Introduction

Taxpayers who take housing loan get benefits of deduction for interest on housing loan under section-24 of the Income Tax Act, 1961. Besides this, Section-80EE of the Act allowed a further deduction of Rs. 50,000 in respect of interest paid towards loan taken for a residential house property. But this deduction was available only for such loans which are sanctioned between 1st April, 2016 and 31st March, 2017. With a objective to give further benefit to first-time home buyers and give boost to the real estate sector, a new section 80EEA has been inserted by Finance Act, 2019. This section extends additional deduction for interest on housing loan to first-time buyers of affordable houses. Section-80EEA is effective from A.Y. 2020-21 (F.Y. 2019-20) and onwards. In this article, we will discuss various aspects related to section-80EEA such as eligibility, quantum of deduction, time limit of deduction etc.

Who is eligible for deduction under section 80EEA??

• Only Individual is eligible to take deduction under section-80EEA.
• It means that other taxpayers such as HUF, Partnership firm, Company, LLP etc. can not take benefit under this section.
• Non-Resident Individuals are also eligible to take deduction under section-80EEA.
• If you are already claiming deduction under section 80EE, then you are not eligible to claim deduction under section 80EEA.

What is the quantum of deduction under section-80EEA??

• Deduction under section 80EEA shall be allowed for an amount not more than Rs. 1,50,000. 
• This deduction is in addition to deduction of Rs. 2 Lakhs allowed under section-24 of the Income Tax Act.
• Therefore, the taxpayers can claim a total deduction up to Rs. 3,50,000 for interest on housing loan.
• However, it should be kept in mind that deduction for the same amount will not be allowed twice. For example, suppose interest on housing loan is Rs. 2,40,000. In this case, maximum deduction which can be claimed shall be restricted to Rs. 2,40,000 [Rs. 2 lakhs under section-24 and Rs. 40,000 under section-80EEA].

What are the conditions for claiming deduction under section-80EEA??

• The assessee must have taken a housing loan for purchasing a residential house property.
• Such loan must have been taken from a bank or housing finance company.
• Such loan should be sanctioned by bank or housing finance company during the period beginning from 1st April, 2019 and ending on 31st March 2021.
• The assessee should not own any other house property as on the date of sanction of loan.
• Stamp duty value of the house property should not exceed Rs. 45 Lakhs.
• Memorandum to Finance Bill, 2019 provided the following additional conditions with respect to carpet area of the house property:

1. Carpet area of the house property should not exceed 60 sq. mtr. (645 sq. ft.) in metro cities of Bengaluru, Chennai, Delhi NCR (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad), Hyderabad, Kolkata and Mumbai.
2. Carpet area should not exceed 90 sq. mtr. (968 sq. ft.) in any other cities or towns.
3. Further, this definition will be effective for affordable real estate projects approved on or after 1st September 2019.

Other points to remember:

• Section-80EEA does not specify that residential house property should be self occupied to claim deduction. Even if the borrower is residing in rented house, he can claim deduction. Only condition is that he should not own any house property on the date of sanction of loan.
• Deduction can also be claimed by individuals on purchase of a house property jointly. Thus, from tax planning point of view, a person can buy property jointly with spouse and pay installments jointly to  claim deduction under section 80EEA for an amount up to Rs. 1,50,000 each.
• Deduction can be claimed u/s 80EEA for purchase of housing units including flats and apartments. No deduction shall be allowed for purchase of vacant plot.
• Deduction under this section will not be allowed if the loan is taken from relatives, friends and relatives.
• You must obtain an interest certificate from bank or housing finance company for claiming deduction u/s 80EEA.

What is the difference between Section-80EEA and Section-24(b)??

Note: Under section-24, deduction of Rs. 2 Lakhs is allowed for a self-occupied property. Whereas entire interest is deductible in case of a let-out property.

Comparison between Section-24(b), 80EE & 80EEA: