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Section 80EEA – Deduction for interest paid on home loan for affordable housing

Section 80EEA deduction


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.


Meaning of important terms under section 80EEA

What is the meaning of “ Financial Institution” used u/s 80EEA?

  • A banking company to which the Banking Regulation Act applies, or
  • Any bank or banking institution referred to in section 51 of that Act, or
  • A housing finance company

What is the meaning of “ Stamp Duty Value” used u/s 80EEA?

Value adopted or assessed or assessable by

  • any authority of the Central Government or
  • a State Government

for the purpose of payment of stamp duty in respect of the immovable property.

What is the meaning of “ carpet area” used u/s 80EEA?

  • Carpet area refers to the actual area that can be used.
  • it means the area on which ‘a carpet’ can be put. It does not include the area of walls and ducts.


Frequently Asked Questions

  1. What is the difference between Section 80EE and Section 80EEA?

    Section 80EE allowed a deduction of up to Rs 50,000 for interest paid by first-time home-buyers for loans sanctioned between 1 April 2016 and 31 March 2017. Section 80EEA extends the benefit for FY 2019-20 and allows a deduction of up to Rs 1,50,000 for interest paid on affordable housing loans.

  2. Is proof required for claiming Section 80EEA?

    Yes, you need to provide proof of interest paid on the housing loan to claim the deduction under Section 80EEA.

  3. Can I claim Section 80EEA in 2023?

    Yes, you can claim the deduction under Section 80EEA for the relevant financial years as long as you meet the eligibility criteria.

  4. How do I add Section 80EEA to my income tax return?

    To claim the deduction under Section 80EEA, ascertain the total interest portion during the year and claim a deduction of Rs. 2 lakh under Section 24(b).

    If the limit is exhausted, you can claim further deduction under Section 80EEA up to Rs. 1.5 lakh, subject to all other conditions for eligibility being satisfied

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