Section 80EEA: Deduction on Home Loan Interest

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Fatema Rasiwala

Income from House Property
Income Source
Section 80EEA

Finance Minister Nirmala Sitharaman laid a vision of “Affordable Housing” in Budget 2019. This announcement brought a lot of changes in Income from House Property. One of them being the introduction of section 80EEA in budget 2019, that allows a deduction on home loan interest which will provide an additional home loan tax benefit for the year 2019-20 A lot of emphasis was laid on it in Budget 2020 as well. Under section 80EEA deductions can be claimed on Loans sanctioned on and after FY 19-20.

Deduction under section 80EEA is not allowed for Financial Year 2020-21 if the taxpayer opts for the new tax regime
Tip
Deduction under section 80EEA is not allowed for Financial Year 2020-21 if the taxpayer opts for the new tax regime

Who can Claim Deduction Under Section 80EEA?

The deduction u/s 80EEA is only available to individuals. Additionally, it is important to meet the criteria listed below in order to claim deduction under this section:

The exemption limit of this deduction is INR 1,50,000. Deduction under Section 24 can also be claimed along with 80EEA which can give taxpayers a total benefit up to INR 3,50,000.

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Difference between Section 80EEA and Section 24

Sr. No. Parameter Under Section 80EEA Under Section 24
1. Possession Possession of the property is not required in order to claim deductions u/s 80EEA Possession of the property is required in order to claim deductions u/s 24
2. Deduction Limit INR 1,50,000 INR 2,00,000
4. Source of Loan Deduction can be claimed only if the loan is taken from banks and financial institutions Deduction can be claimed even if the loan is taken from friends and family
5. Value of the Property 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, 2020 Deductions are available only if the loan is taken after April 1, 1999
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How is the Deduction Calculated Under Section 80EEA?

The total deduction that is available under section 80EEA is INR 1,50,000 or the payable interest amount which ever is lower.

To understand the situation better let’s take two different examples:

Scenario 1:

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. Is Mr Murthy eligible to claim deductions under section 80EEA?

Yes, in this case, Mr Murthy claim deductions under section 80EEA of INR 1,50,000 as the stamp value of the house is less than INR 45 Lakh. Additionally, he can also claim INR 2,00,00 as deductions under section 24, so the total deduction that Mr Murthy can claim under both section 80EEA and 24 is INR 3,50,000

Scenario 2:

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 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 deductions u/s 80EEA while filing ITR if all the above-mentioned conditions are full-filled. Individuals/HUFs 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. The due date for filing ITR is 31st July of the next FY if the tax audit is not applicable.

For FY 2019-20, due to COVID-19 the due date for filing ITR has been extended to 10th January 2021 when tax audit is not applicable and 15th February 2021 when tax audit is applicable.
Tip
For FY 2019-20, due to COVID-19 the due date for filing ITR has been extended to 10th January 2021 when tax audit is not applicable and 15th February 2021 when tax audit is applicable.

Supporting Documents

Following are the supporting documents to claim 80EEA:

The taxpayer can claim deduction under this section if he/she has 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.

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FAQs

Can I claim interest payment deduction on home loan u/s 80EE & 80EEA simultaneously?

No, taxpayers cannot claim deduction u/s 80EEA if they are claiming section 80EE.

Can I claim deduction u/s 24 & 80EEA simultaneously?

Yes, deduction under both sections can be claimed simultaneously subject to other conditions.

What are the conditions to claim deduction u/s 80EEA?

Deduction u/s 80EEA is available subject to given below conditions :
– The stamp duty value of residential houses shall be up to Rs. 45 lakh.
– The deduction can be claimed only by individual taxpayers.
– The loan is taken from a financial institution.
– The loan has been sanctioned between 01-04-2019 to 31-03-2020.
– Assessee is not claiming any deduction under section 80EE.
– The assessee owns no residential house property on the date of sanction of loan.

What is section 80EE?

Before section 80EEA, taxpayers used to claim 80EE. If the loan is sanctioned during FY 16-17 you get deduction u/s 80EE. Under this, taxpayers can avail income tax benefits of Interest on home loans taken for a residential house. These benefits have a maximum exemption limit of Rs. 50,000 per FY. The exemption can be availed by all types of taxpayers until they repay their loan amount.

Can I claim deductions on principal repayment of home loan under section 80EEA?

No, deductions under section 80EEA can be claimed only for the interest repayment of the home loans.

Can my wife and I both claim deduction under section 80EEA?

Yes, provided that the property is registered under both names and the wife is also a co-borrower in the home loans.

  • Suman says:

    My home loan sanction period is February 2019 but sales deed happened on April 2019 and same date money disbursement happen …..I’m eligible for 80eea?

    • Hiral Vakil says:

      Hi Suman,

      A taxpayer is only eligible for 80EEA if the loan is sanctioned on or after 01/04/2019. Hence in your case, since loan was sanctioned before 01/04/2019 you will not be able to claim deduction u/s 80EEA.

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