Analysis of Sec-80EEA – Deduction for interest paid on home loan for affordable housing (w.e.f A.Y 2020-21)

√ Eligibility criteria

The deduction under this section is available only to individuals, not to HUF, AOP, Partnership firm, a company, or any other kind of taxpayer.

Applies to both Resident and Non-Residents.

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(b) of the Income Tax Act.

Therefore, taxpayers can claim a total deduction of Rs 3.5L for interest on home loan, if they meet the conditions of section 80EEA.

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 (This Section was available for only 2 years, f.y 13-14 & 14-15.).

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:-

√ 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)

♦  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 under RERA approved on or after 1 September 2019

Under Section 24(b) Deduction for For Interest paid on Home Loan:-

Pre-Construction/acquisition Interest (No deduction for repair or reconstruction):

Pre-construction Interest can be claimed in 5 equal installment starting from the Year in which Construction/Purchase is completed. (Max. Limit is Rs.2 lakhs in a F.Y)

Post-Construction/acquisition Interest:

For Self Occupied Property:Maximum Interest deduction is upto Rs. 2 lakhs.

Self-Occupied means, if owner or his family resides in the house property or when the house is vacant.

For Let-Out Occupied Property:Actual Interest without any limit. However w.e.f A.Y 2018-19 (Finance Act 2017), Loss u/h House property cannot exceed Rs.2 lakhs.

Conditions for Limit of Rs.2 lakhs (if not satisfied then limit of Rs.30, 000/- shall apply)

> Home loan must be taken for Purchase or construction (not repair) of House property.

> Home loan must be taken on or after 01st Apr 1999.

> The Purchase or construction must be completed within 5 a year from end of F.Y in which loan was taken.

Under Section 80C Deduction for For Principle paid on Home Loan:-

> A deduction for Principle payments up to Rs 1,50,000 is available under Section 80C But to claim this deduction, the house property should not be sold within 5 years of possession.

NOTE:-However, tax benefit of home loan under this section for repayment of principal part of the home loan is allowed only after the construction is complete and the completion certificate has been awarded.

> The Amount paid as Stamp Duty & Registration Fee is also allowed as tax deduction under Section 80C even if the Assessee has not taken Loan.

So, now a Taxpayer having Home Loan can take benefit up to Rs. 5 Lakhs (Rs. 3.5 lakhs for Interest U/s. 80EEA+24(b) and Rs.1.5 lakhs for Principle U/s-80C).

Home Loan Tax savings in case of Joint Ownership:-

If Property is jointly owned by Husband and Wife and they both are paying installments, both of them are eligible to claim deduction u/s-24(b) and u/s-80EEA in their respective ITR for their share, if conditions specified in these sections are satisfied.

 
Property Type Max.Total Interest Dedn Max. Total Intt .Dedn. Max. Total Principle Deduction U/s-80C Max. Total Deduction (Intt.+Prin.)
Sec-24(b) Sec-80EEA
Single Property  
Husband /Wife 200,000 150,000 350,000 150,000 500,000
  200,000 150,000 350,000 150,000 500,000
Jointly Owned Property (Suppose 50% each share)
Husband 200,000 150,000 350,000 150,000 500,000
Wife 200,000 150,000 350,000 150,000 500,000
  400,000  300,000 700,000 300,000      1,000,000
           

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Qualification: CA in Practice
Company: Rahul S Singh and Associates ,Chartered Accountants
Location: South Delhi, Delhi, India
Member Since: 11 Jul 2020 | Total Posts: 9
I am recently qualified Practicing Chartered Accountants (CA) in May 19 and also a B.Com graduate from Delhi University View Full Profile

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7 Comments

  1. venkatesh n says:

    Dear sir,
    For claiming deduction on joint owned property by both husband and wife, should the EMI be paid through joint account or either of owners can pay?
    Thanks in advance!

  2. Himanshu says:

    I am co-borrower of house loan with my wife, however not the co-owner of the house property, owner of the property is my wife only, with these conditions, am I eligible to take a new house loan and get benifit under section 80EEA of ITR?

  3. Madhukar Mishra says:

    Thankyou sir for details explanation
    Please clear my doubt about this line:-

    ” The conditions are effective only for the affordable real estate projects which are approved on or after September 1, 2019.”

    Does it means we wouldn’t section 80EEA tax exemption if we would purchase a flat of approved project before September 1, 2019?

  4. Ravi says:

    Thanks sir for details explanation
    I have doubt on below point, does it means we wouldn’t section 80EEA tax exemption if we would purchase a flat of approved project before September 1, 2019?

    ” The conditions are effective only for the affordable real estate projects which are approved on or after September 1, 2019.”

  5. Ravi says:

    Thank you sir for details information
    I have confusion on RERA approved date, does it mean if any project approved by RERA before 1 September 2019 couldn’t claim on section 80EEA?

  6. Rahul Raj says:

    Dear Rahul,

    Thank you for the detailed article on section 80EEA. I

    Can you please tell me what does Stamp duty value of the house mean?

    Is it the cost of the house or the stamp duty and registration you pay during the sale agreement?

    Thanks in advance.

    Regards,
    Rahul Raj

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