Section 80EE and 80EEA: Interest on housing loan deduction
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Section 80EE and 80EEA: Interest on housing loan deduction

In this blog, we will discuss the section 80EE and 80EEA, conditions for claiming, its eligibility and its differentiation.

Index:

Section 80EE was introduced for the first time in FY 2013-14 for the initial 2 years and then re-introduced for the year 2016-17, for individual taxpayers to avail of the tax deduction on interest on housing loans. In FY 2019-20, a new section 80EEA was introduced to allow extended interest deduction on housing loans.

Section 80EE and 80EEA of the Income Tax Act, 1961, allow taxpayers who are first-time house buyers to claim a tax deduction from their net taxable income. Under these sections, one can claim deduction on the portion of interest of their home loan for reduction of their tax. This deduction of interest on housing loans is over and above the deduction claimed on interest under section 24 of the Income Tax Act, 1961.

Also, it is necessary to remember that you can claim the deduction under any one of the i.e. section 80EE or section 80EEA, depending on when the home loan was sanctioned.

What is Section 80EE?

Under the Income Tax Act, 1961, section 80EE deduction on home loan interest is applicable for first-time home buyers to claim a deduction from their net taxable income. The maximum deduction that can be claimed under this section is Rs.50,000 for the Financial year. The deduction can be claimed on interest over and above section 24, which is Rs 2 Lakh.

Conditions for claiming the deduction for Section 80EE

There are the following term and conditions for claiming the deduction for the section 80EE –

  • This section is applicable only for the first time home buyers.
  • You can avail the benefits up to Rs.50,000/- per financial year.
  • The home loan amount cannot exceed the amount of Rs.35 lakh.
  • The value of the house being purchased should not exceed the amount of Rs 50 lakh.
  • You can’t claim the benefits on commercial property.
  • Only the interest portion of the EMIs can be claimed as deduction.
  • Home loans sanctioned between 1st April 2016 to 31st March 2017 are only eligible for the claim.
  • The home loan has to be sanctioned by a Housing Finance Company or a Financial Institution.
  • As on the date of sanction of loan, the taxpayer should not own any other house.

Eligibility for Claiming Section 80EE Deduction

Before claiming section 80EE deduction, you need to know the following eligibility criteria –

  • Only individuals are eligible for the claim under section 80EE on home/ property owned either jointly or single.
  • Borrowers who are staying in a rented house, can also claim under the section 80EE.
  • Hindu undivided family (HUF), Association of Person (AOP), companies, or any trust cannot claim under this section.
  • This section is applicable on per person basis rather than per property basis
  • That is not important for the taxpayer to reside in the property in order to claim a deduction under section 80EE.

This deduction can be claimed until the home loan prevails. The deduction can be claimed at the time of Income Tax Return Filing. 

How to assess the total claim?

  • Calculate the total interest paid during the financial year towards home loan
  • Claim deduction upto 2 Lakh under section 24 of IT Act
  • The balance, upto Rs 50000, can be claimed under section 80EE (provided the underlying conditions are met)

What is Section 80EEA?

As per section 80EEA, an extended deduction on interest paid towards home loans is allowed for FY 2019-20 which was then extended to FY 2020-21 and FY 2021-22. This section allows deduction of up to Rs.1.5 lakh for interest paid by first-time home buyers for loans sanctioned from any financial institutions. This deduction can be claimed until you have repaid the home loan. 

Conditions for claiming the deduction for Section 80EEA

There are the following term and conditions for claiming the deduction for the section 80EEA –

  • Only the first-time home buyer can claim for deduction and should not own any house property as on the date of sanction of loan. 
  • You can claim a maximum up to Rs.1.5 lakh from the taxable income as deduction under section 80EEA.
  • Values of stamp duty of the house property should be maximum of Rs.45 lakhs.
  • The housing loan should be sanctioned between 1st April 2019 and 31st March 2022.
  • The taxpayer should not be eligible to claim deduction under section 80EE
  • The deduction can be claimed on interest over and above section 24, which is Rs 2 Lakh.

Eligibility for Claiming Section 80EEA Deduction

There are the following eligibilities for claiming section 80EEA deduction –

  • Hindu undivided family (HUF), Association of Person (AOP), companies, or any trust can not claim under this section 80EEA.
  • Only individuals are eligible for claim under section 80EEA on home/ property either joint or single.
  • As like section 80EE, that it is not important for the taxpayer to reside in the property in order to claim a deduction under section 80EEA.

Differentiation of Section 80EE and Section 80EEA –

Differentiation between section 80EE and section 80EEA are as follows –

Basic

Section 80 EE

Section 80 EEA

Maximum deduction 

Up to Rs.50,000 only on the interest portion of the home loan.

Up to Rs. 1.5 lakh on the interest portion of home loan.

Property valueUpto Rs. 50 lakh 

Upto Rs. 45 lakh of stamp duty

Maximum loan amount

Maximum  amount up to Rs. 35 lakh.

Not Defined

Loan sanctioned period 

1st April 2016 to 31st March 2017

April 1st, 2019 to 31st March 2022. 

This is the end of our discussion on section 80EE and 80EEA: interest on housing loan deduction. Let’s know your other questions and opinions on this topic. Mention below the comment box.

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Income Tax Act

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