Everything You Need to Know About Section 80EEA

Sujan Afi S

Introduction

The government of India’s dream vision is that every Indian family have their own house within the year 2022. To fulfil the dream the government of India has taken various initiatives under which Section 80EEA holds an important place.

In this blog, we are going to discuss Section 80EEA which helps the first time home buyer or investor in claiming a deduction on home loan interest for affordable housing.

In India, there are mainly two income tax laws, i.e., Section 80EE and Section 80EEA under which you can apply for an additional deduction on home loan interest if you are a first time home buyer and looking for affordable housing.

What is Section 80EEA?

The Government of India introduced a new provision in the Income Tax Act, 1961 – Section 80EEA which is launched in budget 2019 under which Indian citizen who is first time home buyer and looking for affordable housing can save up to Rs 1.5 lakhs per year on the interest of a home loan. It covers an additional deduction on the payment of home loan interest under some specific conditions. Under Section 80EEA you can claim a deduction on the interest of a home loan when you buy or construct an affordable house. If you have claimed the deduction under Section 80EEA, then you will not able to subsequently claim for tax benefits on housing loans under other provisions of the Income Tax Act. Thus, you will not able to receive tax benefits under Section 80EE and Section 24(b) in conjunction with Section 80EEA. But the tax payers can claim both Section 80EEA (maximum Rs1,50,000 lakhs) and Section 24 (b) (maximum Rs 2,00,000 lakhs) at the same time! Thus, a total deduction of Rs 3,50,00 can be claimed! On the other hand, you are not eligible to claim a deduction under Section 80EEA and Section 80EE at the same time.

What is an Affordable Housing Property?

I have been talking about ‘affordable housing’ in the previous section. You must wonder that what exactly should be the meaning of the phrase in this particular sphere. Well, let me clarify that for you. The property value should be 45 lakhs or less for considering it as an affordable house. Besides the price of the carpet area should not exceed 60 sq. metre or 645 sq. feet in metropolitan cities and should not be above 90 sq. metre or 968 sq. feet in cities or towns other than metropolitan cities. Else the house will not be considered to be an affordable one. Thus, you might not get the benefit of Section 80EEA or the like. 

Eligibility for claiming under Section 80EEA

So, now that it is clear what affordable housing means, let us have a look at the eligibility criteria. Not everyone can be benefitted under Section 80EEA. Only individual tax payers are eligible for applying for a deduction under Section 80EEA. It is not available to HUFs, partnership firms, or corporates. No institution, Hindu Undivided Families, companies, etc. are considered to be eligible for applying for the deduction under Section 80EEA.

Amount of Deduction on home loan interest under Section 80EEA

An individual tax payer can claim up to Rs 1,50,000 per annum additional deduction on the interests on a home loan (affordable house) under Section 80EEA. This deduction is over and above the deduction under Section 24 (b) (maximum Rs 2,00,000 lakhs per annum).


Conditions when you can claim the deduction
There are some particular conditions when you can claim the deduction under Section 80EEA. Let us have a look at them.
You can only claim the deduction when you are applying for a loan of residential property. Further, you must be a first time home buyer, that is, you should not possess any other residential property. Again, the stamp duty of the property needs to be strictly within 45 lakhs. Thus, you can never claim the deduction on any commercial property (factories, offices, firms, etc.)You must take the loan from an authorised financial institution.The loan that you have applied for must have been sanctioned from 01.04.2019 to 31.03.2020. This deduction on the loan interest is available from 2019-20 onwards. You can’t claim it if your loan has already been sanctioned before the above-mentioned time.You cannot claim the deduction on a loan that you have taken for reconstruction, renovation, or repair of your existing property

Conclusion

Both the resident Indians and Non-Residents Indians (NRIs) can claim for the additional deduction on the interests of home loans for affordable housing. People living in a rented house is also eligible to claim the advantages under Section 80EEA. No matter if you purchase the house individually or jointly but you can claim for deduction under Section 80EEA. In a situation where you own the house jointly with your spouse and both are paying the loan there, you both are eligible for apply deduction under the Section 80EEA! 

Hey! I hope that I have been able to explain to you the benefits that you can have under Section 80EEA. Still, you might have some confusion. In that case, feel free to drop a mail at info@roodland.com. We have a devoted team who is ready to answer your queries at the earliest. Further, you can check our LinkedIn page for further updates. Do check the links below to read some more informative articles on real estate.

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