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Section 80 EE and Section 80EEA Tax Deduction

Section 80EE

Section 80EE - Deduction on Home Loan Interest
Tax deduction under Section 80EE of the Income Tax Act 1961, can be claimed by first-time home buyers for the amount they pay as interest on home loan. The maximum deduction that can be claimed under this section is Rs. 50,000 during a financial year. The amount can be claimed over and beyond the deduction of Section 24 and Section 80C, which are Rs. 2, 00,000 and Rs. 1, 50,000, respectively.

Section 80EE was designed for the first time in the FY 2013-14 for individual taxpayers to avail tax deduction on interest on home loans. At that time, the maximum deduction that could be claimed was Rs. 1, 00,000. This tax benefit was available for only two years - FY 2013-14 and FY 2014-15. The Section was reintroduced on FY 2016-17, and the quantum of deduction was changed to Rs. 50,000 for interest paid towards home loan. 


Terms for Claiming Section 80EE Deductions

The conditions associated with claiming deductions under Section 80EE are:
  • This must be the first house that the taxpayer has purchased
  • The value of the house should be Rs. 50 lakhs or less.
  • The home loan availed should be Rs. 35 lakhs or less.
  • Section 80EE allows deduction only for the interest portion of a home loan.
  • The home loan has been sanctioned by a Housing Finance Company or a Financial Institution.
  • As on the date of the loan sanction, the individual must not own another house.
  • The loan should not have been availed for commercial properties.
  • For claiming deductions under this section, the loan should have been sanctioned between 01.04.16 to 31.03.17.

Eligibility for Claiming Section 80EE Deductions

To become eligible for claiming 80EE deductions, a taxpayer has to make sure of the following:
  • Only individual taxpayers can claim deduction under Section 80EE on properties purchased either singly or jointly. If an individual has bought a property jointly with his or her spouse and they are both paying the installments of the loan, then the two can individually claim this deduction.
  • E tax benefits are not applicable for Hindu Unified Families (HUF), Association of Persons (AOP), companies, trusts, etc.
  • Tax benefits under Section 80EE can only be claimed by first-time home buyers. In order to claim this deduction, the individual must have taken the loan from a financial institution for buying his/her first residential house property.
  • Section 80EE is applicable on a per person basis rather than a per property basis.
  • To claim this benefit, it is not necessary for the taxpayer to reside in the property for which he or she is claiming this deduction. Borrowers living in rented homes can also claim this deduction.

Claiming 80EE Tax Deductions

A taxpayer can claim deduction under Section 80EE at the time of filing tax returns.

To find out how much one can claim as deduction, here is what needs to be done:
  • Calculate the total amount of interest that is paid during a financial year on the home loan.
  • Once the total interest amount paid is ascertained, claim deduction up to Rs. 2, 00,000 (under Section 24 of Income Tax Act, 1961).
  • The balance amount, up to Rs. 50,000, can be claimed under Section 80EE of Income Tax Act, 1961.

Section 80EEA

Section 80EEA – Deduction for interest paid on home loan for affordable housing
Under the objective “Housing for all”, the government has now extended the interest deduction allowed for low-cost housing loans taken during the period between 1 April 2019 and 31 March 2020. Accordingly, a new Section 80EEA has been inserted to allow for an interest deduction from AY 2020-21 (FY 2019-20).The existing provisions of Section 80EE allow a deduction up to Rs 50,000 for interest paid by first-time home buyers for loan sanctioned from a financial institution between 1 April 2016 and 31 March 2017.

With a view to further the benefit and give impetus to the real estate sector, the government has extended the benefit for the FY 2019-20. This deduction can be claimed until you have repaid the housing loan. 

Features of Section 80EEA

  1. Eligibility criteria
    The deduction under this section is available only to individuals. This deduction is not available to any other taxpayer. Thus, if you are a HUF, AOP, Partnership firms, a company, or any other kind of taxpayer, you cannot claim any benefit under this section.
     
  2. Amount of deduction
    A deduction for interest payments up to Rs 1, 50,000 is available under Section 80EEA. This deduction is over and above the deduction of Rs 2 lakh for interest payments available under Section 24 of the Income Tax Act. Read more about the deduction of Rs 2 lakh on interest on home loan here. Therefore, taxpayers can claim a total deduction of Rs 3.5L for interest on home loan, if they meet the conditions of section 80EEA.
     
  3. Other conditions
    Similar to Section 80EE, in order to claim deduction under Section 80EEA, you should not own any other house property on the date of the sanction of a loan.

Conditions for claiming the deduction

  • Housing loan must be taken from a financial institution or a housing finance company for buying a residential house property
  • Stamp duty value of the house property should be Rs 45 lakhs or less.
  • The individual taxpayer should not be eligible to claim deduction under the existing Section 80EE.
  • The taxpayer should be a first-time home buyer. The taxpayer should not own any residential house property as on the date of sanction of the loan.

Conditions with respect to the carpet area of the house property.
These conditions have been specified in the memorandum to the finance bill, but not mentioned in section 80EEA:
  • Carpet area of the house property should not exceed 60 square meter ( 645 sq ft) in metropolitan cities of Bangalore, Chennai, Delhi National Capital Region (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad), Hyderabad, Kolkata and Mumbai (whole of Mumbai Metropolitan Region)
  • Carpet area should not exceed 90 square meters (968 sq ft) in any other cities or towns.
  • Further, this definition will be effective for affordable real estate projects approved on or after 1 September 2019.

Section 80EEA has been introduced to further extend the benefits allowed under Section 80EE for low-cost housing. Earlier, Section 80EE had been amended from time to time to allow a deduction for interest paid on housing loan for the FY 2013-14, FY 2014-15, and FY 2016-17.
The section does not specify if you need to be a Resident to be able to claim this benefit. Therefore, it can be concluded that both Resident and Non-Resident Indians can claim this deduction.

The section also does not specify if the residential house should be self-occupied to claim the deduction. So, borrowers living in rented houses can also claim this deduction. Moreover, the deduction can only be claimed by individuals for the house purchases jointly or singly. If a person jointly owns the house with a spouse and they both are paying the installments of the loan, then both of them can claim this deduction. However, they must meet all the conditions laid down.

Difference between Section 80EE and Section 80EEA

First-time buyers claiming deductions under Section 80EE cannot claim deductions under Section 80EEA.
This is specifically mentioned in the law:
Particulars Section 80EE Section 80EEA
Property value Up to Rs 50 lakhs Up to Rs 45 lakhs
Loan amount Up to Rs 35 lakhs Not specified
Loan period covered April 1, 2016 to March 31, 2017 April 1, 2019 to March 31, 2021
Maximum rebate Rs 50,000 Rs 1.50 lakhs
Lock – in period None None

Reference:
  1. https://www.coverfox.com/personal-finance/tax/deduction-under-section-80ee/
  2. https://cleartax.in/s/section-80eea-deduction-affordable-housing
  3. https://housing.com/news/section-80eea-deduction-on-home-loan-interest-for-affordable-housing/

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