The Indian government introduced Section 80EEA under the Income Tax Act to make housing more affordable and provide tax relief to first-time home buyers. This section allows eligible taxpayers to claim an additional deduction on the interest paid on home loans for affordable housing projects.
Let’s delve deeper into Section 80EEA of the Income Tax Act, understand its eligibility criteria, benefits, and how it can help you save on taxes.
Understanding Section 80EEA of the Income Tax Act
Section 80EEA was introduced in the Union Budget of 2019 to extend the benefits of affordable housing to a wider group of taxpayers. It offers an additional tax deduction of up to ₹1.5 lakhs per financial year on the interest paid towards a home loan for first-time home buyers purchasing affordable residential properties.
This deduction is over and above the ₹2 lakh limit under Section 24(b), making it an attractive option for those seeking to maximise their tax savings.
Key Features of Section 80EEA
- Additional Deduction: Taxpayers can claim an additional deduction of up to ₹1.5 lakhs on the interest paid on home loans.
- Eligibility: The benefit is available only to individual taxpayers. Companies, Hindu Undivided Families (HUFs), and other entities cannot claim this deduction.
- Focus on Affordable Housing: The scheme aims to promote affordable housing, aligning with the government’s ‘Housing for All’ initiative.
- Applicability: It applies to home loans sanctioned between 1st April 2019 and 31st March 2022.
Read More About What is Section 80?
Eligibility Criteria for Claiming 80EEA Deduction
To claim a deduction under 80EEA of the Income Tax Act, the following conditions must be satisfied:
- First-Time Home Buyer: You must be a first-time home buyer, which means you should not own any residential property at the time of sanctioning the loan.
- Home Loan from Recognised Institutions: The loan must be taken from a bank, housing finance company, or any recognised financial institution.
- Property Value Limit: The stamp duty value of the house should be ₹45 lakhs or less.
- Loan Sanction Period: The loan should be sanctioned between 1st April 2019 and 31st March 2022.
- Carpet Area Restrictions: For properties in metropolitan cities like Mumbai, Delhi, Bengaluru, and Chennai, the carpet area should not exceed 60 square metres (645 sq ft). In other cities, the limit is 90 square metres (968 sq ft).
- No Previous Deduction Under Section 80EE: You cannot claim this deduction if you have already availed the benefits under Section 80EE, which was applicable for loans sanctioned between 1 April 2016 and 31 March 2017.
How to Claim the 80EEA Deduction?
To claim the 80EEA income tax deduction, follow these steps:
- Opt for the Old Tax Regime: The deduction under Section 80EEA is only available if you choose the old tax regime while filing your income tax return.
- Submit Interest Certificate: Obtain a certificate from your lender that specifies the interest paid on the loan during the financial year.
- Include the Deduction in ITR: When filing your Income Tax Return (ITR), mention the interest paid under the relevant section to claim the deduction.
Differences Between Section 80EE and Section 80EEA
| Criteria | Section 80EE | Section 80EEA |
| Deduction Limit | Up to ₹50,000 | Up to ₹1.5 lakhs |
| Loan Sanction Period | 1 April 2016 – 31 March 2017 | 1 April 2019 – 31 March 2022 |
| Property Value Limit | Up to ₹50 lakhs | Up to ₹45 lakhs |
| Eligibility | First-time home buyers | First-time home buyers |
| Section Applicability | Applicable under old regime | Applicable under old regime |
Example 1: Claiming Deduction Under Section 80EEA
Let’s say Ms. Priya took a home loan of ₹30 lakhs in June 2019 to buy a residential property valued at ₹40 lakhs. The interest paid on the loan during the financial year is ₹2.5 lakhs. Here’s how she can maximise her tax savings:
- Deduction under Section 24(b): ₹2 lakhs
- Additional deduction under Section 80EEA: ₹1.5 lakhs (but restricted to the actual interest paid, i.e., ₹50,000 remaining after Section 24)
In this case, Ms. Priya can claim a total deduction of ₹2.5 lakhs, effectively reducing her taxable income by this amount.
Benefits of Claiming 80EEA Deduction
- Increased Tax Savings: By claiming both Section 24 and Section 80EEA deductions, taxpayers can reduce their taxable income by up to ₹3.5 lakhs on interest payments.
- Encourages Affordable Housing: The focus on affordable housing aligns with the government’s mission to provide housing for all, making it easier for individuals to own their first home.
- No Income Ceiling: Unlike other tax benefits, there is no income ceiling for claiming the deduction under Section 80EEA, making it accessible to a larger group of taxpayers.
Tax Benefits Under Different Sections
The table below summarises the various tax benefits available on home loans:
| Income Tax Act Section | Deduction Limit | Component |
| Section 24(b) | Up to ₹2 lakh | Interest on home loan (self-occupied) |
| Section 80C | Up to ₹1.5 lakh | Principal repayment, stamp duty, and registration charges |
| Section 80EEA | Up to ₹1.5 lakh | Additional interest on affordable home loan |
Joint Home Loan and Tax Benefits
If you take a joint home loan with a co-applicant (e.g., your spouse), both individuals can claim deductions separately. For example, if you and your spouse are both co-owners and co-borrowers, each of you can claim:
- Up to ₹2 lakh under Section 24(b)
- Up to ₹1.5 lakh under Section 80C for principal repayment
- Up to ₹1.5 lakh under Section 80EEA (if eligible)
This can double the potential tax benefits, making joint home loans a smart financial strategy for couples.
Pre-Construction Interest Deduction
If your property is under construction, you can still claim a deduction for the interest paid during the pre-construction period. The interest accrued during this time can be claimed in five equal instalments, starting from the year the construction is completed. This benefit is available under Section 24(b), subject to the ₹2 lakh limit.
Also Know More About Section 80 GGB
Section 80EEA and the New Tax Regime
It’s important to note that the 80EEA deduction can only be claimed if you opt for the old tax regime. Under the new tax regime introduced in 2020, standard deductions replace many individual deductions, including those for home loan interest.
Tax Benefits on Second Home Loan
While Section 80EEA is geared towards first-time home buyers, you can still avail tax benefits for a second home loan under Section 24(b) and Section 80C, subject to the same limits. The notional rent rule, which required taxpayers to declare rental income for a second property, has been relaxed, allowing one to consider a second home as self-occupied.
Conclusion
Section 80EEA is a powerful tool for first-time home buyers looking to save on taxes while investing in affordable housing. By claiming deductions under both Section 24(b) and Section 80EEA, taxpayers can significantly reduce their taxable income, making homeownership more accessible.
If you are considering buying your first home, understanding the eligibility criteria and benefits of 80EEA income tax deductions can help you maximise your tax savings.
FAQs
What is the maximum deduction under Section 80EEA?
The maximum deduction is ₹1.5 lakh per financial year on the interest component of the home loan.
Can both co-borrowers claim the 80EEA deduction?
Yes, provided they meet the eligibility criteria and are co-owners of the property.
Is Section 80EEA available under the new tax regime?
No, the deduction is only available under the old tax regime.
Does the property need to be self-occupied to claim 80EEA?
No, the section does not mandate that the property be self-occupied.
Can NRIs claim the deduction under Section 80EEA?
Yes, both Resident and Non-Resident Indians can claim this deduction, provided they meet the other eligibility criteria.
