- Date : 31/08/2021
- Read: 3 mins
Maximise your tax benefits on home loan interest payments up to to Rs 3.5 lakh a year by ensuring eligibility for Section 80EEA.
Section 80EEA was introduced by Finance Minister Nirmala Sitharaman in the 2019 Union Budget. It was aimed to aid the achievement of the ‘Housing for all by 2022’ target, taken up under the Pradhan Mantri Awas Yojana. This section provides tax relief to taxpayers on the purchase of affordable houses.
Section 80EEA complements the deduction under 80EE provided in earlier assessment years. Section 80EE provided similar deductions for customers in the low-cost housing sector. Section 80EE of the Income Tax Act was amended several times and provided benefits for financial years 2013-14, 2014-15 and 2016-17.
Key features and applicability conditions of section 80EEA
Section 80EEA deduction is available only to individuals. Non-resident Indians have not been excluded from eligibility, but partnerships, companies, Hindu Undivided Families, and any other entities are not eligible to claim deduction under this section.
This section allows deduction of up to Rs 1.5 lakh on interest payments against the home loan borrowed money.
Deduction under section 80EEA is available over and above the Section 24 deductions. Section 24 allows deduction on interests paid on a home loan up to Rs 2 lakh, thus opening up Rs 3.5 lakh in total deduction against housing loan interest payments.
The home loan must be availed of from a financial institution or a housing finance company. Financial institutions here have the same meaning as described in Section 49 and 51 of the Banking Regulation Act, 1949.
- Eligible house properties must have a stamp duty value of Rs 45 lakhs or less.
- A taxpayer eligible and availing of deduction under 80EE of Income Tax Act cannot claim a deduction under this section.
- The deduction is permissible in the assessment year 2020-21 and beyond only.
- The benefits under section 80EEA cannot be claimed under any other section in the same or any other assessment years.
- Only first-time home buyers with no existing residential house on the date of home loan sanction is eligible.
The maximum carpet area of the house property eligible for deduction under this section is 645 sq ft in metros and 968 sq ft in other locations. Metropolitan cities for this purpose are Delhi, Noida, Greater Noida, Ghaziabad, Faridabad, Gurgaon, Chennai, Mumbai, Kolkata, Hyderabad, and Bengaluru.
Related: Home loan vs HRA: Which offers higher tax savings?
In the absence of any mention of conditions, it can be assumed that home loan borrowers living in rented accommodation as well as occupying residential property can claim the deduction. Besides, individuals applying for the home loan jointly can also claim the deduction in their respective IT returns. Read how loan interest will soon be synced with external benchmarks.
What about Section 24?
If an individual taxpayer satisfies the conditions of eligibility under Sections 24 as well as 80EEA, deduction can be claimed under both. Section 24 allows a deduction of Rs 2 lakh, and this amount needs to be exhausted first. Only if a taxpayer has home loan interest paid over Rs 2 lakh can they claim tax benefits under Section 80EEA.
This tax break is expected to offer an incentive to first-time home buyers on a limited budget, and also boost the real estate segment engaged in low-cost housing projects. Buying a home in your hometown or in a big city: What makes financial sense?
Section 80EEA was introduced by Finance Minister Nirmala Sitharaman in the 2019 Union Budget. It was aimed to aid the achievement of the ‘Housing for all by 2022’ target, taken up under the Pradhan Mantri Awas Yojana. This section provides tax relief to taxpayers on the purchase of affordable houses.
Section 80EEA complements the deduction under 80EE provided in earlier assessment years. Section 80EE provided similar deductions for customers in the low-cost housing sector. Section 80EE of the Income Tax Act was amended several times and provided benefits for financial years 2013-14, 2014-15 and 2016-17.
Key features and applicability conditions of section 80EEA
Section 80EEA deduction is available only to individuals. Non-resident Indians have not been excluded from eligibility, but partnerships, companies, Hindu Undivided Families, and any other entities are not eligible to claim deduction under this section.
This section allows deduction of up to Rs 1.5 lakh on interest payments against the home loan borrowed money.
Deduction under section 80EEA is available over and above the Section 24 deductions. Section 24 allows deduction on interests paid on a home loan up to Rs 2 lakh, thus opening up Rs 3.5 lakh in total deduction against housing loan interest payments.
The home loan must be availed of from a financial institution or a housing finance company. Financial institutions here have the same meaning as described in Section 49 and 51 of the Banking Regulation Act, 1949.
- Eligible house properties must have a stamp duty value of Rs 45 lakhs or less.
- A taxpayer eligible and availing of deduction under 80EE of Income Tax Act cannot claim a deduction under this section.
- The deduction is permissible in the assessment year 2020-21 and beyond only.
- The benefits under section 80EEA cannot be claimed under any other section in the same or any other assessment years.
- Only first-time home buyers with no existing residential house on the date of home loan sanction is eligible.
The maximum carpet area of the house property eligible for deduction under this section is 645 sq ft in metros and 968 sq ft in other locations. Metropolitan cities for this purpose are Delhi, Noida, Greater Noida, Ghaziabad, Faridabad, Gurgaon, Chennai, Mumbai, Kolkata, Hyderabad, and Bengaluru.
Related: Home loan vs HRA: Which offers higher tax savings?
In the absence of any mention of conditions, it can be assumed that home loan borrowers living in rented accommodation as well as occupying residential property can claim the deduction. Besides, individuals applying for the home loan jointly can also claim the deduction in their respective IT returns. Read how loan interest will soon be synced with external benchmarks.
What about Section 24?
If an individual taxpayer satisfies the conditions of eligibility under Sections 24 as well as 80EEA, deduction can be claimed under both. Section 24 allows a deduction of Rs 2 lakh, and this amount needs to be exhausted first. Only if a taxpayer has home loan interest paid over Rs 2 lakh can they claim tax benefits under Section 80EEA.
This tax break is expected to offer an incentive to first-time home buyers on a limited budget, and also boost the real estate segment engaged in low-cost housing projects. Buying a home in your hometown or in a big city: What makes financial sense?
