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Section 80EEA of Income Tax Act

The Finance Bill of 2019, has proposed a new deduction under Section 80EEA as per this rule, the interest paid on housing loan which is taken between April 1, 2019 – March 31, 2020, is eligible for deduction starting from assessment year fiscal 2020 – 2021.

The main objective for providing this deduction is to provide a helping hand to the home buyers to have low-cost funds at their disposal as per the ‘Housing for all’ objective of the Government of India.

The existing provisions of Section 80EE will allow a deduction of up to Rs 50,000 for the interest paid for first time home buyers after securing a loan from a financial institution between April 1, 2016, and March 31, 2017. The government of India to help and boost the real estate sector has decided to extend the benefit for fiscal 2019 – 2020. The deduction can be claimed by the loan borrowers until they repay the housing loan.

Features of Section 80EEA

Eligible Deduction Amount

Individuals who are paying housing loan can claim for deduction on interest payment of up to Rs 1,50,000 per annum under Section 80EEA. This deduction is over and above the deduction of Rs 2,00,000 per annum for interest amount payments which is available under Section 24 of the Income Tax Act. Individuals are eligible to claim a total deduction of Rs 3,50,000 per annum for interest on the home loan if they meet the prerequisites of Section 80EEA of the Income Tax Act.

Eligibility Criteria

Deduction under Section 80EEA is applicable only to individuals. Other including Hindu Undivided Family, firms, partnerships, company, the association of persons cannot claim this benefit under this section in the Income Tax Act. Apart from this individual who is claiming deduction under Section 80EEA should not be owing to any other house property on the date of sanction of the loan amount.

Conditions for Claiming Deduction under Section 80EEA

  • Individuals should haven taken the housing loan from a financial institution or a housing finance company for buying the residential house property.
  • The individual taxpayer should not be eligible to claim deduction under the existing Section 80EE of the Income Tax Act.
  • Stamp Duty value of the purchased house property should be Rs 45 lakh or less.
  • The individual should be a first time home buyer and should not own any other residential house property as on the date of sanction of the loan.
  • The maximum amount of deduction permitted under the act is Rs 1,50,000 for the assessment year 2020 – 2021 and subsequent assessment years. 

Carpet Area of House Property

The Finance Bill passed in the Union Budget of 2019, notes the following points concerning the carpet area and it includes

  • The carpet area of the purchased house property should not exceed 600 square meters (645 square feet) in case of metropolitan cities of Delhi (including Noida, Delhi, Greater Noida, Gurgaon, Ghaziabad, Faridabad), Chennai, Mumbai, Kolkata, Hyderabad, Bengaluru.
  • In other cities or towns, the carpet area should not exceed 90 square meters (968 square feet).
    The conditions are effective only for the affordable real estate projects which are approved on or after September 1, 2019.

Section 80EEA has been introduced to add on further benefits under Section 80EE to individuals who have borrowed home loan (low-cost housing segment). Previously, Section 80EE was amended from time to time to allow for a deduction on interest paid on housing loan for the fiscal year 2013 – 2014, fiscal 2014 – 2015 and fiscal 2016 – 2017.

As the section does not specify, if it is applicable for only for the resident Indian or even includes a non-resident, it can be concluded that both resident as well as non – resident Indians can claim for this deduction.

The section does not clarify, it the residential house can be self – occupied to be eligible for deduction or not. Hence, borrowers living in a rented house can also claim for deduction. The deduction can only be claimed by individuals for the house purchases if done either singly or jointly. If in case, the house is jointly owned with spouse and both of them are paying instalments, then both can claim for deduction. One has to meet all the laid out conditions to secure the deductions.

Section 24 and Section 80EEA

As per Section 24 of the Income Tax Act, house owners can claim for a deduction for the interest amount paid of up to Rs 2 lakh on their home loan and if the owner or his or her family resides on the same house property. The deduction of Rs 2,00,000 per annum applies even if the house is vacant. If in case, the house is rented, then the entire home loan amount is allowed for deduction.

If an individual can satisfy the conditions lied down under Section 24 and Section 80EEA of the Income Tax Act, then you can claim the benefits under both the sections. First, you have to exhaust your deductible limit which is mentioned under Section 24 of the Income Tax Act which stands at Rs 2,00,000 per annum. Later go on to claim the additional benefits which are stated under Section 80EEA of the act and hence the deduction is in addition to the Rs 2,00,000 lakh limit which is allowed under Section 24 of Income Tax Act.

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