Section 80EEA -Deduction on Home Loan Interest

Roshni Bhagtani

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Section 80EEA - Home Loan Interest Deduction

This clause was added to provide a tax deduction to first-time home buyers. The principal repayment is exempt from taxation under Section 80C for five years if the property is not sold during that time. Please read the section on 80C for further information. While Section 80 EEA addresses deduction on interest paid on home loans.

Section 80EE allows for a deduction of up to Rs. 50,000 for interest paid for the first-time homebuyers with the requirement that the loan is sanctioned between April 1st, 2016, and March 31st, 2017. Accordingly, section 80 EEA has been inserted to allow a tax deduction from the financial year 2019-20.

What covers in section 80 EEA

Section 80 EEA is an additional deduction allowed on house loan interest payments up to a limit of Rs. 1,50,000 over and above to the deduction available under section 24. This deduction is available beginning with the fiscal year 2019-20.

Eligibility

Only Individuals are eligible for the deduction under this section. It applies to both residents and non-residents. This deduction is not available to anyone besides an individual taxpayer, therefore a HUF, AOP, partnership firm, or company cannot claim it.

A person is eligible with the condition that you should not own any other residential property on the date the loan is issued, according to sections 80EE and 80EEA.

Amount of Deduction

  • Under section 24 you can claim a maximum deduction of Rs. 2,00,000.

  • Section 80 EEA was introduced to provide for a deduction of Rs. 1,50,000 in addition to Section 24.

  • So you can claim a deduction under both sections by first exhausting the limit under section 24, which is Rs. 2,00,000, and then using the deduction under section 80 EEA.

  • In conclusion, a taxpayer can claim a deduction of a total of 3.5 Lakhs upon fulfilling the conditions under sections 24 and 80 EEA.

Applicability

If you have claimed deduction under section 80EE then you cannot claim deduction under section 80 EEA.

Conditions to fulfill for claiming deduction under section 80 EEA

  • The taxpayer must be a first-time homeowner, which means he or she should not own any other residential property as of the date of sanction of loan.
  • The stamp-duty value of a house should be less than 45 lakhs.
  • To purchase a residential house property, a housing loan must be obtained from a financial institution or a housing finance company.
  • These are the metropolitan cities as defined by Section 80 EEA - Bengaluru, Chennai, Hyderabad, Kolkata, Delhi, Faridabad, Ghaziabad, Greater Noida, Gurugram, Mumbai, and Noida.
  • In metropolitan cities, the carpet area of the dwelling property should not exceed 645 sq ft or 60 sq meters, whereas it should not exceed 968 sq ft or 90 meters in any other town or city.
  • This will apply to affordable real estate projects approved on or after September 1st, 2019.

Deduction if the property is not self-occupied

Because this section does not specify whether an individual must be a resident or a non-resident to claim a deduction, non-residents are also able to claim a deduction under section 80 EEA.

It also does not specify whether the house must be self-occupied, therefore those residing in a rented home can also claim a deduction under Section 80 EEA.

Property that is jointly owned

If a husband and wife jointly own a property and are both making payments, both of them are eligible to claim deductions under sections 24 and 80 EEA on their respective ITRs if the conditions specified in both sections are met. However, they can both claim a deduction of 1.5 lakh each.

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