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Section 80EEA – Deduction for interest paid on home loan for affordable housing

Updated on:  

08 min read

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). The existing provisions of Section 80EE allow a deduction up to Rs 50,000 for interest paid by first-time home buyers for loan sanctioned from a financial institution between 1 April 2016 and 31 March 2017.

With a view to further the benefit and give impetus to the real estate sector, the government has extended the benefit for the FY 2019-20. This deduction can be claimed until you have repaid the housing loan.

Latest Update

Budget 2021 update: Tax holiday for affordable housing projects has been extended until 31 March 2022.

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, if you are a HUF, AOP, Partnership firm, a company, or any other kind of taxpayer, you cannot claim any benefit under this section.

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.

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.

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

Section 80EEA has been introduced to further extend the benefits allowed under Section 80EE for low-cost housing. Earlier, Section 80EE had been amended from time to time to allow a deduction for interest paid on housing loan for the FY 2013-14, FY 2014-15, and FY 2016-17.

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, the deduction can only be claimed by individuals for the house purchases jointly or singly. If a person jointly owns the house with a spouse and they both are paying the instalments of the loan, then both of them can claim this deduction. However, they must meet all the conditions laid down.

Section 80EEA and Section 24

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.

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.

Frequently Asked Questions

Can joint owners claim deduction under section 80EEA separately?

Yes, if the joint owners meet all the conditions specified in the Income Tax Act, they can claim deduction of Rs1.5 lakh each.

How much deduction can I claim out of the total repayment of a housing loan made during the financial year?

You can claim principal repayment of upto Rs.1.5 lakh as deduction under section 80C. To claim the deduction under section 80EEA, ascertain the total interest portion during the year and claim deduction of Rs.2 lakh under section 24(b). If the limit is exhausted, you can claim further deduction under section 80EEA up to Rs.1.5 lakh, subject to all other conditions for eligibility are satisfied.

The deduction under section 80EEA can be claimed one time?

You can claim the deduction under section 80EEA until you have repaid the housing loan.

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