Introduction

Section 80EEA of the Income Tax Act was introduced with a significant vision to promote “Affordable Housing.” This initiative aimed to make home ownership more accessible and affordable for first-time homebuyers in India. Let’s delve into the details:

• The primary goal was to further extend the benefits allowed under Section 80EE for low-cost housing.
• Previously, Section 80EE provided a deduction of up to ₹50,000 for interest paid by first-time homebuyers for loans sanctioned between April 1, 2016, and March 31, 2017.
• To enhance the benefits and give impetus to the real estate sector, the government introduced Section 80EEA for FY 2019-20 and subsequent years.

 

Objective of Section 80EEA

• Section 80EEA of the Income Tax Act provides an additional deduction for interest paid on home loans specifically for first-time homebuyers of affordable housing
• The primary objective of Section 80EEA is to promote affordable housing and encourage first-time homebuyers to fulfill their dream of owning a home.
• It extends the benefits allowed under Section 80EE for low-cost housing.

 

Eligibility Criteria of Section 80EEA

• • The deduction under Section 80EEA is available only to individuals. Other taxpayers such as HUFs, AOPs, partnership firms, and companies cannot claim this benefit.
  • To avail of the deduction, the taxpayer must opt for the old tax regime.
  • First-Time Homebuyer: To qualify for the deduction, you must be a first-time homebuyer. This means that you are purchasing a residential property for the first time.
  • To claim this deduction, you should not own any other house property on the date of loan sanction.
  • The loan has been sanctioned between 01-04-2019 to 31-03-2022.
  • The stamp duty value of the property you are buying should not exceed ₹45 lakhs.
  • If the property’s stamp duty value is higher, you won’t be eligible for this deduction.
  • Not Claiming Section 80EE: You cannot claim benefits under Section 80EEA if you have already claimed deductions under Section 80EE.
  • Loan Source:You must have taken a home loan from a housing finance company or a recognized institution.

 

Deduction limits of Section 80EEA

• • Under Section 80EEA, you can claim a deduction of up to ₹1,50,000 per financial year towards the interest component of the housing loan repayment.
  • It allows for an interest deduction from AY 2020-21 (FY 2019-20) onwards.
  • This deduction is in addition to the benefits available under other sections:
    • Section 24: Allows a deduction of up to ₹2 lakh per year towards the interest component of the housing loan repayment.
    • Section 80C: Provides a deduction of up to ₹1.5 lakh per year towards the principal component of the housing loan repayment.

 

Deduction Calculation of Section 80EEA

• Let’s consider an example:
  • Mr. Manohar took out a home loan in FY 2019-20 for a house with a stamp duty value of Rs. 40 lakh.
  • He paid Rs. 4,00,000 in interest for the year.
  • Mr. Manohar did not own any other residential property on the date the loan was issued.
• In this case:
  • Mr. Manohar can claim a Rs. 200,000 deduction for home loan interest under Section 24.
  • Additionally, because the house’s stamp value is less than Rs. 45 lakh, he is eligible for a Rs. 1,50,000 deduction under Section 80EEA.
  • Therefore, Mr. Manohar is eligible for a total deduction of Rs. 3,50,000 under Sections 80EEA and 24

 

Difference between section 80EE and 80EEA

1. Section 80EE:

   • Eligibility:
     • Available only to first-time homebuyers who are individuals.
     • The property’s value cannot exceed ₹50 lakhs.
     • The maximum loan amount eligible for deduction is ₹35 lakhs.
     • Loan must be sanctioned between 01-April-2016 to 31-March-2017
   • Deduction:
     • You can claim a maximum deduction of ₹50,000 per fiscal year.
     • This deduction is applicable only to the interest portion of the loan EMIs.
     • The benefit continues until the loan is fully repaid.

2. Section 80EEA:

   • Eligibility:
     • Available to first-time homebuyers in India.
     • The property’s stamp duty value must not exceed ₹45 lakhs.
     • The loan has been sanctioned between 01-04-2019 to 31-03-2022.
     • For metro areas, the property’s carpet area cannot exceed 60 square meters (645 square ft).
     • For other towns and cities, the carpet area cannot exceed 90 square meters (968 square ft).
   • Deduction:
     • You can claim an additional tax deduction of up to ₹1.5 lakhs under Section 80EEA.
     • Similar to Section 80EE, this deduction is applicable only to the interest portion of the loan EMIs.

 

Joint Owners and Deductions under section 80EEA

1. Joint Owners and Deductions:
   • When multiple individuals jointly own a property and take a home loan, they can indeed claim deductions separately.
   • Here’s how it works:
     • Each joint owner can claim a deduction of up to Rs. 1,50,000 per year on the interest paid towards the home loan.
     • The total deduction for all joint owners combined cannot exceed the actual interest paid during the financial year.
     • Therefore, if there are two joint owners, each can claim up to Rs. 1,50,000 individually, subject to the actual interest amount paid.
2. Example Scenario:
   • Let’s consider an example:
     • Mr. A and Ms. B jointly own a house and have taken a home loan.
     • The total interest paid during the year is Rs. 300,000.
     • Mr. A can claim a deduction of Rs. 1,50,000, and Ms. B can also claim a deduction of Rs. 1,50,000.
     • The total deduction claimed by both joint owners would be Rs. 3,00,000 (Rs. 1,50,000 each), which is within the actual interest paid.
3. Important Points:
   • Joint owners must ensure that the loan is in their joint names to claim the deduction individually.
   • The property should meet the criteria for affordable housing (stamp duty value up to Rs. 45 lakh).
   • The deduction is available only if the joint owners are first-time home buyers.

 

Can I avail deductions under sections 24 and 80EEA at the same time?

Certainly! As a first-time homebuyer, you can indeed avail deductions under both Section 24 and Section 80EEA if you meet the eligibility criteria. Let’s break it down:

1. Section 24 Deduction:
   • Under Section 24 of the Income Tax Act, you can claim a deduction on the interest payable on a home loan for a self-occupied property.
   • The maximum deduction allowed is ₹2 lakh per assessment year.
   • This deduction is available for interest components of the home loan.
2. Section 80EEA Deduction:
   • Section 80EEA provides an additional benefit specifically for first-time homebuyers.
   • You can claim a deduction of up to ₹1.5 lakh on the interest payable on a home loan taken for the purchase or construction of a residential house property.
   • This deduction is available over and above the existing deduction under Section 24.
   • The loan must have been sanctioned between 1st April 2019 and 31st March 2022.
   • Other conditions, such as loan amount, ownership of other properties, etc., also apply.

Here’s how you can maximize your benefits:

1. First, utilize the Section 24 deduction up to ₹2 lakh.
2. Then, claim the additional benefits provided by Section 80EEA for the remaining interest amount.

 

Tax Benefits on Home Loan (FY 2023-24)

Income Tax Act allows home loan borrowers to save on their taxes through key sections:

1. Deduction of up to Rs. 1.5 lakh on the principal repayment under Section 80C.
2. Deduction of up to Rs. 2 lakh on the interest payment under Section 24(b).
3. Deduction of up to Rs. 1.5 lakh on the interest payment under Section 80EEA.

 

 

Frequently Asked Questions