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Section 80EEA: Deduction on Home Loan Interest

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Aakash (Quicko Customer Success Representative)

Income from House Property
Income Source
Section 80EEA
Last updated on April 16th, 2021

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.

It was announced in the Budget 2021 that the deduction under section 80EEA is to be extended to loans taken up to 31st March 2022
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It was announced in the Budget 2021 that the deduction under section 80EEA is to be extended to loans taken up to 31st March 2022

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.

ITR for Salaried Individuals
CA Assisted Income Tax Return filing for individuals having salary, one house property & income from other sources.
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ITR for Salaried Individuals
CA Assisted Income Tax Return filing for individuals having salary, one house property & income from other sources.
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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.

due date extension for AY 2021-22

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.

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

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.

Got Questions? Ask Away!

  1. Hey @sushil_verma

    There are a wide range of deductions that you can claim. Apart from Section 80C tax deductions, you could claim deductions up to INR 25,000 (INR 50,000 for Senior Citizens) buying Mediclaim u/s 80D. You can claim a deduction of INR 50,000 on home loan interest under Section 80EE.

  2. Hey @Dia_malhotra , there are many deductions that you can avail of. Your salary package may include different allowances like House Rent Allowance (HRA), conveyance, transport allowance, medical reimbursement, etc. Additionally, some of these allowances are exempt up to a certain limit under section 10 of the Income Tax Act.

    For eg,

    • Medical allowance is exempt up to INR 15,000 on a reimbursement basis.
    • Children education allowance is exempt up to Rs. 200 per child per month up to a maximum of two children.
    • Conveyance allowance is exempt up to a maximum of Rs. 1600 per month.

    Tax on employment and entertainment allowance will also be allowed as a deduction from the salary income. Employment tax is deducted from your salary by your employer and then it is deposited to the state government.

  3. The benefit Section 80EEB can be claimed by individuals only. An individual taxpayer can claim interest on loan of an electric vehicle of up to INR 1.5 lacs u/s 80EEB. However, if the electric vehicle is used for the purpose of business, the vehicle should be reported as an asset, loan should be reported as a liability and the interest on loan can be claimed as a business expense irrespective of the amount. (We have updated the article with the changes).

    Thus, if you have a proprietorship business, you should claim interest amount as a business expense only if the vehicle is used for business purpose. However, if it is used for personal purpose, you can claim deduction of interest u/s 80EEB in your ITR since you would be reporting both personal and business income in the ITR (under your PAN).

    As per the Income Tax Act, the deduction under Section 80EEB is applicable from 1st April 2020 i.e. FY 2020-21.

  4. Hey @Sharath_thomas , we have updated the content according to the appropriate assessment year. Thanks for the feedback. :slight_smile:

  5. Hey @shindeonkar95

    In case of capital gain income (LTCG/STCG), transfer expenses are allowed as deduction, except STT.

    However, in case of business income (F&O, intraday), all expenses incurred for the business (including STT) are eligible to claim deduction in ITR.

    Hope, it helps!

  6. Hello,

    Is it possible to claim deductions under S. 80CCF for Infra bonds bought in the secondary market and held to maturity?

    There were a number of 10 year infra bonds issued in the 2010- 2013 period, which will start maturing soon. These are all listed on the exchanges (although hardly any liquidity or transactions in them). If I were to buy some of these bonds in the open markets and hold them in my demat to maturity (<3 years), is it possible to claim tax deductions (upto 20k per year) under 80CCF for buying?

    I couldn’t find anything on this. Any help is appreciated.

  7. Hello @Veejayy,

    Yes you can claim deduction under 80CCF for investment made in specified infrastructure and other tax saving bonds bought in the secondary market and held to maturity.

    Deduction under Section 80CCF can be availed only through investment in certain tax saving bonds, issued by banks or corporations after gaining permission from the government which shall be restricted upto 10,000 per year.

    These bonds are generally long term bonds, having tenure of more than 5 years with a lock in period of 5 years in most of the cases. These bonds can be sold after the lock in period!

    Also, interest earned on these bonds will be taxable.

    Hope this helps!

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