80 EEA Income Tax

Planning to buy a house or construct one, but afraid of the EMI? The government of India provides tax relief under section 80 EEA of the Income Tax Act to its citizens. This deduction can be claimed apart from the other deductions for up to INR 1.5 lakhs for a period of five years. The government has increased the period to claim a deduction for the low-budget housing loans sanctioned between April 1, 2019, and March 31, 2022.

Section 80 EEA was introduced to push the real estate market during the covid times. And also to support the middle-class section in being the house of their dreams. The benefits of this section can be claimed by first-time home buyers. Earlier a deduction of only INR 50,000 can be claimed on the interest of the home loans. But after the introduction of section 80 EEA in the budget 2019, the deduction limit has been raised to INR 1.5 lakh. 

This article will cover the basics of section 80 EEA, the terms and conditions applied, and things to know to claim this deduction. 

What does 80EEA mean?

Section 80 EEA states that any person who has bought a house or is building a house after taking a loan from an authorized financial institution can claim a deduction of up to INR 1,50,000 lakh from their income. This deduction is separate from the other deductions claimed in that financial year. This means that the buyer gets to claim a deduction not just under section 80 EEA, but also under sections 80 C, 80 CCC, and 80 CCD.

Who are eligible for 80EEA?

The eligibility criteria to claim deduction under section 80 EEA are given below.

1. This deduction is only for Indian citizens.
2. The loan-sanctioning financial institution must be registered with the government.
3. The loan must have been in the name of a sole person or in joint names to acquire the residential property.
4. The date of sanctioning the loan must be between April 1, 2020, and March 1, 2023.
5. The upper limit of the loan amount should be up to INR 35 lakh.
6. There must not be any other loan for acquiring any other residential property.
7. The buyer should not be the owner of any other residential property.
8. The buyer should not have claimed a similar deduction under any other provision.

Other conditions that must be fulfilled to claim this deduction are the type of housing property the buyer is buying. The conditions are stated below:

The maximum carpet area of the housing property should be less or equal to 645 square feet in metropolitan cities and 968 square feet in other cities.

The income tax act has section 80EE which also defines the provisions for affordable housing. Let’s see how it differs from section 80 EEA.

What is difference between 80EE and 80EEA?

Section 80 EE is the head section for the provision of deductions applicable to a housing property bought with loaned money from a bank. This section covers a property value of up to 50 lakhs. The loan amount limit is INR 35 lakhs. The loan must be sanctioned between April 1, 2016, and March 31, 2017. The maximum rebate can be claimed up to INR 50,000.

Whereas, Section 80 EEA is a subclause/sub-section added under section 80 EE in the year 2019 for the provisions of deductions for the affordable housing program. This section covers a property value of up to 45 lakhs. The loan amount limit depends on the bank and salary scale of the buyer. The loan must be sanctioned between April 1, 2019, and March 31, 2021. The maximum rebate can be claimed up to INR 1,50,000.

Who can not avail of deductions under section 80 EEA?

The following can not avail any deduction under section 80 EEA:

1. Any individual who has one or more residential properties under his name.
2. Any HUF, AOP, BOI, Company, or organization.
3. If the market value of the house after stamp duty and registration is exceeding INR 45 lakhs, he can’t avail of the deduction.
4. This deduction is only applicable on a property used for residential purposes by the buyer and not for commercial purposes.
5. If the loan was sanctioned before 1 April 2019 or after 31 March 2022, this deduction can’t be availed.

The Basic Calculation for Deduction Under Section 80 EEA

1. Calculate the total interest amount paid in a financial year on the home loan.
2. Now, deduct INR 2 lakhs as per the provisions of section 24 of the IT Act.
3. From the balance amount in hand, up to INR 50,000 can be claimed under section 80 EEA deductions.

FAQS- 80EEA Income Tax

1. Can we claim 80EEA every year?

The deduction under section 80 EEA can be claimed till the loan has been repaid.

2. Is Section 80EEA extended?

The deduction under section 80 EEA can be claimed for the fiscal year 2023-24. The deduction will be granted on the total gross income of the taxpayer. The gross total income will include the income from all the sources like rent, interests, salary, agriculture income, etc.  

3. Can I claim 80EEA before possession?

Yes, the clause says that the buyer can claim the deduction from the year the loan was sanctioned. There is no clause saying that the buyer can only claim the deduction after the possession of the residential property.

4. When was section 80EEA introduced?

Section 80 EEA was introduced in the financial budget 2019. This move by the income tax department to give extra benefits to the people buying affordable houses was much appreciated. The buyer can claim an additional deduction other than the deductions permissible under section 80 C and section 24.

Conclusion

Section 80 EEA Income tax allows first-time home buyers to get tax relief on the interest amount paid to the bank. The buyers can get an extra deduction of up to 1.5 lakhs. However, the housing property must come under the affordable housing criteria specified above. Also, it’s only available to individuals and joint owners and not to commercial organizations. All banks provide a range of schemes to give loans under the affordable housing program of the government. Choose your bank wisely and make sure they are registered. 

For more such informational blogs keep visiting us, thanks!  

Recommended Articles

Cess on Income Tax (The Complete Guide)

234B of Income Tax Act (All You Need to Know)