Tax Deduction Under Section 80EEA: Amount of Deduction, Eligibility & How To Claim
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12 October 2021Section 80EEA of the Income Tax Act 1961 allows eligible first-time homebuyers to claim an additional tax exemption of up to Rs.1.5 lakh against their home loan interest payments. Individuals who are purchasing an affordable house for the first time can claim tax deduction benefits of up to Rs.1.5 lakh in addition to the deduction of Rs.2 lakh available as per Section 24 (B) against the yearly interest payment made towards their housing loans.
The deduction under Section 80EEA is directly linked with the cost of the residential property. Individuals are eligible for this tax rebate only if they purchase their first house between April 1, 2019 to March 31, 2022 whose stamp duty value is not more than Rs.45 lakh. Read on to know everything about Section 80EEA of income tax act.
Table of contents
- Amount of Deduction under Section 80EEA
- Eligibility Criteria to Claim Deduction under Section 80EEA of the Income Tax Act
- Other Parameters For Claiming Section 80EEA Deduction
- Differences between Section 80EEA and Section 24(B)
- How to Claim Tax Deduction Benefits Under Section 80EEA?
- Final Word
- FAQs on Section 80EEA Deduction
Amount of Deduction under Section 80EEA
Under Section 80EEA of the income tax act, the amount of deduction is up to Rs.1.5 lakhs. New homebuyers are eligible for a total deduction of Rs.3.5 lakh (including both Section 24(B) and 80EEA) on the interest they pay on home loans during a financial year. However, all necessary conditions must be satisfied. For example, the value of the residential property cannot exceed Rs.45 lakh.
Eligibility Criteria to Claim Deduction under Section 80EEA of the Income Tax Act
You are eligible for claiming tax deductions under Section 80EEA of the income tax act if:
- You are a new homebuyer.
- If you are an individual homebuyer.
- The stamp duty value of the property does not exceed Rs.45 lakhs.
- You are not claiming tax deductions under Section 80EE.
- You have taken a loan from a housing finance company or a bank.
The following taxpayers cannot claim tax rebate under Section 80EEA:
- Hindu Undivided Families
- Association of Persons
- Partnership firms
- Private limited or public limited companies
Also read: Home Loans Tax Benefits: Exemptions Under Section 80C, 24(b), 80EE, & 80EEA
Other Parameters For Claiming Section 80EEA Deduction
There are parameters in relation to the area of the residential property:
- The carpet area of the residential properties must not be more than 60 square metres or 645 square feet in metropolitan cities, such as Bengaluru, Mumbai, and Chennai.
- In the case of non-metropolitan cities, the carpet area of the housing unit must not be over 90 square metres or 968 square feet.
Differences between Section 80EEA and Section 24(B)
Here’s a tabular representation of the differences between Section 80EEA and Section 24 (B) of the Income Tax Act:
| Basis of Comparison | Section 80EEA | Section 24 (B) |
| Need of Possession | Individuals do not need to have possession of the residential property. They can claim a tax rebate as soon as they start paying interest on home loans. | Taxpayers must have possession of the residential property to claim deduction under Section 24 (B). |
| Source of Funds | Provisions of this section allow individuals to take home loans from financial institutions only. | Taxpayers can claim deduction under this section even if they take a loan from their friends or family members to purchase a residential property. |
| Maximum Yearly Deduction Allowed | Taxpayers can claim up to Rs. 1,50,000 as deduction. | The maximum tax rebate available under this section is Rs. 2,00,000. |
| Conditions to Qualify | A residential property’s stamp duty value cannot exceed Rs. 45 lakh. Also, taxpayers must not own any other residential property. | Individuals do not have to fulfil such conditions. |
| Applicable Time Period | Throughout the loan tenure. | Throughout the loan tenure. |
| Timing of home purchase | Between April 1, 2019 to March 31, 2022. | No such conditions. |
| Restrictions on property size | 645 sq. ft. carpet area for metros, 968 sq. ft. for non-metros | No such conditions. |
How to Claim Tax Deduction Benefits Under Section 80EEA?
In order to claim tax deduction benefits linked to home loan repayments under Section 80C, 24B and 80EEA, borrowers need to submit the lender’s statement clearly stating the amount paid in principal and interest towards a home loan in a financial year. All eligible contributions subject to predefined limits are deducted from the income of the borrower, and tax obligation is calculated on the remaining income according to the applicable income tax slab rate.
Also Read: ₹20 Lakh Home Loan: Interest Rates, EMI And Benefits
Final Word
Individuals can reduce their tax liability by gaining insight into all details regarding Section 80EEA deductions. Accordingly, they can successfully maximise their net income during the financial year. Also, they can opt for financial assistance from a home loan provider that charges low interest to minimise their cost of borrowing. Install the Navi app on Android or iOS for home loans of up to Rs.10 crore against affordable interest rates.
FAQs on Section 80EEA Deduction
Ans: Tax deduction under Section 80EEA can be claimed every year until you have repaid your home loan.
Ans: No, borrowers will not be eligible for deduction under Section 80EEA if they took a housing loan in 2016. This section of the Income Tax Act clearly states that the deduction will be applicable only on home loans availed between 1 April 2019 and 31 March 2022.
Ans: Individuals cannot claim tax rebate under Section 80EEA as it is only applicable to the purchase of affordable housing units.
Ans: Tax laws do not specify whether borrowers purchasing a house for the first time have to be a resident Indian to claim a deduction under Section 80EEA. Thus, according to experts, even NRIs could be eligible for this tax rebate.
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