Section 80EEA – Income Tax Deduction on Home Loan Interest

section 80eea

In budget 2019-20, new tax deduction benefits up to 1.5 Lakh is announced by the government. This new tax deduction benefit is applicable under new section 80EEA for the home loan interest rate payments. The main objective behind giving this relaxation is housing for all or affordable housing by 2022. The new tax deduction benefit will help a taxpayer in saving a lot of money at the longer run.

Key features, eligibility condition and benefit of this new income tax deduction are given below.

Section 80EEA – Income Tax Deduction on Home Loan Interest

Features of Section 80EEA deduction

  • Additional tax deduction up to 1.5 Lakh for interest paid on loans taken up to 31st March 2020.
  • This benefit is extended under new section 80EEA. It is an additional benefit on the top of 2 Lakh benefit extended by section 24.
  • The maximum tax deduction on interest amount paid for home loan will be 3.5 Lakhs. 2 Lakh under section 24 and 1.5 Lakh under section 80EEA.
  • The deduction will be available on loans taken up to 31st March 2020.
  • The benefit will be given only on the interest component of the home loan.
  • The tax deduction is applicable on entire home loan tenure.

Also Read – 10 Best Bank for Home Loan in India 2019

Eligibility conditions for claiming a deduction

  • This benefit will be extended only to the first time homeowners. You should not be owner of any other house at the time of sanction to avail this benefit.
  • The stamp duty value of a home should be 45 Lakhs or less.
  • The deduction under this scheme is available only to the individuals. HUF, company or any other kind of taxpayer cannot claim benefit under this section.
  • In order to claim this benefit the property should be self-occupied and affordable.
  • To claim this benefit, the individual must have taken the loan from the financial institution or bank. The loan sanction should be between 1st April,2019 to 31st March,2020.
  • This tax deduction can be claimed for by individual as well as joint home loan borrower. The joint home loan borrower can individually claim this benefit.
  • The above benefit is not applicable for the commercial properties.
  • You need to submit home loan interest certificate in order to claim this benefit.

Section 80EEA and Section 24

Section 24 of the income tax act allows homeowners to claim a deduction up to 2 Lakh on their home loan interest payment. The owner or his family should reside on this property to avail this benefit. The same treatment is applicable if the house is vacant. If it is let out you can claim entire home loan interest as a deduction.

Section 80EEA is a new section introduced for the first time home buyer. If you are able to meet eligibility conditions mentioned in the eligibility section above you can claim an additional 1.5 Lakh tax deduction benefit on home loan interest payment.

Maximum Tax Deduction benefit on Home Loan Interest = 2 Lakh (Section 24) + 1.5 Lakh (Section 80EEA)

Example

Rakesh works in pune in IT company. He lives in pune in a rented house. He purchased property in Surat. His father and family members live in a newly purchased house. He is buying a home for the first time, so he can take benefit of section 80EEA. The cost of a home is 45 Lakh and. He purchased this home by taking a home loan of 40 Lakh in May 2019.

The monthly EMI of this property is Rs.37000. The total of EMI for FY2019-20 will be 4.07 Lakh. This includes principal payment of 0.3 Lakh and 3.77 Lakh of interest component.

As it is self occupied house and fulfilling condition of section 80EEA, Rakesh can claim 3.5 Lakh as tax deduction while filing Income tax return. He will need a home loan interest certificate from bank to avail these benefits.

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