In a bid to ensure affordable ‘Housing for all,’ the Central Government introduced Section 80EEA into the Income Tax Act, of 1961. The government took this decision in the Union Budget 2019, allowing first-time home buyers to enjoy deductions of up to ₹1.5 Lakhs on the home loan interest. 

 

The provisions of this section came into effect from April 1, 2020. This tax benefit is available over and above the exemptions provided by Section 24(b). According to this section, you can claim a total deduction of up to ₹2 Lakhs on the interest amount paid towards a home loan. 

 

Once you exhaust this limit, you are eligible to claim further deduction u/s 80EEA. This takes the total exemption amount available to first-time home buyers to up to ₹3.5 Lakhs.

Eligibility Criteria

To avail of this tax exemption on home loan interest, you need to fulfill the following Section 80EEA deduction eligibility criteria:

  • You must be an individual taxpayer

  • You must be a first-time home buyer  

  • You must finance the property purchase with a loan from a housing finance company or recognised institution

  • The property's stamp duty value should not exceed ₹45 Lakhs  

Conditions for Claiming a Section 80EEA Deduction

Apart from being a first-time individual home buyer, you need to fulfil certain conditions to claim deductions under Section 80EEA of the Income Tax Act:

  • An exemption is available only on loans sanctioned between April 1, 2019, and March 31, 2022 

  • The property's stamp duty value should not exceed ₹45 Lakhs  

Difference Between and Section 24(b) and Section 80EEA

Both Sections 24(b) and 80EEA allow you to enjoy tax rebates on home loans. However, here is how one differs from the other:

Parameter

Section 24(b)

Section 80EEA

Deduction

Up to ₹2 Lakhs on the interest paid towards home loans

Up to ₹1.5 Lakhs on home loan interest 

Conditions 

House property must be self-acquired with the completion of construction or acquisition before 5 years

Exemptions are available over and above the benefits offered u/s 24 (b)

Key Points to Remember

If you wish to claim tax deductions under Section 80EEA, here are some of the key highlights of these provisions you need to remember:

  • Resident and non-resident individual taxpayers can avail of these benefits

  • You can claim the tax benefits under this section even if the property is not self-acquired

Which Cities are Affected by the 80EEA Income Tax Act?

The Finance Bill outlines the following conditions regarding the requirement of the carpet area:  

Metropolitan Cities

The carpet area must not exceed 645 square feet in metropolitan cities that include:

  • Delhi NCR (Delhi, Noida, Greater Noida, Ghaziabad, Faridabad and Gurugram)

  • Kolkata

  • Mumbai

  • Chennai

  • Hyderabad

  • Bengaluru

Other Cities

The carpet area must not exceed 968 square feet in other cities or towns.

 

How is the Deduction Calculated Under Section 80EEA?

To help you understand Section 80EEA exemption calculations, here is an example. Say Mr. X is a first-time home buyer who purchased a house property with a registration stamp duty of ₹45 Lakhs. 


If he pays ₹5 Lakhs as interest on a home loan in a year, he can avail of tax exemption of ₹2 Lakhs under Section 24(b). Not only that, he can also claim deductions of up to ₹1.5 Lakhs under Section 80EEA over and above the tax benefits available under Section 24(b).

Tax Deductions for Stamp Duty and Registration Charges

You can claim tax deductions on stamp duty and registration charges under Section 80C of the Income Tax Act of 1961. However, they need to be under the maximum deduction limit of up to ₹1.5 Lakhs in a year on principal payments.

Tax Deductions on Interest Paid for Properties Under Construction

The home buyers can avail of tax deductions on interest paid on properties under construction. However, the total deductions available is 1/5th of the interest in the pre-construction period plus the interest in the post-construction period.

Tax Benefits on a Joint Home Loan

On joint home loans, you can avail of deductions of up to ₹2 Lakhs under Section 24(b) on the interest paid. In addition, you can also claim exemption on the principal paid under Section 80C. 

Tax Benefits on a Second Home Loan

As per the new rules introduced by the Central Government in the Union Budget of 2019, you can claim a tax rebate on a second home loan. However, these benefits are subject to the restrictions on tax benefits under the relevant sections of the Income Tax Act.

FAQsFAQs on Section 80EEA of the Income Tax Act

Can I avail of tax exemption under Section 80EEA of the Income Tax Act if I am eligible for Section 80EE deductions?

No, you can avail of Section 80EEA exemption if you are eligible to claim tax deductions available under Section 80EE.

 

Can I avail of tax exemptions under Section 80EEA if the loan sanction date is in FY 2023-24?

No, Section 80EEA allows tax deductions on loans sanctioned only till March 31, 2022. Hence, you cannot claim the rebate for a loan sanctioned in FY 2022-23 under this section.

 

Can I enjoy tax benefits under Section 80EEA if I do not possess the property?

Yes, you can enjoy Section 80EEA tax benefits even if the property is not self-acquired. 

 

Can a HUF entity claim tax exemption u/s 80EEA?

No, only individual home-buyers are eligible to claim a deduction according to Section 80EEA of the Income Tax Act.

 

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