Section 80EEA of Income Tax Act: Additional deduction of interest payment in respect of housing loan (Co-related with Section 80EE & Section 24b of the Income Tax Act)

A new Section 80EEA has been inserted by government 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.

Amount Eligibility

The amount of deduction available under this section shall be calculated in the following manner, whichever is lower: –

Actual Interest payment OR Rs. 1,50,000/-

This deduction is available over & above exemption u/s 24b provided other conditions satisfied.

Therefore, taxpayers can claim a total deduction of Rs 3.50 Lakhs for interest on housing loan, if they meet the conditions of section 80EEA.

Who is Eligible

♦ Only Individual assessee.

Conditions to claim

Example1: Mr. Bhaskar has taken a home loan during FY 2019-20. The stamp duty value of the house is Rs. 53 lakhs. Total interest payment made during the year is Rs. 3,24,000/-. Whether Bhaskar is eligible to claim deduction under section 80EEA?

Reply: stamp duty value of the house exceeds Rs. 45 lakhs hence Bhaskar is not eligible to claim deduction under section 80EEA.

However, he can claim exemption of interest u/s 24b of Rs. 2,00,000/-

Example 2: Mr. Suraj has taken home loan. Given below are the information:

S. No. Total Interest Loan Year Deduction u/s 24b Deduction u/s 80EE Deduction u/s 80EEA
1 Rs. 4,50,000 FY 2016-17 Rs. 2,00,000 Rs. 50,000 NA
2 Rs. 3,00,000 FY 2018-19 Rs. 2,00,000 NA NA
3 Rs. 3,20,000 FY 2019-20 Rs. 2,00,000 NA Rs. 1,20,000
4 Rs. 4,00,000 FY 2019-20 Rs. 2,00,000 NA Rs. 1,50,000

 Reply:

Section 24b: Under this section, exemption of interest payment on home loan maximum upto Rs. 2,00,000 under house property income is available subject to certain conditions.

Section 80EE: Deduction on the interest of a home loan under this section is available. The maximum deduction available as per this section is Rs. 50,000/- subject to certain conditions:

♦ Value of house should be up to Rs. 50 lakhs

♦ Loan amount should not exceed Rs. 35 lakhs

♦ Loan must be sanctioned between 01-April-2016 to 31-March-2017

Compiled by: –

CA Ayush Agarwal

CA Piyush Agarwal

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One Comment

  1. Surya M says:

    Detailed Analysis, But i have a doubt regarding Carpet Area Criteria mentioned here.

    Where in income tax act or in income tax rules or in notifications or in circular, this carpet area criteria is mentioned for claiming deduction u/s 80EEA.

    I have this doubt because, as fas as I concern, there is no such criteria specified directly in the section 80EEA.

    Kindly Clarify

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