Section 80EEA Deduction for interest on home loan
Under the objective “Housing for all”, the government has now
extended the interest deduction allowed for low-cost housing loans taken
during the period between 1 April 2019 and 31 March 2020.
Accordingly, a new Section 80EEA has been inserted to allow an
interest deduction from AY 2020-21 (FY 2019-20). The existing provisions
of Section 80EE allow a deduction up to Rs 50,000 for interest paid by
first-time homebuyers for loans sanctioned from a financial institution
between 1 April 2016 and 31 March 2017.
With a view to further the benefit and give impetus to the real
estate sector, the government has extended the benefit for FY
2019-20. This deduction can be claimed until you have repaid the housing
loan.
Budget 2021 update: The tax holiday for affordable housing projects has been extended until 31 March 2022.Features of Section 80EEA
Eligibility criteria
The deduction under this section is available only to individuals, and this deduction is not available to any other taxpayer. Thus, if you are a
HUF, AOP, Partnership firm, company, or any different type of taxpayer,
you cannot claim any benefit under this section.
Amount of deduction
A deduction for interest payments up to Rs 1,50,000 is available
under Section 80EEA. This deduction is over and above Rs 2 lakh for interest payments available under Section 24 of the Income
Tax Act.
Therefore, taxpayers can claim a total deduction of Rs 3.5L for
interest on home loans if they meet the conditions of section 80EEA.
Other conditions
Similar to Section 80EE, to claim deduction under Section
80EEA, you should not own any other house property on the date of the
sanction of a loan.
Conditions for claiming the deduction
- Housing loan must be taken from a financial institution or a housing finance company for buying a residential house property.
- Stamp duty value of the house property should be Rs 45 lakhs or less.
- The individual taxpayer should not be eligible to claim deduction under the existing Section 80EE.
- The taxpayer should be a first-time home buyer. The taxpayer should not own any residential house property as on the date of sanction of the loan.
Conditions with respect to the carpet area of the house property. These conditions have been specified in the memorandum to the finance bill, but not mentioned in section 80EEA:
- Carpet area of the house property should not exceed 60 square meter ( 645 sq ft) in metropolitan cities of Bengaluru, Chennai, Delhi National Capital Region (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad), Hyderabad, Kolkata and Mumbai (whole of Mumbai Metropolitan Region)
- Carpet area should not exceed 90 square meter (968 sq ft) in any other cities or towns.
- Further, this definition will be effective for affordable real estate projects approved on or after 1 September 2019
Section 80EEA has been introduced to further extend the benefits allowed under Section 80EE for low-cost housing. Earlier, Section 80EE had been amended from time to time to allow a deduction for interest paid on housing loan for the FY 2013-14, FY 2014-15, and FY 2016-17.
The section does not specify if you need to be a Resident to be able to
claim this benefit. Therefore, it can be concluded that both Resident
and Non-Resident Indians can claim this deduction.
The section also does not specify if the residential house should be
self-occupied to claim the deduction. So, borrowers living in rented
houses can also claim this deduction. Moreover, the deduction can only
be claimed by individuals for the house purchases jointly or singly. If a
person jointly owns the house with a spouse and they both are paying
the instalments of the loan, then both of them can claim this deduction.
However, they must meet all the conditions laid down.
Section 80EEA and Section 24
Under Section 24, homeowners can claim a deduction for interest
payments up to Rs 2 lakh on their home loan, if the owner or his family
resides in the house property.
The deduction of up to Rs 2 Lakh applies even when the house is vacant.
If you have rented out the property, the entire home loan interest is
allowed as a deduction.
If you are able to satisfy the conditions of both Section 24 and
Section 80EEA of the Income Tax Act, you can claim the benefits under
both the sections.
First, exhaust your deductible limit under Section 24, which is Rs 2
lakh. Then, go on to claim the additional benefits under Section 80EEA.
Therefore, this deduction is in addition to the Rs 2 lakh limit allowed
under Section 24.
For more information on this, visit TAXAJ
Posted by Aashima
Team TaxaJ
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