The unprecedented rate of urbanization the world has witnessed for the past few decades has inevitably led to increasingly high demand for good, affordable housing. To home buyers delight, Govt of India has announced some remarkable offers/rebates on housing loan. Under Income Tax Act of 1961, special provisions have been made that offers further exemption to first time home buyers for purchase of affordable homes.
Section 80EEA was first introduced by our FM Nirmala Sitharaman in the 2019 Union Budget with an agenda to promote Govt’s initiative ‘’Housing for all by 2022” programme by providing further additional tax benefits on the purchase of affordable homes.
1)Under Section 80EEA what is the amount of deduction available;
“Interest paid on housing loan is allowed as a deduction to the extent of Rs 2 lakhs in respect of self-occupied property. In order to provide further benefit, I propose to allow an additional deduction of Rs 1.5 lakhs for interest paid on loans taken up to March 31, 2020, for purchasing an affordable house up to Rs 45 lakhs in value. Therefore, a person purchasing an affordable house, now will get an enhanced interest deduction up to Rs 3.5 lakhs,” Sitharaman concluded in her 2019 Budget Speech. Further extension of one year has been given under the Budget 2020.
It must be noted that this has been applicable to all categories of buyer who can claim deduction on home loan interest payment under Section 24(B). To an extent the rebate of rupees 1.50lakhs against interest payment under Section 80EEA is an additional benefit.
2)Points to be noted under Section 80EEA;
- It has been specified that only the first time home buyers can avail this tax benefit and he /she should not own any residential property in his/her name.
- Deduction will only be applicable against home loan interest payment only.
- The deduction limit is Rs 1.50lakhs per year.
- The Act specifies that only a single individual buyer can claim deductions under this section. This tax exemption is not applicable to companies, Hindu undivided families.
- This tax exemption period covers from April 1,2019 to March 31, 2021. Borrowers whose home loan has been sanctioned between this period can claim benefits.
- The source for the home loan should be either from bank or from any other financial institutions. The Act also specifies that the money should not be borrowed from any family members, relatives or friends.
- The stamp duty of the property should not be more than 45 lakhs.
- Buyers only looking for residential property are eligible to claim this tax benefit. It does not apply for reconstruction, maintenance or repair.
- A buyer/ borrower cannot claim deductions under both the sections of this Income Tax Act. (Section – 80EE, Section -80EEA). Either of the one will be applicable.
3)Basic requirements to claim deduction under Section 80EEA;
a) Areas to be claimed under Section 80EEA;
The finance Bill stated that the area of the unit, which is located in a metropolitan city should not exceed 645sft to 60 sq meters. Considering other cities, the size has been limited at 968 sft or 90 meters.
b) Can deductions be claimed under Section 80EEA if the property is not self-occupied?
In order to avail the tax, break it has not been clearly specified in Act, that whether the property should be self-occupied. This is also applicable to the buyers who are living in rented accommodation and claiming HRA benefits under Section 80GG.
c) Can joint owners claim deductions under Section 80EEA separately?
Yes, they can. Provided if the joint owners are co borrowers, individually they both can claim rupees 1.5 lakhs as deductions under this Section, provided they meet all the necessary conditions.
4)What is the basic difference between Section 80EEA and Section 24(b);
Deductions can be claimed under both Sections 24(b) & 80EEA and increase the non- taxable income to rupees 3.50lakhs if the buyer meets all the eligibility criteria. Further it has to be remembered, that a prospective buyer can claim deductions under Section 80EEA only after depleting rupees 2lakh limit under Section 24(b). The table below will help you better to understand the differences.
5)What is the difference between Section 80EEA and Section 80EE?
The Act categorically mentions that any first time buyer/borrower must not claim tax deductions under both the Sections 80EE & Section 80EEA. This is by law.
|Particulars||Section 80EE||Section 80EEA|
|Property value||Up to Rs 50 lakhs||Up to Rs 45 lakhs|
|Loan amount||Up to Rs 35 lakhs||Not specified|
|Loan period covered||April 1, 2016 to March 31, 2017||April 1, 2019 to March 31, 2021|
|Maximum rebate||Rs 50,000||Rs 1.50 lakhs|
6)FAQs on Section 80EEA
- When did Section 80EEA come into force;
Section 80EEA was introduced in the Budget 2019. In Budget 2020 it had further been extended for another year to March, 2021.
- Under Section 80EEA what is the deduction limit available;
Under this Section only the first-time home buyers can claim tax deduction of Rs 1.50 lakhs in a year against the home loan interest payment.
- Who is eligible for tax deductions under Section 80EEA;
Any individual, buying home for the first time and has taken loan from any bank/financial institutions, for a property whose stamp duty value is not more than 45 lakhs and he/she has not claimed any tax deductions under Section 80EE.
- What should be the value of the flat, to avail the benefits under Section 80EEA;
As mentioned, the stamp duty of the property should not exceed rupees 4lakhs.
- Can one claim deductions under Section 80EEA for plot purchase;
The answer is NO. Tax deductions under 80EEA can only be claimed for the purchase of housing units, flats or apartments. It is not applicable for purchasing of plots.
- Under Section 80EEA can any individual claim deduction of principal repayment on home loan:
Under Section 80EEA deductions can only be availed against home loan interest payment.
- Can one claim deduction under Sections 24 and Section 80EEA simultaneously;
Any prospective buyer who meets the eligibility criteria can claim tax deductions under both the Sections (24) b &80EEA and enhance their total non-taxable income to 3.50 lakhs provided he/she has fully utilised the limit of rupees 2 lakhs under Section 24(b)
- How long is the tenure of deduction under Section 80EEA;
One can claim deductions throughout the tenure of the loan repayment.
- Can both the partners claim deduction under Section 80EEA;
Deductions can be claimed by both the parties if the property is registered in both names and also if both the parties are co borrower in the home loan.
- Can one claim deductions under Section 80EEA if the loan has been taken from family members/friends;
No. One can only claim tax deductions under Section 80EEA provided the money has been borrowed from any bank/financial organisation.
- What is the definition of affordable homes;
Homes that are priced up to 45 lakhs are been defined as affordable homes by government of India.
- What documentation any applicant needs to provide to the company to claim tax deduction under Section 80EEA;
To claim the rebate one has to submit the interest certificate issued by the bank.