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Section 80EEA Overview

Section 80EE is an existing provision which allows deduction up to Rs. 50000 on interest, paid by first time home buyers on a loan sanctioned by financial institution between 1st April 2016 to 31st March 2017.

The government extended this benefit by introducing section 80EEA in financial year 2019-20. This benefit is extended by the government in order to give impetus to real estate sector. Under section 80EEA, you can avail deduction up to Rs. 150000 until you repay the housing loan.

Section 80EEA: Deduction for Interest Paid on Home Loan for Affordable Housing

Eligibility Criteria under Section 80EEA

Under section 80EEA, the deduction is only applicable to individual tax payers. In case you are AOP, HUF, Partnership firm, company or any other kind of tax payer, you are not entitled to claim benefit under this section.

Amount of deduction under Section 80EEA

Under section 80EEA, you can claim deduction on interest payments up to Rs.1.5 Lakhs. You can avail this deduction over and above the amount of Rs.2 Lakhs on interest payments of home loan under section 24 of the income tax act. Therefore, in totality individual tax payers can claim a total deduction of Rs.3.5 Lakh on interest of home loan after meeting all the conditions specified under section 80EEA.

Other conditions under Section 80EEA

In order to claim deduction under section 80EEA, you should not own any other house property on the loan sanction date. This condition is also applicable for Section 80EE.

Conditions for claiming the deduction under Section 80EEA

  1. This deduction is applicable only for individuals (Not for HUF, AOP etc.)
  2. This deduction can only be claimed when the house loan is taken from a financial institution or a housing finance company between 1st April 2019 to 31st March 2020 in order to buy residential house property.
  3. Stamp duty value of the house property should not exceed Rs.45 Lakh.
  4. Individual should not own any other house property on the loan sanction date i.e. first time buyer.
  5. When you claim your deduction under this section, it is not allowable in other section.
  6. An individual can claim deduction of Rs.1.5 Lakh over & above the amount of Rs.2 Lakh under section 24. Total deduction – 3.5 Lakh
  7. Carpet area of housing property should not exceed 60 square meter (645 square feet) in metropolitan cities (Delhi, Chennai, Mumbai, Hyderabad, Kolkata and Bengaluru)
  8. Carpet area of housing property should not exceed 90 square meter (968 square feet) in any other city or town
  9. In case two persons jointly own housing property and both are paying the loan installments, then both are eligible to claim the deduction.

Section 80EEA & Section 24

Under section 24 of the income tax act, house owners can claim a deduction of Rs.2 Lakh on interest payments of home loan, when the owner or his family resides in the house property. It can also be claimed if the house property is vacant.

In case, the tax payer rent out the property, the entire amount of home loan interest is allowed as deduction.

If an individual taxpayer satisfy all the conditions of section 24 & section 80EEA of the income tax act, he or she is entitled to claim firstly a limit of Rs.2 Lakh under section 24 i.e. Rs.2 Lakh. Then, after claiming the first limit, you can also claim the additional deduction of Rs.1.5 Lakh under section 80EEA. This deduction is allowed as an additional benefit above Rs.2 Lakh.

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