Finance Minister Nirmala Sitharaman laid a vision of “Affordable Housing” in Budget 2019. This announcement brought the introduction of section 80EEA, which allows a tax benefit of additional deduction on home loan interest from FY 2019-20 onwards for first-time home buyers. Under Section, 80EEA deduction can be claimed on payment of interest on a Loan sanctioned between 01/04/2019 to 31/03/2022. Deduction under this section can be claimed until full repayment of the loan.
Who can Claim a Deduction Under Section 80EEA?
The deduction u/s 80EEA is only available to individuals who opt for the old tax regime. This section does not mention if you need to be a Resident individual in order to claim this deduction hence even Non-Resident individuals can also claim a deduction under this section. Additionally, it is important to meet the criteria listed below in order to claim a deduction under this section:
- The stamp duty value of residential houses shall be up to INR 45 lakh.
- The loan is taken from a financial institution or a housing finance company.
- The loan has been sanctioned between 01-04-2019 to 31-03-2022.
- Assessee is not claiming any deduction under section 80EE.
- The assessee owns no residential house property on the date of sanction of the loan being a first-time home buyer.
- The exemption limit of this deduction is INR 1,50,000. Deduction under Section 24 can also be claimed along with 80EEA. Hence, the taxpayer can get a total benefit of up to INR 3,50,000 in a financial year.
If an individual owns a house jointly and all the co-owners are making payments of loan installments, they can claim this deduction individually. However, they must meet all of the conditions mentioned above.
Conditions for the carpet area of the house property
These conditions are mentioned in the memorandum to the finance bill and not in section 80EEA:
- In metro cities like Bengaluru, Chennai, Delhi NCR (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad), Hyderabad, Kolkata, and Mumbai, the carpet area of the house property should not exceed 60 square meters (645 sq ft)
- In any other city or town, the carpet area should not exceed 90 square meters (968 square feet).
- Furthermore, this definition will apply to affordable real estate projects approved on or after September 1, 2019.
Difference between Section 80EEA and Section 24
Deduction under section 80EEA is available over and above deduction under section 24. Hence a first-time home buyer can claim a deduction under both sections if all the required conditions are satisfied. First, exhaust your Section 24 deductible limit of INR 2 lakh. Then, claim the additional benefits provided by Section 80EEA. Here are some of the major differences between both sections.
|Sr. No.||Parameter||Under Section 80EEA||Under Section 24|
|1.||Possession||Possession of the property is not required to claim deductions u/s 80EEA||Possession of the property is required to claim deductions u/s 24|
|2.||Deduction Limit||INR 1,50,000||INR 2,00,000|
|4.||Source of Loan||A deduction can be claimed only if the loan is taken from banks and financial institutions||A deduction can be claimed even if the loan is taken from friends and family|
|5.||Value of the Property||The stamp duty value of the house should not be more than INR 45 Lakh||There is no such specification|
|6.||Category of Buyers||This deduction is available only to first-time home buyers||This deduction is available to all types of home buyers|
|7.||Loan Period||Deductions are available only if the loan is taken between April 1, 2019, and March 31, 2022||Deductions are available only if the loan is taken after April 1, 1999|
How is the Deduction Calculated Under Section 80EEA?
The total deduction that is available under section 80EEA is INR 1,50,000 or the interest payable amount whichever is lower.
To understand the situation better let’s take two different examples:
Mr. Murthy in the FY 2019-20 took a home loan for a house whose stamp duty value is INR 40 Lakh and the interest payment that Mr. Murthy made for the year was INR 4,00,000. He does not own any other residential house on the date of sanction of the loan. Is Mr. Murthy eligible to claim deductions under section 80EEA?
Yes, in this case, Mr. Murthy can claim a deduction for home loan interest under section 24 of INR 2,00,000. Additionally, he can also claim a deduction under section 80EEA of INR 1,50,000 as the stamp value of the house is less than INR 45 Lakh. So the total deduction that Mr. Murthy can claim under both sections 80EEA and 24 is INR 3,50,000.
Mr. and Mrs. Mehta jointly purchased a house worth INR 45 Lakhs in FY 19-20 and Mr. Mehta individually also took a home loan whose annual interest payment is INR 3,00,000. Can Mr. and Mrs. Mehta both claim deductions under section 80EEA?
No, only Mr. Mehta can claim a deduction u/s 80EEA as Mrs. Mehta is not a co-borrower in the loan. The total deduction that Mr. Metha can claim is INR 3,00,000. (INR 2,00,000 u/s 24 and INR 1,00,000 u/s 80EEA).
ITR Form Applicable for Section 80EEA
The taxpayer can claim a deduction u/s 80EEA while filing ITR if all the above-mentioned conditions are fulfilled. Individuals can claim 80EEA in any of the ITR forms, i.e. ITR 1, ITR 2, ITR 3 and ITR 4 depending upon their income sources.
Following are the supporting documents to claim 80EEA:
- Form 16
- Home Loan Certificate from the bank
- Bank Account Statement through which the EMI is paid
- Home Loan Sanction letter
Note: The taxpayer can claim a deduction under this section if interest is payable and the individual has not actually made payment of a home loan. You can claim the deduction even if it is not present in your Form 16, provided, you have supporting documents with you.
No, taxpayers cannot claim a deduction u/s 80EEA if they are claiming a deduction under section 80EE.
Yes, the taxpayer can claim a deduction under both sections subject to other conditions.
Before the introduction of section 80EEA, taxpayers had the option to avail a deduction u/s 80EE. If the loan is sanctioned during FY 16-17 deduction u/s 80EE can be claimed. Under this, taxpayers can avail income tax benefits of Interest on home loans taken for first-time home buyer maximum of up to INR 50,000. The exemption can be availed until they repay their loan amount.
No, the taxpayer can only claim the deduction of interest repayment of home loan.
Yes, but the property needs to registered under both names and the wife is also a co-borrower in the home loans then both of you can claim a deduction of INR 1,50,000 each.