Section 80EEA of Income Tax Act, 1961 was introduced in the budget of 2019 to give the benefit to taxpayers who are first time home buyers and are purchasing an affordable house. In addition to the deductions already available under other sections for interest on home loan, this section gives an additional tax deduction for such interest. This section provides a major financial benefit to those taxpayers who are purchasing their first home. In this article, we will discuss about the section 80EEA in detail.
What is Section 80EEA of Income Tax Act 1961?
Section 80EEA of Income Tax Act, 1961 allows a deduction for interest on loans taken for house property purchased during the specified period for a maximum deduction of ₹150,000 per financial year. Individual can claim deduction under this section for the period starting from the date the loan is sanctioned and to the date the loan is fully repaid. Along with standard deduction of ₹200,000 u/s 24 of Income Tax Act, an Individual can also claim an additional deduction of ₹150,000 under Section 80EEA. Overall an individual can claim a total deduction of ₹350,000 per financial year under both sections.
Who is eligible for Section 80EEA?
To be eligible for claiming the deduction under Section 80EEA of Income tax act, you are required to fulfill the following conditions:
- First-Time Home buyer: You must be first time home buyer and you must not be owner of any residential property prior or at the time of purchasing the property to claim the deduction under this section.
- Individual Taxpayer: This deduction can be claimed by individual taxpayers only whether he is salaried and self-employed.
- Sanction Date of Loan: To claim the deduction under this section for assessment years 2020-21 to 2023-24, your home loan must have been sanctioned between April 1, 2019 and March 31, 2022.
- Affordable House: The residential house purchased must meet the criteria of government’s for affordable housing. This criteria include:
- Carpet Area Limits: The maximum carpet area limits are set by government for affordable housing based on location of property like metropolitan cities, urban areas, or rural areas. If your house purchase fall under this criteria only then you can claim the deduction under this section.
- Approval of Designated Authority: The residential house purchased must be approved by a designated authority of government to make sure it fulfill all the conditions of affordable housing criteria.
Amount Eligible for Deduction under Section 80EEA
If you have paid the interest on home loan taken for you first home, a maximum deduction up to ₹150,000 can be claimed by you as per section 80EEA of Income Tax Act.
Important Points for Deduction under Section 80EEA
- Pre and Post-Construction Interest: This section covers both interest paid during the construction period and interest paid after the completion of property.
- Joint Home Loan: If you take a joint home loan with another individual who is also first-time homebuyer, in such case both individual can claim deductions under this section separately.
- Sharing of Deduction: If another co-borrower is eligible first-time homebuyer whether spouse or not, you can split the maximum deduction amount on the basis of your respective incomes and payment of loan.
- Spouses as Co-Borrowers: If you take join home loan with your spouse and you both are first-time homebuyers, then both of you can claim a deduction up to ₹150,000 under this section.
- Impact of Expired Dates: Deduction under this section is available if home loans was sanctioned between April 1, 2019 and March 31, 2022. Any loan sanctioned before and after these dates are not eligible. However, other deduction like section 24 for home loan interest may be available.
What is Difference between Section 80EE and Section 80EEA?
| Parameters | Section 80EE | Section 80EEA |
|---|---|---|
|
Introduced |
It was introduced for a specified period starting from Financial year 2013-14 and ending with financial year 2016-17. After this period it was replaced by Section 80EEA. |
It was introduced in the budget of 2019. This section aims to focus on promoting affordable housing.
|
|
Scope |
It promote first-time home buyers with no specific restrictions for value of property. |
It offers deductions only for first-time home buyers who purchase house specified as affordable housing as per criteria set by government regulations. |
|
Applicability |
Currently this section is not active. Deduction cannot be claimed under this section for home loans sanctioned after March 31, 2017. |
Deduction can be claimed under this section for home loans sanctioned between April 1, 2019, and March 31, 2022. |
|
Property Value |
No restrictions on the value of property to claim the deduction under this section. |
The house purchased must be classified as affordable housing. |
|
Deduction Limit |
The maximum deduction of ₹50,000 per financial year is allowed. |
The maximum deduction of ₹150,000 per financial year is allowed. |
Final Words
Section 80EEA of Income Tax Act gives a major tax benefit for first-time home buyers purchasing affordable housing during the specified period. The eligibility period has been over to claim deduction under this section has ended, however to get update about the provisions can be useful if you are planning to purchase a house in the future.
Frequently Asked Questions (FAQ)
Yes, if the below conditions are fulfilled:
- If you are first time home buyer
- Your house falls under criteria of affordable housing
- Your home loan has been sanctioned between specified period.