Section 80EEA of the Indian Income Tax Act provides a significant tax deduction for individuals who take out home loans to purchase or construct affordable housing. This deduction, which can go up to ₹1.5 lakh per financial year, is a boon for first-time homebuyers, offering additional benefits beyond what is available under Sections 80C and 24. Here’s a detailed look at the regulations, conditions, and benefits associated with Section 80EEA.
Section 80EEA allows individuals to claim a deduction for interest paid on home loans taken for purchasing or constructing a residential property. The key highlights of this section include:
Section 80EEA of the Income Tax Act provides an additional deduction on interest paid on home loans for purchasing affordable housing. This benefit is specifically designed to encourage first-time homebuyers and promote housing for all. Here’s a detailed explanation of the eligibility criteria:
Section 80EEA offers a maximum deduction of ₹1,50,000 on interest paid on loans taken for affordable housing.
This deduction is over and above the ₹2,00,000 limit under Section 24(b) for interest on housing loans.
First-Time Buyer: The individual should not own any residential property at the time of sanctioning the loan.
Loan Sanction Date: The home loan must be sanctioned between April 1, 2019, and March 31, 2022.
Loan Purpose: The loan should be availed solely for purchasing residential property, not for renovation or reconstruction.
Stamp Duty Value: The stamp duty value of the property should not exceed ₹45,00,000.
Carpet Area: For metro cities, the carpet area must not exceed 60 square meters (645 square feet), and for other locations, it must not exceed 90 square meters (968 square feet).
The home loan must be borrowed from:
If you purchase a house worth ₹40,00,000 with a sanctioned home loan of ₹30,00,000 on May 15, 2020, and the annual interest paid is ₹2,50,000:
Section 80EEA offers significant tax savings for first-time homebuyers, aligning with the government’s vision of affordable housing for all.
You may also want to know What is a Debit Note, Credit Note and Revised Invoice?
Section 80EEA provides tax benefits for individuals purchasing affordable housing. However, to claim this deduction, taxpayers must meet specific conditions. Below is a detailed explanation of these requirements:
A deduction under Section 80EEA applies to the interest paid on home loans for the purchase of affordable residential property. The maximum deduction limit is ₹1,50,000 per financial year.
Sanction Period: The lender must have sanctioned the loan between April 1, 2019, and March 31, 2022.
Purpose: The loan must be taken specifically for the purchase of residential property. Loans for reconstruction, renovation, or commercial property do not qualify.
Lender Type: The loan must be obtained from:
Stamp Duty Value: The stamp duty value of the property should not exceed ₹45,00,000.
Property Use: You must use the property for residential purposes and not rent it out or use it for commercial activities.
Carpet Area:
First-Time Homebuyer: The individual should not own any other residential property when the loan is sanctioned.
Exclusivity of Section 80EEA: Taxpayers cannot claim deductions under both Section 80EE (another section for first-time homebuyers) and Section 80EEA simultaneously.
If the loan is taken jointly, each borrower can claim the deduction individually, provided they meet the eligibility criteria. The total interest claimed, however, cannot exceed the actual amount paid.
The deduction is available only to individuals. Hindu Undivided Families (HUFs), companies, and other entities are not eligible to claim benefits under this section.
To claim the deduction:
If you purchase a house with a stamp duty value of ₹40,00,000 and take a home loan of ₹35,00,000 sanctioned on June 1, 2020, paying ₹1,80,000 in interest:
By adhering to these conditions, taxpayers can leverage the benefits of Section 80EEA, reducing their tax liability while promoting affordable housing ownership.
You may also want to know Section 17(5) of CGST Act
You can also claim tax deductions for stamp duty and registration fees under Section 80C, within the overall limit of ₹1.5 lakhs, which applies to principal payments. However, this benefit can only be availed in the year in which the expenses are incurred.
The Income Tax Act allows deductions for both pre-construction and post-construction period interest.
Section 24B of the Income Tax Act allows individuals to claim a deduction of up to ₹2,00,000 per financial year for interest paid on home loans. This deduction applies to self-occupied residences if the house’s construction or acquisition is completed within 5 years.
If you meet the criteria under both Section 24 and Section 80EEA, you can claim deductions under both sections, maximizing your tax benefits.
If multiple borrowers take a home loan jointly, each borrower can claim a deduction for home loan interest under Section 80EEA, up to ₹2,00,000 under Section 24(b), and for principal repayment up to ₹1,50,000 under Section 80C. To claim these deductions, both borrowers must be co-owners of the property and contribute to the EMI payments.
If an individual takes out a loan for a second house, they can still avail the same benefits under Sections 24B and 80C, subject to the respective limits and regulations.
Section 80EEA of income tax offers a valuable opportunity for first-time homebuyers to benefit from additional tax deductions on home loan interest, making homeownership more accessible. By combining this with deductions under Sections 24B and 80C, taxpayers can significantly reduce their taxable income, fostering a conducive environment for investment in affordable housing.
Only first-time homebuyers who meet the conditions, including the loan being sanctioned between April 1, 2019, and March 31, 2020, are eligible.
Yes, you can claim deductions under both sections, provided you meet the eligibility criteria for each.
The maximum deduction allowed under Section 80EEA is ₹1,50,000 per financial year.
No, the deduction is only available for new properties, not resale or pre-owned properties.
No, there is no income ceiling for claiming the deduction under this section.
Get the link to download the App
