Section 80EEA – Additional Deduction on Home Loan Interest for Affordable Housing

Overview:
Section 80EEA provides an extra deduction of up to Rs. 1.5 lakh per year on home loan interest, in addition to the benefits available under Sections 24 and 80C. This deduction applies to loans sanctioned between 1st April 2019 and 31st March 2022. It is specifically designed for individuals who are first-time homebuyers and do not own any other residential property when the loan is sanctioned.

What is Section 80EEA?

This section allows first-time homebuyers to claim a tax deduction on the interest paid for their home loan, provided the property’s stamp duty value does not exceed Rs. 45 lakh. Loans must have been taken between April 2019 and March 2022. Section 80EEA was introduced to extend the benefits of Section 80EE for affordable housing. The deduction is available only to individuals, including non-resident Indians.

Key Features of Section 80EEA

Eligibility: Only individual taxpayers can claim this deduction. Other entities like HUFs, AOPs, partnerships, companies, or firms are not eligible.
Tax Regime: The individual must opt for the old tax regime to avail of this deduction.
First-time Homebuyer: The individual should not own any other residential property at the time of loan sanction.

Tax Benefits for Home Loans (FY 2024-25):

Income Tax Section	Deduction Allowed
Section 24	Up to Rs. 2 lakh per year for the interest component of the home loan repayment
Section 80C	Up to Rs. 1.5 lakh per year for the principal repayment of the home loan
Section 80EEA	Up to Rs. 1.5 lakh per year for the interest component of the home loan

Other Conditions for Claiming Deduction under Section 80EEA

Similar to Section 80EE, to avail of a deduction under Section 80EEA, the individual must not own any other residential property on the date the home loan is sanctioned.

Eligibility Conditions:

The housing loan must be taken from a financial institution or a housing finance company to purchase a residential property.
The loan should be sanctioned between 1st April 2019 and 31st March 2022.
The stamp duty value of the house should not exceed Rs. 45 lakh.
The taxpayer must not be eligible to claim deduction under Section 80EE.
The individual should be a first-time homebuyer and should not own any residential property at the time of loan sanction.

Conditions Related to Carpet Area:

Although not explicitly mentioned in Section 80EEA, the finance bill memorandum specifies:

In metropolitan cities – Bengaluru, Chennai, Delhi NCR (including New Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad), Hyderabad, Kolkata, and Mumbai (entire Mumbai Metropolitan Region) – the carpet area of the house should not exceed 60 sq. meters (645 sq. ft.).
In other cities and towns, the carpet area should not exceed 90 sq. meters (968 sq. ft.).
These carpet area conditions apply to affordable housing projects approved on or after 1st September 2019.

How is the Deduction Calculated Under Section 80EEA?

Let’s understand the calculation of deductions under Section 80EEA with a couple of examples:

Example 1:
Mr. Manohar took a home loan in FY 2019-20 for a property with a stamp duty value of Rs. 40 lakh and paid Rs. 4,00,000 as interest during the year. He did not own any other residential property at the time of loan sanction.

Under Section 24, Mr. Manohar can claim a deduction of Rs. 2,00,000 on the interest paid.
Since the property’s stamp duty value is below Rs. 45 lakh, he is also eligible for an additional Rs. 1,50,000 deduction under Section 80EEA.

Total Deduction: Rs. 3,50,000 (Section 24 + Section 80EEA).

Example 2:
Mr. and Mrs. Biswas purchased a property worth Rs. 45 lakh in FY 2019-20, and Mr. Biswas paid Rs. 3,00,000 in home loan interest.

Only Mr. Biswas, being the loan borrower, can claim the deduction under Section 80EEA. Mrs. Biswas is not eligible as she is not a co-borrower.
Mr. Biswas can claim Rs. 2,00,000 under Section 24 and Rs. 1,00,000 under Section 80EEA, totaling Rs. 3,00,000.

Important Note:
Interest amounts already claimed under other sections of the Income Tax Act cannot be claimed again under Section 80EEA. For instance, if Mr. Biswas has fully claimed Rs. 2,00,000 as a deduction under Section 24, the same interest cannot be claimed again under Section 80EEA.

Points to Consider While Claiming Deduction under Section 80EEA

Residency Status: The law does not require the taxpayer to be a resident. Therefore, both Resident and Non-Resident Indians (NRIs) can claim this deduction.
Self-Occupied Requirement: There is no condition that the house must be self-occupied. This means individuals living in rented accommodation can also avail of the deduction.
Joint Ownership: The deduction can be claimed whether the property is purchased jointly or individually. If both spouses have taken the loan and jointly own the property, both can claim the interest deduction, provided all other conditions of Section 80EEA are satisfied.

Final Word:

Section 80EEA encourages affordable housing and supports the government’s “Housing for All” initiative by offering significant tax relief to first-time homebuyers.

FAQs

1. How much deduction can I claim on my housing loan repayment during a financial year?

Principal Repayment: You can claim up to ₹1.5 lakh under Section 80C.
Interest Payment: Under Section 24(b), you can claim interest paid up to ₹2 lakh per year.
Additional Deduction under Section 80EEA: If eligible, you can claim up to ₹1.5 lakh for interest paid, subject to conditions.

2. Can I claim deductions under both Section 80EE and Section 80EEA?
No. You cannot claim both; Section 80EEA is applicable only if you do not claim Section 80EE.

3. Are home loan top-ups eligible for tax benefits?
Yes. Tax benefits apply:

Section 80C: If the top-up is used for purchase or construction of a residential property.
Section 24(b): If used for acquisition, construction, repair, renewal, or reconstruction of the property.

4. Can I claim deductions under Sections 24, 80EE, and 80EEA together?

You cannot claim 80EE and 80EEA together.
However, you can claim either 80EE or 80EEA along with Section 24 (up to ₹2 lakh).

5. Can joint owners claim deduction under Section 80EEA separately?
Yes, each joint owner can claim ₹1.5 lakh under Section 80EEA if all conditions are satisfied.

6. Does home loan protection insurance qualify for tax benefits?
Yes, premiums paid for home loan protection insurance are deductible under Section 80C.

Note: If the insurance premium is paid through loan EMIs, no deduction is allowed.

7. Can I claim deductions under Section 24 and 80EEA simultaneously?
Yes, both deductions can be claimed together, as Section 24 covers interest paid on the loan and 80EEA is an additional benefit for first-time homebuyers.

8. What deductions are available for home loan interest under the new tax regime?

Section 80EE and 80EEA are not available under the new tax regime.
If the property is rented out, interest paid can still be claimed under Section 24 against rental income.

9. Is there any restriction on claiming Section 80EEA deduction for jointly owned property?
Each co-owner can claim the deduction separately if they satisfy all eligibility criteria, even if they hold unequal shares in the property.

10. Are there eligibility conditions for Section 80EEA?
Yes. Some key conditions include:

The loan must be for a first-time home purchase.
The loan amount and property value limits must be satisfied.
The property must be residential and not previously owned by the borrower.

11. Can a non-resident Indian claim deduction under Section 80EEA?
Yes, both resident and non-resident Indians can claim the deduction, provided all other eligibility conditions are met.

12. Can rented house owners claim home loan interest deduction?
Yes, under Section 24, interest paid on a home loan for a rented property is deductible against rental income.