Section 80EEA: Tax Deduction On Home Loan Interest Payment

Section 80EEA of the Income Tax Act allows first-time home buyers to claim a tax deduction of up to ₹1.5 Lakh for the interest payments made towards their home loan. This tax relaxation benefit was launched in the year 2019 and was applicable for home loans taken during the financial years 2019-2020 and 2020-2021. However, it was later extended to home loans availed in the financial year 2021-2022 as well.

Section 80EEA was introduced in a bid to support a housing initiative of the Government of India, called the ‘Pradhan Mantri Awas Yojana.’ The scheme aimed to provide ‘Housing for All’ by the year 2022.

Eligibility under Section 80EEA

You must meet the following criteria to be able to claim a tax deduction on the home loan interest payments under Section 80EEA –

1. Type of Taxpayer

The interest payment deduction under Section 80EEA is available for individuals only. Thus, if you are registered as a Hindu Undivided Family (HUF), partnership firm, or public/private company, then you cannot claim a deduction under this section for your home loan interest payments.

2. First-Time Home Buyer

For being eligible for a tax deduction benefit under Section 80EEA, you must not own any other property in your name at the time when the home loan was sanctioned to you. You must be a first-time buyer of a residential property.

3. Type of Property

The tax deduction can only be claimed for a home loan taken for buying a residential property. It is important to note that the tax deduction is not available for any other type of property and is also not available if the home loan has been taken for financing maintenance, construction, or repair expenses.

4. Lender of Home Loan

The home loan must have been taken for buying a residential property from a housing company or a financial institution only.

5. No Tax Deduction under Section 80EE

Benefit under this section is available only if no deduction is claimed under section 80EE.

6. Home Loan Sanctioning Period

For availing tax deduction for the interest payments of your home loan, you must have taken the home loan between April 1, 2019, and March 31, 2022.

7. Stamp Duty Value of the Property

The stamp duty value of the property should not be more than ₹45 Lakhs. This condition has been levied to ensure that the tax deduction benefit is available only for affordable housing.

8. Carpet Area of Property

The carpet area of the residential property should not be more than 60 square meters if the property is located in a metropolitan city and should not exceed 90 square meters if it is located in any other city or town.

Please note that, under the Act, the following cities in India are considered to be metropolitan:

• Delhi
• Gurugram
• Noida
• Greater Noida
• Ghaziabad
• Faridabad
• Kolkata
• Mumbai
• Hyderabad
• Bengaluru
• Chennai

What is the Stamp Duty Value of a Property?

The stamp duty value of a property refers to the value of the property assessed or adopted by a State Government or any authority of the Central Government of India. It is assessed by the government for the calculation of the stamp duty payable for immovable property.

How much tax deduction can be availed under Section 80EEA?

You can claim a tax deduction on the interest payments made towards your home loan for the following amount –

1. The actual interest amount paid by you in a financial year, or
2. ₹1.5 Lakh

whichever is lower.

It is important to note that the tax deduction benefit available under Section 80EEA is in addition to the ₹2 Lakhs deduction available under Section 24(b) of the Income Tax Act.

Thus, you can avail a total tax deduction benefit of ₹3.5 Lakhs for the interest payments made under your home loan if you meet the applicable eligibility conditions of both Sections 24(b) and 80EEA.

What is Section 24 (b) of the Income Tax Act?

To avail a complete income tax benefit on the interest payments toward your home loan, you must know about Section 24(b) of the Income Tax Act, in addition to Section 80EEA.

Section 24(b) of the Act allows individuals owning a residential property to claim a tax deduction of up to ₹2 Lakhs for the interest payments made towards their home loan if –

1. Capital is borrowed on or after 1-4-1999.
2. Capital is borrowed for the purpose of acquisition or construction (i.e., not for repair, renewal, reconstruction).
3. Acquisition or construction is completed within 5 years from the end of the financial year in which the capital was borrowed.
4. The person extending the loan certifies that such interest is payable in respect of the amount advanced for acquisition or construction of the house or as re-finance of the principal amount outstanding under an earlier loan taken for acquisition or construction of the property.
5. If any of the above conditions is not satisfied, then the limit of Rs. 2,00,000 will be reduced to Rs. 30,000.

If the property has been let-out, you can claim the actual amount paid as the interest towards the home loan, without any upper limit for a tax deduction.

Understanding Section 80EEA With Examples

Let us understand Section 80EEA with the help of the following examples –

Example 1:

Suppose Mr A took a home loan on April 01, 2020, for his first-ever residential property featuring a stamp duty of ₹55 Lakhs. His annual interest payment for the financial year 2020-2021 stood at Rs. 5 Lakhs. Can Mr A claim a tax deduction under Section 80EEA of the Income Tax Act?

No. He cannot as the stamp duty of the residential property exceeds ₹45 Lakhs. However, he can claim a tax deduction of ₹2 Lakh under Section 24(b) of the Act.

Example 2:

Ms B bought a residential property in November 2019 and financed its purchase with the help of a home loan. The stamp duty value for the property stands at ₹30 Lakhs and the interest payment from November 2019 to March 2020 ₹1.3 Lakh. Moreover, the annual home loan interest for the financial year 2021 is ₹4 Lakhs.

In this case, Ms B would be eligible for claiming a tax deduction in the following manner (Section 80EEA deduction is applicable as the stamp value is less than Rs. 45 lakhs).

Difference Between Section 80EEA and Section 24 (b) of the Income Tax Act

Below, we have enlisted the points of difference between Sections 80EEA and 24(b) of the Income Tax Act, 1961:

Differences between Sections 80EEA and 80EE

Section 80EE of the Income Tax Act allows first-time home buyers to claim an additional tax deduction benefit of ₹ 50,000 over and above Section 24 (b). It is important to note that if you have claimed a tax deduction under Section 80EE, you cannot claim a tax deduction benefit under Section 80EEA.

Following are the key points of distinction between Section 80EEA and Section 80EE –

Documents Required for Claiming Tax Benefit Under Section 80EEA

To claim the tax deduction benefit towards your home loan interest payment, you need to submit an interest certificate while filing your income tax with the government. You can obtain the interest certificate from the lender to whom you have paid the home loan interest amount.

Frequently Asked Questions