Section 80EEA Tax Benefit On Affordable Housing : How Much Can You Save?

Section 80EEA governs the additional deduction of payment of interest over home loans and is subject to several conditions. The maximum tax deduction offered under this section is ₹1,50,000 and has been made available from the financial year 2019-20.

Key Features of Section 80EEA

Eligibility Criteria:

The deduction under Section 80EEA is available only to individuals and not to other taxpayers. You cannot claim benefits under this if you are a partnership firm, AOP, or HUF.

Amount of Deduction:

A deduction for interest payments of up to ₹1,50,000 is available under this section. This is over and above the deduction of ₹2 lakh offered for interest payments under Section 24 of the Indian Income Tax Act. Overall, an individual can claim a total deduction of ₹3.5 lakhs over home loan interest paid. Also, to claim deductions under Section 80EEA, you should not own any other property on the date the loan is sanctioned.

Conditions for claiming the deduction 

  • The housing loan has to be taken from any housing finance company or a financial institution
  • The stamp duty value needs to be ₹45 lakhs or less
  • The taxpayer claiming deduction should be a first-time home buyer and should not own any residential house on the date of loan sanction
  • The carpet area of the property should not be more than 60 square meters in metropolitan cities
  • The carpet area should not be over 90 square meters in other towns and cities
  • The applicant is claiming benefit on a loan sanctioned between 1st April 2019 and 31st March 2020

Is this Tax Deduction applicable for Non-Resident Indians?

Not much has been specified about the applicability of home loans to non-resident Indians. Experts have concluded that both resident and non-resident Indians can claim deduction under this section. Also, there is mention of whether a self-occupied residential house is eligible for deduction or not. Deductions can only be claimed over house purchases either if done singly or jointly with other members of your family. Make sure to check all the requirements laid down in order to claim deductions.

What is the difference between Section 24 and Section 80EEA? 

Section 80EEA and Section 24 of the Income Tax house allow house owners to claim for deduction on the home loan interest rate for up to ₹2 lakh. Section 80EEA doesn’t have any special requirements for possession. You can claim the deduction as soon as you start paying monthly installments over your home loan. On the other hand, for claiming deduction under Section 24, you need to have possession of your house.

Section 80EEA allows deduction claims only on home loans taken from financial institutions and banks. However, Section 24 allows deductions on loans taken from relatives or friends and interest being paid to them. The maximum deduction available under 80EEA is ₹1,50,000 whereas in the case of Section 24 it is ₹2,00,000. There are certain conditions laid down under Section 80EEA when it comes to claiming deductions. However, there are no such rules under Section 24.

In Summary

Claiming tax benefits under Section 80EEA especially if you are eligible can help you save a lot of money. You can save a minimum of ₹1,50,000 over the interest that you pay on the home loan borrowed from any financial institution.