Tax Deductions for Home Loan Interest Under Section 80EEA

In line with the Union Government's goal of providing affordable housing to citizens, Section 80EEA was added into the Income Tax Act. Introduced in Budget 2019, this sub-section allows you to claim deductions of up to ₹1.5 Lakhs, provided that you meet certain conditions.

Check out the scope of applicability of Section 80EEA deductions: 

• Tax Deductions for Stamp Duty and Registration Charges

Section 80EEA does not directly allow you to claim tax benefits for these charges when you buy a property. However, you can claim these deductions under Section 80C, the details of which are provided below: 

1. The deductions claimed for stamp duty and registration charges must not exceed ₹45 Lakhs 

2. You can claim these deductions only in the year when you incurred this cost

• Tax Deductions on Interest Paid for Properties Under Construction

You can club the benefits offered by Section 80EEA with Section 24(b) to enjoy tax exemption on properties under construction. Here are the provisions of the latter:

1. The total deductions available is 1/5th of the interest in the pre-construction period provided in five equal instalments

2. The maximum limit for deductions on interest paid in the pre-construction period is ₹2 Lakhs

• Tax Benefits on a Joint Home Loan

As per the provisions, you and the co-owner can claim Section 80EEA exemption as joint applicants. To claim these deductions, the joint loan holder must be the co-owner of the property.

• Tax Benefits on a Second Home Loan

You can claim tax benefits under Section 80EEA only if you are a first-time home loan borrower. However, you can claim deductions for your second home loan under Sections 80C and 24(b).

The Income Tax Act enlists the requirements you need to meet to claim these exemptions. Here is a list of the 80EEA eligibility requirements:

• You must be an individual taxpayer 

• You must not own any residential house property at the time of sanction of the loan

• You must finance the property purchase with a loan from a housing finance company or recognised financial institution

• You must opt for the old tax regime to claims under this section

Apart from the requirements listed above, you can claim such an exemption only under certain circumstances. Here are the conditions for 80EEA deductions that you need to fulfil:

• An exemption is available only on loans sanctioned between April 1, 2019, and March 31, 2022 

• You must not be eligible to claim deductions under Section 80EE of the Income Tax Act of 1961

The Finance Bill of 2019 outlines different conditions regarding the requirement of the carpet area based on the type of the city. 

• Metropolitan Cities

The carpet area must not exceed 645 square feet in metropolitan cities that include:

1. Delhi NCR (New Delhi, Noida, Greater Noida, Ghaziabad, Faridabad and Gurugram)

2. Kolkata

3. Mumbai

4. Chennai

5. Hyderabad

6. Bengaluru

• Other Cities

The carpet area must not exceed 968 square feet in other cities or towns.

Here is an example to help you understand how to calculate these exemptions: 

 

Say that you are a first-time home buyer who purchased a house with a registration stamp duty of ₹45 Lakhs.

If you pay ₹5 Lakhs as interest on a home loan in a year, you can enjoy a tax exemption of ₹2 Lakhs under Section 24(b). You can also claim deductions of up to ₹1.5 Lakhs under Section 80EEA.