A lot of people don’t know how to save income tax on the home loan. For this, we have come up with something to help you save income tax, which is section 80EEA – Income Tax deduction for Home Loan.
According to Section 80EEA, the interest paid on a housing loan that is taken between 01/04/2019 to 31/03/2020 is eligible for deduction starting the fiscal year 2020-2021
The prime objective of providing this deduction is to help home buyers to have low-cost funds available according to the ‘Housing for all’ objective of the Government of India.
The existing provisions of Section 80EE allow a deduction of up to Rs.50,000 for the interest paid for first time home buyers after availing a loan from any financial institution between 01/04/2016 and 31/03/2017. However, the Government of India has decided to extend the benefit for the fiscal year 2019-2020 in order to boost the real estate sector.
The loan borrowers can claim the deduction until they repay the housing loan.
Section 80EEA – Income Tax Deduction for Interest on Home Loan
Now let’s talk about the features of Section 80EEA:
Eligible Deduction Amount
Under Section 80EEA, individuals who are paying housing loan can claim for deduction on interest payment of up to Rs.1,50,000. This deduction is over and above the deduction of Rs 2,00,000 per annum for interest amount payments available under Section 24 of the Income Tax Act. If the individuals meet the prerequisites of Section 80EEA of the Income Tax Act, then they are eligible to claim a total deduction of Rs.3,50,000 per annum on the home loan.
Conditions for Claiming the Deduction Under Section 80EEA of the Income Tax Act
The house value should be up to or less than Rs 50 Lakhs.
The loan taken for buying the house should be up to or less than 35 Lakhs.
A Financial Institution or a Housing company should have sanctioned the loan.
The loan must have been sanctioned between 01/04/2016 to 31/03/2017.
There should be no other house property on your name at the time of sanctioning of the loan.
In the fiscal year 2013-2014, Section 80EE came into existence, and it was only present for two years (i.e., FY 2013-2014 and FY 2-14-2015). The deduction allowed was limited to a maximum of Rs 1,00,000. Now, this Section is reintroduced and the deduction allowed is Rs 50, 000 per year until the loan is repaid.
Section 80EEA does not specify whether you are required to be a Resident or not to claim this benefit. Thus, it can be assumed that both Non-Resident and Resident Indians can claim this deduction.
Also, Section 80EEA does not whether the house needs to be self-occupied to claim the deduction. Therefore, this deduction can be claimed by borrowers living in rented houses. However, this Section does specify that individuals can only claim this deduction for house purchases singly or jointly, which means if a person jointly owns the house with a spouse and they both are paying the installments of the house loan, then both of them are eligible to claim this deduction.
Carpet Area Prerequisites of House Property
The house property carpet area cannot exceed 600 square metres (645 sq. ft) in the case of metropolitan cities such as Delhi, Noida, Greater Noida, Faridabad, Gurgaon, Ghaziabad, Chennai, Bengaluru, Kolkata, Mumbai, and Hyderabad. Other than these cities or towns, the carpet area cannot exceed more than 90 square metres (90 Sq. ft).
Section 24 Vs. Section 80EEA
According to Section 24 of the Income Tax Act, if the house owner or his or her family resides on the same property, then he/she can claim for a deduction for the interest amount paid of up to Rs.2,00,000 on his/her home loan. This deduction is also applicable if the house remains vacant. You can claim the benefits under both Section 24 and Section 80EEA if you meet all the conditions specified.