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

Section 80EEA allows an additional deduction of up to Rs. 1.5 lakh per annum on home loan interest, over and above benefits under Sections 24 and 80C. The loan must be sanctioned between 1st April 2019 and 31st March 2022. It is available to individual, first-time homebuyers who do not own any other residential property at the time of loan sanction.

What is Section 80EEA?

Section 80EEA provides deduction against interest on home loan for first time home buyers. The stamp duty of the property shall not exceed Rs. 45 lakhs. It can be claimed against loan obtained from April 2019 to March 2022. Section 80EEA has been introduced to further extend the benefits allowed under Section 80EE for low-cost housing. It can be claimed only by individuals. Even non-residents can claim this deduction.

Features of Section 80EEA

Eligibility Criteria

The deduction under this section is available only to individuals. This deduction is not available to any other taxpayer.  Thus, you cannot claim any benefit under this section if you are a HUF, AOP, partnership firm, company, or any other taxpayer. Moreover, the taxpayer needs to opt for the old tax regime to avail of deduction under this section.

Tax Benefits on Home Loan (FY 2024-25)

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

Other Conditions

Similar to Section 80EE, in order to claim a deduction under Section 80EEA, you should not own any other house property on the date of the sanction of a loan.

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.
• The loan should be sanctioned during the period 1st April 2019 and 31st March 2022.
• Stamp duty value of the house property should be Rs 45 lakh or less.
• The individual taxpayer should not be eligible to claim a 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 of the date of sanction of the loan.

Conditions with Respect to the Carpet Area  

These conditions have been specified in the memorandum to the finance bill, but not mentioned in section 80EEA:

• The 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 New 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.

How is the Deduction Calculated Under Section 80EEA?

Let's look at two examples to calculate deductions under Section 80EEA:

Example 1:

Mr Manohar took out a home loan in FY 2019-20 for a house with a stamp duty value of Rs 40 lakh, and he paid Rs 4,00,000 in interest for the year. He did not own any other residential property on the date the loan was issued. Is Mr Manohar qualified for a Section 80EEA deduction?

In this case, Mr Manohar can claim a Rs 200,000 deduction for home loan interest under Section 24. Furthermore, because the house's stamp value is less than Rs 45 lakh, he is eligible for a Rs 1,50,000 deduction under Section 80EEA. As a result, Mr Manohar is eligible for a total deduction of Rs 3,50,000 under Sections 80EEA and 24.

Example 2:

Mr and Mrs Biswas purchased a house of Rs 45 lakh in FY 19-20, and Mr Biswas also took out a home loan with an annual interest payment of Rs 3,00,000. Mr and Mrs Biswas, can they both claim deductions under Section 80EEA?

Mrs Biswas is not a co-borrower in the loan. Hence only Mr Biswas can claim a deduction under Section 80EEA. Mr Biswas can claim a total deduction of Rs 3,00,000 (Rs 2,00,000 under Section 24 and Rs 1,00,000 under Section 80EEA).

It is to be noted that the interest that was already claimed as a deduction under other sections of the act cannot be claimed again under this section. For example, if Mr. Biswas has paid an interest of Rs.2,00,000. He has fully claimed the sum as deduction under section 24. The same interest cannot be claimed under section 80EEA.

Points to be Considered to Claim Deduction u/s 80EEA

• The section does not specify if you need to be a resident to be able to claim this benefit. Therefore, it can be concluded that both Resident and Non-Resident Indians can claim this deduction.
• The section also does not specify if the residential house should be self-occupied to claim the deduction. So, borrowers living in rented houses can also claim this deduction. 
• Moreover, individuals can claim the deduction for house purchases jointly or singly. If a person jointly owns the house with a spouse and they both borrowed the loan, then both of them can claim the interest as deduction. However, they must meet all the conditions laid down.

Final Word

Section 80EEA therefore supports the nation's action plan towards housing for all by providing a valuable tax relief to first time home buyers.

Related Articles:
Section 80EE Income Tax Deduction for Interest on Home Loan 
Section 24 - Deductions from House Property Income
Section 80GGB Deductions
Section 80G & 80GGA - Donations