Section 80EEA

Section 80EEA - Deduction for Interest Paid on Home Loan for Affordable Housing

The government increased the interest deduction permitted for low-cost housing loans taken out between 1 April 2019 and 31 March 2022 with the goal of "Housing for all."

Because of this, a new Section 80EEA has been added, enabling an interest deduction starting in AY 2020–21 (FY 2019–20). Under the previous version of Section 80EE, first-time homebuyers could deduct up to Rs 50,000 for interest paid on loans approved by financial institutions between April 1, 2016, and March 31, 2017.

The government has extended the benefit for FY 2019–20 in an effort to increase it and stimulate the real estate industry. You may deduct this amount up until the housing loan is paid off.

Features of Section 80EEA

Eligibility Criteria

This section's deduction is exclusive to people. Other taxpayers are not eligible for this deduction. Therefore, whether you are a HUF, AOP, partnership business, company, or any other type of taxpayer, you are not eligible to get any benefits under this provision. Furthermore, in order to qualify for the deduction under this clause, the taxpayer must choose the previous tax system.

Tax Benefits on Home Loan (FY 2023-24)

The table below gives you the tax benefits under the sections of the Income Tax Act, 1961.

Other conditions

As with Section 80EE, you must not own any other real estate on the day the loan is sanctioned in order to be eligible for a deduction under Section 80EEA.

Conditions for Claiming the Deduction

• When filing an income tax return, the taxpayer must select the previous tax regime.

• Purchasing a residential property requires obtaining a housing loan from a financial institution or a housing financing business.

• The loan must be approved between April 1, 2019, and March 31, 2022.

• The home property's stamp duty must be Rs 45 lakh or less.

• Under the current Section 80EE, the individual taxpayer should not be able to claim a deduction.

• It should be the taxpayer's first time purchasing a house. The taxpayer could not have any residential real estate on the day the loan was approved.

Conditions concerning the dwelling property's carpet area. The following requirements are listed in the finance bill's memorandum but are not covered by section 80EEA:

• In the metropolitan areas of Bengaluru, Chennai, Delhi National Capital Region (limited to New Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, and Faridabad), Hyderabad, Kolkata, and Mumbai (the entire Mumbai Metropolitan Region), the carpet area of the house property should not exceed 60 square meters (645 sq ft).

• In all other cities or towns, the carpet area shouldn't be more than 90 square meters (968 square feet).

• Additionally, developments involving affordable real estate that are approved on or after September 1, 2019, will fall under this criterion.

To increase the benefits permitted under Section 80EE for affordable housing, Section 80EEA was established. In the past, Section 80EE had been sporadically changed to permit a deduction for interest paid on home loans during the fiscal years 2013–14, 2014–15, and 2016–17.

It's unclear from this section if you have to live in the area to be eligible for this benefit. Thus, it may be said that Indians who are residents or who are not may claim this deduction.

Moreover, it is unclear from this clause if the residential property must be self-occupied in order to qualify for the deduction. Therefore, debtors who are renters are eligible to deduct this as well. Additionally, people may only deduct expenses for single or combined home purchases. Both the spouse and the individual jointly owning the home are eligible to claim this deduction if they are both making loan payments. But they have to fulfill all of the requirements stated.

Tax Deductions for Stamp Duty and Registration Charges

Under Section 80C of the Income Tax Act, stamp duty and registration fees may also be deducted from taxes; however, they must stay within the overall Rs 1.5 lakh main payment cap. This advantage is yours regardless of whether you obtain a mortgage. In addition, this advantage is only valid for the year that the costs are spent.

Tax Deductions on Interest Paid for Properties under Construction

Interest paid during the pre-construction and post-construction phases is deductible under the Income Tax Act. Interest on loans for residential properties under construction is deductible in five equal yearly installments, starting in the year the property is purchased or finished. Therefore, up to a maximum of Rs. 200,000, the total interest deduction permitted to a taxpayer under Section 24(b) is equal to one-fifth of the interest related to the pre-construction period (if any) plus interest related to the post-construction period (if any).

Tax Deduction on Home Loans under Section 24(b)

You can write off the interest you pay on your home loan under Section 24(b) of the Income Tax Act. If the building or purchase of the home is finished within five years, you may deduct up to Rs. 2 lakh in taxes from your gross annual income for self-occupied housing.

If you meet the requirements of both Section 24 and Section 80EEA of the Income Tax Act, you may claim the advantages.

First, use up the entire Rs 2 lakh Section 24 deductible limit. Proceed to assert the extra advantages pursuant to Section 80EEA. Thus, this deduction is in addition to the maximum of Rs 2 lakh permitted under Section 24.

Tax Benefits on Joint Home Loan

Each borrower may deduct up to Rs. 2 lakh in house loan interest under Section 24(b) and up to Rs. 1.5 lakh in principle repayment under Section 80C if you take out a home loan jointly. This increases the amount of deductions that are achievable over a single-applicant house loan. Nonetheless, both applicants must serve the EMIs and be co-owners of the property.

Tax Benefits on Second Home Loan

You can get the same tax benefits if you take out a second mortgage to purchase another home, but the total amount of deductions is limited by the applicable limits mentioned above. In the 2019 Union Budget, the government increased the incentives for real estate investment. Previously, notional rent was calculated and taxed as income since only one property could be classified as self-occupied and one as rented. However, a second residence may now be considered a self-occupied building.