakh.
- The buyer should not have any other residential property on the date of the sanction of the loan.
These conditions render Section 80EE time-limited and restrictive in terms of eligibility. It’s applicable only to a certain category of taxpayers who purchased their first homes within that time frame. But for those who are eligible, it offers a useful additional deduction in addition to what Section 24(b) provides.
Section 24 is the first deduction availed by the majority of home loan borrowers and has been a traditional advantage under Indian taxation.
Key Differences Between Section 24 and Section 80EE
| Criteria | Section 24(b) | Section 80EE |
| Applicability | Available to all taxpayers with a home loan | Only for first-time home buyers |
| Deduction Limit | Up to Rs 2,00,000 per year (for self-occupied property) | Additional Rs 50,000 per year on top of Section 24(b) |
| Loan Sanction Period | No specific sanction date required | Loan must be sanctioned between 1st April 2016 and 31st March 2017 |
| Property Value Limit | No cap on property value | Property value must not exceed Rs 50 lakh |
| Loan Amount Limit | No cap on loan amount | The loan amount must not exceed Rs 35 lakh |
| Type of Property Allowed | Both self-occupied and let-out properties | Only for residential, typically self-occupied properties |
| Number of Properties Owned | Can be claimed even if the taxpayer owns multiple properties | The taxpayer must not own any other residential property at the time of the loan |
| Status of Provision | Ongoing provision under the Income Tax Act | Time-bound provision — not available for loans after March 2017 |
| Works With Other Deductions | Can be claimed along with 80C and 80EE if eligible | Can be claimed in addition to Section 24(b) |
Can You Claim Both Section 24 and Section 80EE?
Yes. If you meet the eligibility conditions for both, you can claim both the deductions in one financial year. First, you claim Rs 2 lakh under Section 24(b) and then another Rs 50,000 under Section 80EE.
This two-way advantage is especially worth it for the middle-income earners who availed their first home loan in FY 2016–17. But if your interest portion is less than Rs 2 lakh a year, then the extra Rs 50,000 relief under 80EE may not be maximally usable.
For new home loans, the same benefit is available under Section 80EEA, which gives the same deduction of Rs 1.5 lakh for affordable housing but once again, with its own conditions and timelines.
Conclusion
Although both Section 24(b) and Section 80EE offer tax relief on home loan interest, they are for different purposes and are offered to different groups of taxpayers. Section 24 is the general available deduction and is available to most home buyers. Section 80EE is a special privilege and is offered to first-time buyers within a limited time and subject to stringent conditions.
It makes sense to know the difference between these two parts in order to make wise decisions while planning your home purchase or preparing your ITR. If you qualify under both, be sure to claim them properly in order to gain maximum tax relief. As always, it is advisable to seek advice from a tax professional or a CA if you are not clear about your eligibility or how to organize your return.
Related Services
Income Tax Return Filing Online
References
The Income Tax Rules, 1962
The Income Tax Act of 1961 (Act No. 43 of 1961)
