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


Section 80EEA - Deduction for interest on home loan for affordable housing

The Government of India extended income tax benefits for home loan borrowers and first-time homebuyers through its flagship scheme ‘Housing for All’. As a result, a new section ‘80EE’ was added to the Income Tax Act in the F.Y. 2013-2014. In 2019, it was replaced by Section 80EEA.


This article delves into the intricacies of Section 80EEA of the Income Tax Act, 1961.

 

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Section 80EEA


Section 80EEA of the Income Tax Act, 1961, came into effect from April 1, 2020. It allows a deduction for interest on a loan taken for specific house property. The maximum limit for 80EEA exemption is INR 1,50,000 for a particular financial year. The deduction is allowed beginning from the date of sanction of loan till all the subsequent assessment years till the final repayment is made.


Homebuyers can claim an additional deduction of INR 1,50,000 over and above the normal deduction of INR 2,00,000 allowed under Section 24 of the Act. That means, an assessee can claim a total deduction of INR 3,50,000 in a particular financial year by combining the benefits of both the sections.


Terms for claiming Deduction under Section 80EEA


Following are the terms and conditions for claiming deduction under Section 80EEA:

  • Only first-time homebuyers can claim deduction under Section 80EEA. That means the assessee should not possess any residential house property on the date of sanction of loan.

  • A deduction of INR 1,50,000 can be claimed from the net taxable income  under Section 80EEA.

  • If the property is located in any of the following metro cities: Mumbai, Hyderabad, Bangalore, Kolkata, Chennai, or Delhi NCR (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, and Faridabad), the carpet area must not exceed 60 square meters (645 square feet).

  • For properties in any other town or city in the country, the carpet area cannot exceed 90 square meters (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.


Eligibility for claiming Deduction under Section 80EEA


Following assessees are allowed to claim deduction under Section 80EEA:

  • Only individual borrowers are eligible to claim deduction under Section 80EEA for property purchased either singly or jointly.

  • Section 80EEA does not apply to Association of Persons (AOPs), Hindu Undivided Families (HUFs), trusts, or companies.

  • The taxpayer does not need to reside in the property, to be eligible for claiming deduction under Section 80EEA, as is the case with Section 80EEA.


Difference between Section 80EE and Section 80EEA

The following are the points of distinction between Section 80EE and Section 80EEA:


Difference between Section 80EE and Section 80EEA - Taxbuddy