Under Section 80EEA of the Income Tax Act in India, first-time homebuyers investing in affordable property with the help of a home loans get Rs 1.50 lakh tax deductions on home loan interest payment. Benefits of this provision are applicable only only housing loans sanctioned between between 1 April 2019 and 31 March 2022.
It begs clarification here that borrowers who has applied for a home loan during this period would be able to claim deductions under Section 80EEA through throughout their loan repayment tenure.
Section 80EEA: Background
Section 80EEA was introduced by finance minister Nirmala Sitharaman in the 2019 Union Budget to give a boost to the Centre’s Pradhan Mantri Awas Yojana (PMAY). The section was launched in the 2019 Budget. The Section 80EEA deduction is over and above the Rs 2 lakh deduction limit allowed under Section 24 (b).
Section 80EEA deduction amount
One can get up to Rs 1.50 lakh of deduction under Section 80EEA. This is over and above the deduction of Rs 2 lakh on interest payment under Section 24(b). For a first-time buyer, then, the annual tax rebate against home loan interest payment thus comes to Rs 3.50 lakh. Since the ‘affordable’ tag of the property remains the determining factor on whether or not you can claim deductions under Section 80EEA, it becomes pertinent to have a clear idea about what an affordable property is.
Know about: Section 80ee
Who are eligible for deductions under Section 80EEA?
- One who takes home loan from a bank or a housing finance company.
- The loan can be used for only buying or building a residential unit below Rs 45 lakh.
- The loan must be sanctioned between 1st April 2019 and 31st March 2022.
- No other residential property should be held by the borrower at the time of sanction of loan.
- No other deductions on home loan should be claimed by borrower in that financial year.
Who can claim Section 80EEA deduction?Only first-time home buyers can claim benefits under this Section, as it specifies that at the time of grant of the home loan the borrower should not own any residential property.
Who is a first-time homebuyer according to Section 80EEA?A first-time home buyer is a person who does not own a property in his name at the time of applying for his home loan. For tax calculation purposes, a working adult, even if single, is considered a separate household and thus, a first-time home buyer even if his parents own properties.
What is the deduction for under Section 80EEA?Deduction can be claimed against home loan interest payment only.
Which category of buyer can apply for deduction under Section 80EEA?Only individual buyers can claim deductions under this section. This means companies, Hindu Undivided Families, etc., cannot claim benefits.
What sort of property is covered under 80EEA?Buyers of residential house property can claim the benefit. It is also specified that the loan must be borrowed for buying the property and not reconstruction, repair, maintenance, etc. What is the time period that the deduction is valid?Note that a home loan borrower can avail of the benefit of this deduction for a maximum of 5 years that starts from the financial year the loan is granted. Who all can claim the deduction?Also, note that deduction can be only claimed by person who pays interest on the home loan and not necessarily the co-owner/ co-borrowers. |
What is the carpet area limit of units to claim deduction under Section 80EEA?
According to the Finance Bill, if a unit is located in a metropolitan city, its carpet area should not exceed 645 square foot (sqft) or 60 square metre (sqm) to claim the Section 80EEA benefit. For units in any other city, the carpet area has been limited at 968 sqft or 90 sqm.
Which cities are considered metropolitan cities under Section 80EEA?
Cities that are considered metropolitan for this purpose are Bangalore, Chennai, Delhi, Faridabad, Ghaziabad, Greater Noida, Gurgaon, Hyderabad, Kolkata, Mumbai and Noida.
Can Section 80EEA deductions be claimed if the property is not self-occupied?
Section 80EEA does not specify if the property must be self-occupied, to seek the tax break. This also allows buyers who are living in rented accommodations to claim deductions while also claiming HRA benefits under Section 80GG.
Can joint owners claim Section 80EEA deductions separately?
In case the joint owners are also co-borrowers, they can both claim Rs 1.50 lakh each as deductions under this Section, provided they meet all the other conditions.
Can NRIs claim 80EEA deduction?
Since the law does not specify whether a first-time buyer has to be a resident Indian to claim deduction, it has been interpreted by tax experts that even non-residents claim deductions under Section 80EEA.
Income tax deductions for interest paid on home loan under various sections
| Section 24(B) | Section 80EE | Section 80EEA |
| Deduction of Rs 2 lakh for self-occupied property
Deduction of entire interest paid on rented property |
Additional deduction (over and above Section 24B) of Rs 50,000 on interest paid for first-time buyers on loans sanctioned by banks between April 1, 2016, to March 31, 2017. | Additional deduction (over and above Section 24B) of Rs 1.50 lakh on interest paid for first-time buyers on loans sanctioned by banks between April 1, 2019, to March 31, 2022. |
Section 80EE vs Section 80EEA
First-time buyers must know the difference between Section 80EE and Section 80EEA. Those claiming deductions under Section 80EE cannot claim deductions under Section 80EEA. This is specifically mentioned in the law.
Section 80EE vrs Section 80EEA
| Particulars | Section 80EE | Section 80EEA |
| Property value | Up to Rs 50 lakh | Up to Rs 45 lakh |
| Loan amount | Up to Rs 35 lakh | Not specified |
| Loan period covered | April 1, 2016 to March 31, 2017 | April 1, 2019 to March 31, 2022 |
| Maximum rebate | Rs 50,000 | Rs 1.50 lakh |
| Lock-in period | None | None |
See also: All about carpet area
Section 80EE deduction
First-time home buyers can claim deduction of up to Rs 50,000 under Section 80EE in a financial year against payment of home loan interest. 80EE deductions can be claimed till the home loan is fully repaid. Also note that 80EE deduction is available only to individuals. This means an HUF, an AOP, a company, etc., cannot claim 80EE deduction.
Difference between Section 80EEA and Section 24(b)
| Category | Section 24(b) | Section 80EEA |
| Possession | Must | Not required |
| Loan source | Banks or personal sources | Only banks |
| Deduction limit | Rs 2 lakh or entire interest* | Rs 1.50 lakh |
| Property value | No specification | Rs 45 lakh |
| Loan period | Loans taken after April 1, 1999 | April 1, 2019 to March 31, 2022 |
| Buyer category | All home buyers | First-time individual home buyers |
| Lock-in period** | None | None |
*While a rebate of Rs 2 lakh is allowed for self-occupied property, the entire interest is allowed as deduction in case of let-out property.
**Section 80C specifies that buyers should not sell the property for five years, to claim deductions. This is known as the lock-in period.
Buyers can claim deductions under both, Section 24(b) and Section 80EEA, and enhance their total non-taxable income to Rs 3.50 lakh if they meet the eligibility criteria. However, deductions under Section 80EEA can only be claimed after exhausting the Rs 2-lakh limit under Section 24(B).
See also: All about e stamping
How buyers can use Section 80EEA to claim maximum deduction?
Since Section 80EEA has been introduced to help the middle-income group to own a home by way of higher monetary support, let us see how much of his income a person can make non-taxable if he were to buy his first home today.
80EEA tax calculation example
| Rahul Khanna works at an IT company in Noida and his annual salary package is Rs 15 lakhs. Let us assume that he is not enjoying any tax deductions so far. At the current tax slab, his total taxable income would be:
Rs 15 lakhs – Rs 40,000 (This is the standard deduction all tax payers in India enjoy) = Rs 14.60 lakhs Khanna falls in the Rs 12.5 lakhs-Rs 15 lakhs tax bracket. So, the highest rate at which his income will be taxed is 30%.
Split of Rs 14.60 lakhs for tax calculations Rs 2.5 lakhs (@0%) = 0 Rs 2.5 lakhs (@5%) = Rs 12,500 Rs 5 lakhs (@20%) = Rs 1,00,000 Rs 4.6 lakhs (@30%) = Rs 1,38,000 Total = Rs 2,50,500 + cess (@4%) = Rs 10,020
Khanna’s total tax outgo = Rs 2,60,520
Now, let us assume that Khanna invests in his maiden property to lower his tax outgo. He is buying a property worth Rs 45 lakhs, for which he is taking 80% of the property value (Rs 36 lakh) as loan from a scheduled bank at an 8% interest rate.
Key numbers Loan amount: Rs 36 lakh Tenure: 15 years Interest rate: 8%
This would lead to: EMI of Rs 34,403 Total interest (in 15 years): Rs 25,92,624 Total payable (in 15 years): Rs 61,90,624
If Khanna took the loan in December 2019, through 2020 (the first year of the loan tenure) he would be paying: Rs 1,29,522 as home loan principal Rs 2,83,319 as home loan interest
Under Section 80C, which offers rebate against specific investments, including home loan principal, Khanna can get Rs 1,29,522 from his income made tax-free (the upper limit under this Section is Rs 1.50 lakhs in a year).
Under Section 24(b), Khanna can claim Rs 2 lakhs as deduction against the interest paid.
Now, under Section 80EEA, Khanna can also claim the remaining Rs 83,319 as deduction from the overall limit of Rs 1.50 lakhs.
After applying all these deductions, here is the breakup of Khanna’s total taxable income:
Rs 15 lakh – Rs 40,000 (Standard deduction) = Rs 14.60 lakh
Deduction under Section 80C: Rs 1,29,522 Deduction under Section 24(b): Rs 2,00,000 Deduction under Section 80EEA: Rs 83,319 Total deductions: Rs 4,12,841
Total taxable income: Rs 14,60,000 – Rs 4,12,841 = Rs 10,47,159
Khanna still falls in the category of over Rs 10 lakh taxable income, so the highest rate at which his income is taxed remains 30%, but the amount to be taxed at 30% has come down significantly. Here is the split of his income for tax calculations:
Rs 2.5 lakhs (@0%) = 0 Rs 2.5 lakhs (@5%) = Rs 12,500 Rs 5 lakhs (@20%) = Rs 1,00,000 Rs 47,159 (@30%) = Rs 14,148
Total tax: Rs 1,26,648 + cess at 4% = Rs 5,066
Total tax outgo: Rs 1,31,714
Total savings as against the earlier outgo: Rs 2,60,520 – Rs 1,31,714 = Rs 1,28,806 |
Can I claim deduction under Section 80EEA if loan was taken in 2015?
Since the provision specifically mentions that the deduction will apply on only those loans that have been/would be granted between April 1, 2019, and March 31 2021, people whose loans have been sanctioned prior to or after this period, will not be eligible to claim the additional rebate under Section 80EEA.
See also: All about GST on flat
Section 80EEA benefit time limit
Even though the deduction under 80EEA may be available only on home loans sanctioned till March 2022. But those who are eligible for the rebate, can claim deductions throughout the term of their home loan repayment.
Under the PMAY rules, a single earning member of a family is considered a separate household for tax calculation purposes. This also means that an unmarried buyer, who is financially independent, is a separate household and can thus claim tax deductions under Section 80EEA for his first property purchase.
Document needed to claim tax deduction under Section 80EEA
For claim relief provided under Section 80EEA, a borrower will have to submit the following documents/details:
Title documents: Documents such as sale deed would be necessary to claim deductions under Section 80EEA.
Bank details: You will have to provide complete details of the bank from which you have taken the loan. These details will include the full address of the bank, its IFSC code and its PAN.
Interest certificate from bank: The borrower will also have to submit the annual interest certificate issued by the bank that provides the detailed break-up of loan repayment to claim deduction under section 80EEA.
You may also like to read
| Section 80C | Section 24 | GST real estate |
| Tax saving on property purchase | Section 80GG | Section 80E |
| Section 54 | TDS on rent | GST on rent |
FAQs
When did Section 80EEA come into force?
Section 80EEA was introduced in the Budget 2019. In the Budget 2021, its cover was increased up to March, 2022.
What is the deduction limit under Section 80EEA?
First-time home buyers can claim tax deduction of Rs 1.50 lakhs in a year against the home loan interest payment under this Section.
Who is eligible for tax deductions under Section 80EEA?
First-time home buyers can claim deductions under Section 80EEA, if: *The loan has been taken from a bank or housing finance company. *The stamp duty value of property is up to Rs 45 lakhs. *They are not claiming deductions under Section 80EE.
What should be the value of the flat, to avail of the benefits under Section 80EEA?
The stamp duty value of the property should not exceed Rs 45 lakhs.
Can I claim deductions under Section 80EE and Section 80EEA together?
The law clearly states that those claiming benefits under Section 80EE cannot claim rebate under Section 80EEA.
Can I claim deductions under Section 80EEA for plot purchase?
Deduction under Section 80EEA can only be claimed for purchase of housing units, including flats or apartments. The section is not applicable on the purchase of plots.
Can I claim deduction of principal repayment on home loan under Section 80EEA?
Deduction under Section 80EEA can only be claimed against home loan interest payment.
Can I claim deduction of interest payment on electric vehicle loan under Section 80EEA?
Deduction of interest payment on electric vehicle is allowed under Section 80EEB.
Can I claim deduction under Sections 24 and Section 80EEA simultaneously?
Buyers can claim deductions under both these sections and enhance their total non-taxable income to Rs 3.50 lakhs, if they meet the eligibility criterion. However, deductions under Section 80EEA can only be claimed after exhausting the limit of Rs 2 lakhs under Section 24(b).
For how many years is the deduction under Section 80EEA available?
Deductions can be claimed throughout the loan repayment tenure.
Can I claim deductions under Section 80EEA after I buy my second property?
Yes, deductions under the section are available on home loans that are taken when the tax payer had no property. Your future property ownership has no impact on this rebate.
Can my wife and I both claim deduction under Section 80EEA?
Yes, if the property is registered in both names and if she is also a co-borrower in the home loan.
Can I claim deductions under Section 80EEA if I take loan from family members/friends?
No, the loan has to be borrowed from a bank or HFC to claim this benefit.
What is stamp duty value of a property?
The value at which a property is registered in the government records is known as its stamp duty value.
What is the definition of affordable homes?
According to government-defined standards, affordable homes are units priced up to Rs 45 lakhs.
What documents will I have to give to my company to claim tax deduction under Section 80EEA?
The borrower will have to submit the interest certificate issued by his bank, to claim the rebate.
Can I claim 80EEA benefit for a loan taken for renovation or extension of a property? No, tax benefits under 80EEA can be claimed only for a loan taken for the purchase of a residential property.
