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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Table of content

Section 80EEA

Terms for claiming Deduction under Section 80EEA

Eligibility for claiming Deduction under Section 80EEA

Difference between Section 80EE and Section 80EEA

Most Asked Questions

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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:

Frequently Asked Questions

Q1. Can an assessee claim deduction under Section 80EEA every year?

Yes. An assessee can claim deduction under Section 80EEA every year till the time of final repayment of loan is made.

Q2. Can joint owners be eligible for deduction under Section 80EEA?

Yes. Joint owners are eligible for deduction under Section 80EEA. The property should be registered under names of the joint owners, and both are the co-borrowers of the loan, then each can claim INR 1,50,000 as a deduction under Section 80EEA.

Q3. Can an assessee claim deduction under both Section 80EE and Section 80EEA towards the interest payment of home loan?

No. A deduction under one of the two sections can be claimed by the assessee at a time. Therefore, an assessee cannot claim deduction under both the sections, viz, Section 80EE  and Section 80EEA towards the interest payment of home loan simultaneously. 

Q4. Does Section 80EEA allows the deduction towards the payment of principal amount of home loan?

No. Section 80EEA allows the deduction of interest on the home loan obtained for certain specific categories. Therefore, it does not allow deduction towards the payment of principal amount of home loan.

Q5. Can a deduction under Section 24 and Section 80EEA will claimed simultaneously?

Yes. Subject to the satisfaction of conditions specified under each section, an assessee can claim deduction under Section 24 and Section 80EEA simultaneously.

Q6. Can a deduction under Section 80EEA be claimed by AOPs, BOIs, HUFs, partnership firms, trusts, or companies?

No. Deduction under Section 80EEA can be claimed only by the individual assessees. Hence, AOps, BOIs, HUFs, partnership firms, trusts or companies are kept outside the purview of the said section.

Q7. Who is considered a first-time homebuyer under Section 80EEA?

A first-time homebuyer is someone who does not already own a house at the time of loan application for the purchase of a house. A working adult, even if single, is considered as a separate family member for tax purposes and, as such, a first-time home buyer, even if his parents own a house already.

Q8. Is there any specific requirement on the source of home loan to be obtained for claiming deduction under Section 80EEA?

To avail the deduction under Section 80EEA, the buyer must obtain the home loan from a financial institution, like banks or housing finance companies rather than from family members, friends or relatives.

Q9. Can the interest on loan used to reconstruct the entire property be claimed as a deduction under Section 80EEA?

No. The loan must be borrowed for buying the property and not reconstruction, repair, or maintenance of the same.

Q10. Can a deduction under Section 80EEA be claimed for the purchase of land or plot?

The Section 80EEA deduction can only be claimed for the purchase of residential dwellings, such as flats or apartments. Therefore, this section does not apply to the purchase of plot or land.