Section 80EE vs. Section 80EEA: Home Loan Deductions Demystified
Updated: Jun 12
Under Sections 80EE and 80EEA of the Income Tax Act, first-time homeowners are allowed to deduct a specific amount of their expenses from their net taxable income. According to sections 80EE and 80EEA of the Income Tax Act, anyone buying a new property can deduct expenses from their net taxable income. Sections 80EE and 80EEA allow for deductions ranging from ₹50,000 to ₹1,50,000. The only component of a monthly home loan payment that qualifies for this deduction is the interest component. But it's important to keep in mind that you can only write off expenses under Sections 80EE or 80EEA, depending on when your house loan was authorized. In this article, we will discuss both these sections in detail and explain the differences between them.
Table of Contents
Section 80EE: A Detailed Overview
A tax deduction for house loan interest is available under Section 80EE of the Income Tax Act. First-time homebuyers who have taken out a house loan for a property up to Rs 50 lakhs and have a loan amount up to Rs 35 lakhs are eligible for tax incentives under this clause. A person can deduct up to Rs 50,000 in total during a financial year, per Section 80EE. The benefit is available until all unpaid balances on a house loan are settled.
Illustration
Let's take an example where Mr. X, a first-time house buyer, borrowed Rs 30 lakhs in May 2016 to buy a property valued at Rs 40 lakhs. Assume that he will pay Rs 2.5 lakhs in interest on his home loan for the fiscal year 2022–2023. In addition to the deduction of Rs 2 lakhs allowed under Section 24, Mr. X is eligible to claim a deduction of up to Rs 50,000 under Section 80EE since he satisfies all of the requirements of the section. His tax due will be lowered as a result of the Rs 2.5 lakh reduction in his taxable income.
Eligibility
A taxpayer must ensure the following to be qualified to claim 80EE deductions:
Under Section 80EE, only individual taxpayers may deduct expenses for properties acquired either separately or jointly. A person can claim this deduction on an individual basis as well as jointly with their spouse if they purchased the property and are making loan payments.
Hindu Unified Families (HUF), Association of Persons (AOP), corporations, trusts, etc. are not eligible for these tax benefits.
First-time home buyers are the only ones eligible to claim tax incentives under Section 80EE. The person must have gotten a loan from a financial institution to purchase their first residential property in order to be eligible for this deduction.
Rather than being applied to individual properties, Section 80EE is applicable to individuals.
It is not required for the taxpayer to live in the property for which they are claiming this deduction in order to be eligible for this benefit. Rent-paying borrowers are also eligible to deduct this amount.
Claiming Deduction under Section 80EE
When filing taxes, a taxpayer may claim a deduction under Section 80EE. The following steps must be taken in order to determine the maximum amount that can be deducted:
Determine how much interest is paid on the house loan overall in a given fiscal year.
Upon determining the entire amount of interest paid, you may deduct up to Rs. 2,00,000 (under Section 24 of the Income Tax Act, 1961).
The Income Tax Act, 1961's Section 80EE may be used to claim the remaining sum, up to Rs. 50,000.
Section 80EEA: A Detailed Overview
In the 2019 Union Budget, Section 80EEA was included to give first-time homebuyers greater tax breaks. An individual may deduct up to Rs 1.5 lakhs from their home loan interest when purchasing a residential property thanks to this provision. The benefit is offered in addition to the current Rs 2 lakh tax deduction allowed by Section 24 of the Income Tax Act.
Illustration
For instance, the total interest payable for the financial year would be Rs 4 lakhs if a first-time homeowner took out a home loan for Rs 50 lakhs at an interest rate of 8%. The Income Tax Act's Section 24 permits a deduction of Rs 2 lakh, and Section 80EEA adds another Rs 1.5 lakh, for a total deduction of Rs 3.5 lakh. As a result, there is a large decrease in taxable income and tax liabilities.
Eligibility
Section 80EEA permits the following assessees to claim a deduction:
Under Section 80EEA, only individual borrowers may deduct expenses on property acquired either singularly or jointly.
Associations of Persons (AOPs), Hindu Undivided Families (HUFs), trusts, and businesses are exempt from Section 80EEA.
As is the situation under Section 80EEA, the taxpayer does not need to live in the property to be eligible for a deduction.
Claiming Deduction under Section 80EEA
The terms and circumstances for claiming a deduction under Section 80EEA are as follows:
Section 80EEA allows deductions only to first-time homebuyers. This implies that on the day the loan is sanctioned, the assessee should not own any residential real estate.
Section 80EEA allows for a deduction of INR 1,50,000 from net taxable income.
The carpet space cannot be more than 60 square metres (645 square feet) if the property is situated in any of the following metro areas: Delhi NCR (which includes Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, and Faridabad), Mumbai, Hyderabad, Bangalore, Kolkata, Chennai, or Delhi.
The carpet area for houses located in any other town or city within the nation must be larger than 90 square metres (968 square feet).
The stamp duty of the property must be INR 40 Lakhs or less.
The housing loan must be obtained in the F.Y. 2019-2020 or F.Y. 2020-2021.
Section 80EE vs. Section 80EEA: Understanding the Differences
While they serve similar purposes, 80EE vs 80EEA are two different ideas. The following table highlights the primary distinctions between 80EEA and 80EE here:
Conclusion
There are important distinctions between Sections 80EE and 80EEA, even though they both offer tax advantages to homeowners who have secured a mortgage. It is essential to comprehend the distinction between 80EE and 80EEA in order to take advantage of these tax advantages. In comparison to 80EE, Section 80EEA has a somewhat lower property valuation threshold and a greater deduction limit. Homeowners can take advantage of government tax perks and reduce their tax bill by knowing the distinction between 80EE and 80EEA.
FAQ
Q1. Can I claim both 80EE and 80EEA?
No, taxpayers cannot simultaneously claim income tax deductions under Section 80EE and Section 80EEA.
Q2. How do I know if I qualify for 80EEA?
The home property's stamp duty value must be Rs 45 lakh or less to qualify for deduction under Section 80EEA. Under the current Section 80EE, the individual taxpayer should not be able to claim a deduction. It should be the taxpayer's first time purchasing a house. On the day the loan was approved, the taxpayer could not have any residential real estate.
Q3. What is Section 24 of the home loan tax benefit?
If the owner or his family resides in the house property, homeowners are eligible to deduct up to Rs. 2 lakhs (or Rs. 1,50,000 if you are filing returns for the previous financial year) from their home loan interest under Section 24 of the Income Tax Act. When the house is rented, the whole interest is waived as a deduction.
Q4. What is the difference between 80EE and section 24?
For self-occupied property, Section 24(b) allows a deduction of Rs 2 lakh, while for let-out property, the entire interest is deductible. But according to Section 80EE, you can only deduct an extra Rs 50,000 under Section 80EE after you've used up all of Section 24(b).
Q5. What is the difference between 80EE, 80EEA and 24b?
A maximum deduction of ₹50,000 and ₹1,50,000 can be claimed on the interest component of the house loan EMIs, under Sections 80EE and 80 EEA, respectively. This deduction exceeds the deduction allowed under Section 24(b) of the Income Tax Act on the interest amount.
Q6. Is 80EEA applicable for under construction property?
According to Section 80EEA of the IT Act of 1961, there is an under-construction property tax benefit. If the Rs. 1.5 Lakh allowed maximum under Section 80C has been reached, Section 80EEA of the Income Tax Act provides an additional under-construction property tax benefit of Rs. 1,50,000 each financial year on house loan interest rates.
Q7. Can I claim both section 24 and 80EEA?
You may claim the benefits under both Section 24 and Section 80EEA of the Income Tax Act if you are able to meet their requirements.
Q8. Is proof required for 80EEA?
You must provide an interest certificate with your income tax filing to the government in order to be eligible for the tax deduction on your home loan interest payment.
Q9. Which section offers higher tax benefits: 80EE or 80EEA?
Compare the deduction limits and conditions under Section 80EE and Section 80EEA to determine which provides greater tax benefits for home loan interest payments.
Q10. Are there any restrictions on the type of property eligible for tax benefits under Section 80EE and Section 80EEA?
Explore whether there are limitations on the type of residential properties for which individuals can claim tax benefits under Section 80EE and Section 80EEA.
Q11. Can non-resident Indians (NRIs) avail of tax benefits under Section 80EE and Section 80EEA?
Understand whether NRIs are eligible to claim deductions for home loan interest payments under Section 80EE and Section 80EEA, and any additional conditions they need to fulfill.
Q12. Do the deduction limits under Section 80EE and Section 80EEA vary based on the taxpayer's age or gender?
Investigate whether the deduction limits for home loan interest payments under Section 80EE and Section 80EEA are influenced by factors such as age or gender of the taxpayer.
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