Sec 80EEA 1.5 Lakhs Deduction for Interest Paid on Housing Loan from Income Tax

Under the objective “Housing for all”, the government has now extended the interest deduction allowed for low-cost housing loans taken during the period between 1 April 2019 and 31 March 2020. Accordingly, a new Section 80EEA has been inserted to allow for an interest deduction from AY 2020-21 (FY 2019-20) to enable the home buyer to have low-cost funds at his disposal. The Finance (No.2) Act, 2019 has inserted a new section 80EEA under the Income-tax Act for those individuals who are not eligible to claim deduction under section 80EE. So for the Housing Loan Takers, in the Financial year between 1st Apr 2019 to 31st March 2020, they can avail 3.5 Lakhs total exemption for the Interest Paid for Housing Loan from Income Tax.

Sec 80EEA 1.5 Lakhs Deduction for Interest Paid on Housing Loan from Income Tax

An individual can claim deduction of up to Rs. 1,50,000 under section 80EEA subject to following conditions:
  1. a) Loan should be sanctioned by the financial institution during the period beginning on 01-04-2019 and ending on the 31-03-2020;
  2. b) Stamp duty value of residential house property should not exceed Rs. 45 lakhs;
  3. c)The assessee should not own any residential house property on the date of sanction of loan; and
  4. d)The assessee should not be eligible to claim deduction under section 80EE.
  5. Hence, an individual who does not meet the criteria of section 80EE shall now be eligible to claim deduction under section 80EEA of up to Rs. 150,000 in addition to deduction under section 24(b). Thus, the aggregate deduction which can claimed in respect of interest on housing loan shall be Rs.350,000.

Features of Section 80EEA

a) Eligibility criteria
  • The deduction under this section is available only to individuals. This deduction is not available to any other taxpayer. Thus, if you are a HUF, AOP, Partnership firm, a company, or any other kind of taxpayer, you cannot claim any benefit under this section.
b) Amount of deduction
  • A deduction for interest payments up to Rs 1,50,000 is available under Section 80EEA. This deduction is over and above the deduction of Rs 2 lakh for interest payments available under Section 24 of the Income Tax Act. Read more about the deduction of Rs 2 lakh on interest on home loan here. Therefore, taxpayers can claim a total deduction of Rs 3.5L for interest on home loan, if they meet the conditions of section 80EEA.
c) Other conditions
  • Similar to Section 80EE, in order to claim deduction under Section 80EEA, you should not own any other house property on the date of the sanction of a loan.
2. Conditions for claiming the deduction
  • Housing loan must be taken from a financial institution or a housing finance company for buying a residential house property.
  • Stamp duty value of the house property should be Rs 45 lakhs or less.
  • The individual taxpayer should not be eligible to claim deduction under the existing Section 80EE.
  • The taxpayer should be a first-time home buyer. The taxpayer should not own any residential house property as on the date of sanction of the loan.
Conditions with respect to the carpet area of the house property. 
These conditions have been specified in the memorandum to the finance bill, but not mentioned in section 80EEA:
  • Carpet area of the house property should not exceed 60 square meter ( 645 sq ft) in metropolitan cities of Bengaluru, Chennai, Delhi National Capital Region (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad), Hyderabad, Kolkata and Mumbai (whole of Mumbai Metropolitan Region)
  • Carpet area should not exceed 90 square meter (968 sq ft) in any other cities or towns.
  • Further, this definition will be effective for affordable real estate projects approved on or after 1 September 2019

The Finance Act Extract is given below for Sec 80 EEA

After section 80EE of the Income-tax Act, the following sections shall be inserted with effect from the 1st day of April, 2020, namely:––
  • ‘80EEA. (1) In computing the total income of an assessee, being an individual not eligible to claim deduction under section 80EE, there shall be deducted, in accordance with and subject to the provisions of this section, interest payable on loan taken by him from any financial institution for the purpose of acquisition of a residential house property.
  • (2) The deduction under sub-section (1) shall not exceed one lakh and fifty thousand rupees and shall be allowed in computing the total income of the individual for the assessment year beginning on the 1st day of April, 2020 and subsequent assessment years.
  • (3) The deduction under sub-section (1) shall be subject to the following conditions, namely:
  • (i) the loan has been sanctioned by the financial institution during the period beginning on the 1st day of April, 2019 and ending on the 31st day of March, 2020;
  • (ii) the stamp duty value of residential house property does not exceed forty-five lakh rupees;
  • (iii) the assessee does not own any residential house property on the date of sanction of loan.
  • (4) Where a deduction under this section is allowed for any interest referred to in sub-section (1), deduction shall not be allowed in respect of such interest under any other provision of this Act for the same or any other assessment year.
(5) For the purposes of this section,––
  • (a) the expression “financial institution” shall have the meaning assigned to it in clause (a) of sub-section (5) of section 80EE;
  • (b) the expression “stamp duty value” means value adopted or assessed or assessable by any authority of the Central Government or a State Government for the purpose of payment of stamp duty in respect of an immovable property.

Section 80EEA and Section 24

  1. Under Section 24, homeowners can claim a deduction for interest payments up to Rs 2 lakh on their home loan, if the owner or his family resides in the house property. The deduction of up to Rs 2 Lakh applies even when the house is vacant. If you have rented out the property, the entire home loan interest is allowed as a deduction.
  2. If you are able to satisfy the conditions of both Section 24 and Section 80EEA of the Income Tax Act, you can claim the benefits under both the sections. First, exhaust your deductible limit under Section 24, which is Rs 2 lakh. Then, go on to claim the additional benefits under Section 80EEA. Therefore, this deduction is in addition to the Rs 2 lakh limit allowed under Section 24.

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