Section 80EEA Deduction for interest paid on home loan – Housing for All

Section 80EEA Deduction for interest paid on home loan

Section 80EEA introduced in July Budget 2019 with the objective “Housing for all”. The government has extended the benefit for the FY 2019-20.

The main motive to the introduction of the section is to provide affordable housing finance for every class in common man and to enable the home buyer to have low-cost funds.

In this article, you will get all the features and benefits of this section for the Indian economy.

Section 80EEA – Points to read before

Exemption u/s 80EEA comes with some of the conditions to get full benefits of affordable housing finance.

  • A loan was taken from a financial institute or a housing finance company for buying a residential house property between April 1, 2019, to March 31, 2020.
  • Only first time home buyer or the applicant have never applied for a home loan or not having any residential house on his name can avail the benefit of this section.
  • The actual value (stamp duty value) of the house should be 45 Lakhs or less.
  • The applicant is eligible if the carpet area of metropolitan cities of Bengaluru, Chennai, Delhi National Capital Region (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad), Hyderabad, Kolkata, and Mumbai (the whole of Mumbai Metropolitan Region) does not exceed 645 Sq Feet.
  • The carpet area of Non-metropolitan cities must not exceed 970 Sq Feet.

Previously u/s 24 you can save up to Rs 2 lakh tax exemption on Intrest for a home loan, now the introduction of section 80EEA, you can get total exemption of Rs 2 Lakhs + 1.5 Lakhs, Total 3.5 Lakhs.

If you are able to satisfy the conditions of both Section 24 and Section 80EEA of the Income Tax Act, you can claim the benefits under both the sections.

Section 80EE for FY 2018-19 or AY 2019-21

For FY 2018-19 or AY 2019-20, the first-time Home Buyers can claim an additional Tax deduction of up to Rs 50,000 on home loan interest payments u/s 80EE. The below criteria has to be met for claiming tax deduction under section 80EE.

  • The home loan should have been sanctioned during/after FY 2016-17.
  • Loan amount should be less than Rs 35 Lakh.
  • The value of the house should not be more than Rs 50 Lakh &
  • The home buyer should not have any other existing residential house in his name.

Deduction under Section 24 and section 80EE/80EEA, the only difference is your possession, section 80EE/80EEA does not require possession of your house.

Income Tax Benefits on Home loan

Earlier income tax benefit on the home loan can be claimed into three parts. Home loan consists of Principal amount and interest amount, and the EMI is calculated under certain home loan calculation formulae, which results in higher interest repayment and lower principal repayment in their initial stage and in the middle of your tenue both (principal and interest) amount are equal and the driven to the bottom bring your principal repayment with higher ratio and interest repayment with lower.

Section 80C – Home Loan principal repayment

How much principal repayment you have made is clearly mentioned in your home loan account statement, all you have to use section 80C, which allow you to get tax exemption up to Rs 1.5 Lakhs (maximum) for your principal repayment.

Section 24 – Home Loan interest repayment

Home Loan Intrest repayment up to Rs 2 Lakhs is exempted u/s 24B of the Income-tax act.

Section 80EE – Additional Home Loan interest repayment

This section 80EE introduced for the first time home buyer opts for a home loan, the first-time Home Buyers can claim an additional Tax deduction of up to Rs 50,000 on home loan interest payments u/s 80EE, This section is already available in ITR form.

There are some criteria to meet the benefit under this section.

  • Section 80EE introduced from FY 2016-17, any loan sectioned beyond 2016-17.
  • Loan amount must be less than 35 Lakhs.
  • The Value of the House against home Loan is processed should not be more than Rs 50 Lakh.
  • The Home Laon applicant never have in possession of any other residential house in his name.

New Section 80EEA for FY 2019-20 [AY 2020-21]

This section overlap section 80EE and the introduction of this section raise interest payment exemption limit by Rs 1.5 Lakhs.

This tax benefit will be available from 1st April 2020 (AY 2020-21) and till the end of the home loan tenure (closure).

Section 24 vs Section 80EEA

Although both the section available for the taxpayer for interest payment exemption of Home Loan, beyond this there is some minor difference you must aware of:

  • If the applicant with a family resides in the house property or its vacant or let out for rent – In all scenario, The deduction of up to Rs 2 Lakh applies.
  • In case loan taken from friends or relative and interest paid to them also allow you for exemption u/s 24, In the case of section 80EEA the home loans from banks and approved financial institutions only.
  • To claim u/s 24, you must have possession of your house, on the other hand, Section 80EE and 80EEA do not impose any requirement of possession, as soon as you start your interest repayment you can claim for exemption.

In my personal opinion, only a few loan borrowers can get 100% benefit from this section, because there is a lot of hurdle in between. I recommend read and understand this section completely and calculate Income tax return for FY 2019-2020 [AY 2020-2021].

This post is based on the limited available information, so, request you to let us know if any of the above details need to be corrected/updated. Thank you!

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