Section 80EEA - Deduction for Interest on Home Loan

The Indian Income Tax Act provides a tax deduction of up to Rs. 1.5 lakhs per financial year for interest paid on home loans taken for purchasing or constructing an affordable house.

This deduction is available under Section 80EEA of the Income Tax Act and is in addition to the existing tax benefits available under Section 80C and Section 24.

What is Section 80EEA ?

Under Section 80EEA, one can claim a deduction for the interest required to be paid on the housing loan.

Note that the taken-out loan should have been used for acquiring a residential house. The construction of a residential house is not covered in this section. Section 80EEA allows deductions up to ₹ 1,50,000 per financial year. A deduction can be claimed under this section until the loan is completely repaid.

Eligibility Criteria to Claim Deduction under Section 80EEA

To be eligible for this deduction, the following conditions must be met-

• The home loan must be taken from a financial institution or housing finance company.
• The loan must be taken for purchasing or constructing a residential property valued at Rs. 45 lakhs or less.
• The loan must be sanctioned between 1st April 2019 and 31st March 2020.
• The individual must not own any other residential property at the time of loan sanction.
• The individual must not have claimed any other deduction for the same year for interest paid on the home loan.

The benefit of this deduction is available for a maximum of 5 years starting from the financial year in which the loan is sanctioned. The deduction can be claimed by the individual paying the interest on the home loan and not by the co-borrowers or co-owners of the property.

Conditions to Fulfil for Claiming the Deduction under Section 80EEA

1. Eligibility: The deduction under Section 80 EEA is available to individuals who have taken a home loan for an affordable housing project.
   
   
2. Maximum Deduction: The maximum deduction available under this section is Rs. 1.5 Lakhs.
   
   
3. Time Period: The deduction can be availed for 5 consecutive financial years starting from the year the loan was taken.
   
   
4. Home Loan Amount: The home loan amount should be less than Rs. 35 Lakhs, and the property's value should be less than Rs. 45 Lakhs.
   
   
5. Interest Payment: The deduction is available for the interest paid on the home loan and not for the principal repayment.
   
   
6. New Construction: The property should be new, not a resale or pre-owned property.
   
   
7. Additional Benefit: The deduction under Section 80 EEA can be claimed in addition to Section 24 for interest paid on the home loan.
   
   
8. No Ceiling Limit: There is no ceiling limit on the individual's income to claim the deduction under this section.
   
   
9. No Carry Forward: The unclaimed deduction under this section cannot be carried forward to the next financial year.
   
   
10. Who can Avail: The benefit of this section is available only to first-time home buyers. It means that if the individual has already availed the benefit of any other section in respect of any other property, he shall not be eligible for the benefit under this section.

In summary, 80EEA of Income Tax Act is a welcome move by the government to provide additional tax benefits to individuals purchasing or constructing an affordable house. This will encourage more people to invest in the housing sector and help achieve the government's 'Housing for All' goal.