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:
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. 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?
Solution:
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.
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?
Solution:
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.
Supporting Documents
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.
FAQs
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.
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.
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,
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.
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.
Hey @Sharath_thomas , we have updated the content according to the appropriate assessment year. Thanks for the feedback.
No issues. You’re welcome!
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!
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.
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!
Hi, I need to file my income tax for FY21, I am using Quicko platform for filing, I wanted to confirm if the ELSS investment amount for the FY21 is to be added in the section 80C, since I already the amount of Rs30,072 , should I add my ELSS amount to this existing amount and submit the total
Hey @Sheirsh_Saxena, yes, the investment amount needs to be added under 80C.