facebook pixel

What is Section 80EEA of the income tax act?

Section 80EEA of the Income Tax Act is a deduction that taxpayers can claim on the interest paid on home loans. It was introduced in the Union Budget of 2019 to relieve middle-class taxpayers who have taken home loans. In this article, we will discuss the key aspects of Section 80EEA and its eligibility criteria.

Eligibility Criteria for Claiming Deduction Under Section 80EEA

To claim a deduction under Section 80EEA, you must fulfill certain eligibility criteria. These criteria are as follows:

  1. Maximum Loan Amount: The loan amount should not exceed Rs. 45 lakhs.
  2. Year of Purchase or Construction: The property should have been purchased or constructed on or after April 1, 2019, and on or before March 31, 2022.
  3. Total Income: The taxpayer’s total income should be less than or equal to Rs. 18 lakhs per year.
  4. One House Property: The taxpayer should have only one house property.
  5. No Other House Property: The taxpayer should not own any other house property on the date of the loan sanction.
  6. Loan from Financial Institutions: The loan should be sanctioned by a financial institution such as a bank or a housing finance company.

It’s important to note that these criteria are subject to change based on the government’s policies. Therefore, it’s always advisable to check the latest rules before claiming a deduction under Section 80EEA.

Deduction limits under Section 80EEA

The deduction limit under Section 80EEA is a maximum of Rs 1.5 lakh per year. This means taxpayers eligible for the deduction can claim up to Rs 1.5 lakh of the interest paid on their home loan as a deduction from their taxable income each year. It’s important to note that this deduction is available only for the interest component of the home loan and not for the principal repayment.

Taxpayers who have taken a home loan under the Pradhan Mantri Awas Yojana (PMAY) scheme can also claim this deduction, which is subject to fulfilling the other eligibility criteria. Additionally, it’s important to remember that the deduction under Section 80EEA is over and above the deduction of Rs 2 lakh available under Section 24(b) of the Income Tax Act.

How to claim a deduction under Section 80EEA?

Claiming a deduction under Section 80EEA is a simple process that can help you reduce your tax liability. You need to meet the eligibility criteria and submit the relevant documents to claim this deduction. Here’s a step-by-step guide on how to claim the deduction under Section 80EEA:

  1. Check your eligibility: Before claiming the deduction, make sure you meet the eligibility criteria for Section 80EEA. As discussed earlier, the deduction is available only for first-time homebuyers, and the property value should not exceed Rs. 45 lakhs. Additionally, the loan should have been sanctioned between April 1, 2019, and March 31, 2022.
  2. Collect the relevant documents: Once you confirm your eligibility, gather all the necessary documents to claim the deduction. These include:
    • Loan sanction letter: This document confirms that the loan was sanctioned within the specified time frame and that you are eligible for the deduction.
    • Interest certificate: This certificate shows the interest paid on the home loan during the financial year for which you are claiming the deduction.
    • Sale deed and possession certificate: These documents prove that you are the legal owner of the property and have taken possession of it.
  3. File your income tax return: To claim the deduction under Section 80EEA, you must file your income tax return. While filing your return, make sure to fill in the details of the home loan interest paid, and the deduction claimed under Section 80EEA.
  4. Submit the relevant documents: After filing your return, submit the relevant documents to the tax authorities. These documents serve as proof of your eligibility, and the amount of deduction claimed.

Following these steps, you can easily claim the deduction under Section 80EEA and reduce your tax liability. Make sure to keep all the relevant documents handy, and consult a tax professional if you have any doubts.

Difference Between Section 80EE and Section 80EEA

While both Section 80EE and Section 80EEA of the Income Tax Act provides tax benefits to homebuyers, there are some key differences between the two sections.

The primary difference between Section 80EE and Section 80EEA is the eligibility criteria for claiming the deduction. Under Section 80EE, only first-time homebuyers are eligible to claim the deduction. In contrast, under Section 80EEA, any individual who fulfills the specified criteria can claim the deduction.

Another significant difference between the two sections is the maximum deduction limit. Under Section 80EE, the maximum deduction can be claimed is Rs. 50,000, while under Section 80EEA, the maximum deduction limit is Rs. 1.5 lakh.

Under Section 80EE, the loan amount cannot exceed Rs. 35 lahks, and the property’s value cannot exceed Rs. 50 lakh. In contrast, there are no such restrictions under Section 80EEA.

It is important to note that the two sections may apply to different assessment years. Section 80EE was introduced in the Finance Act of 2013 and is applicable for the assessment years 2014-15 to 2016-17, while Section 80EEA was introduced in the Finance Act of 2019 and is applicable for the assessment year 2020-21 and 2021-22.

It depends on their specific circumstances in terms of which section may be more beneficial for taxpayers. If they are first-time homebuyers and are purchasing a property valued at less than Rs. 50 lakh, they may find Section 80EE more beneficial. However, they are not first-time homebuyers or are purchasing a property with a higher value. In that case, they may better claim the deduction under Section 80EEA.

Can I Apply for Both Section 80EE and Section 80EEA?

Many taxpayers wonder whether they can apply for deductions under both Section 80EE and Section 80EEA. The answer is yes, and it is possible to claim deductions under both sections for the same assessment year. 

However, certain conditions and criteria must be met to claim the deductions under both sections.

  1. The conditions for claiming deductions under Section 80EE and Section 80EEA are different. To claim deductions under Section 80EE, the taxpayer must be a first-time homebuyer and meet the eligibility criteria. On the other hand, to claim deductions under Section 80EEA, the taxpayer must have taken a home loan in the previous financial year and meet the eligibility criteria.
  2. The maximum deduction limit for both sections is different. Under Section 80EE, the maximum deduction limit is Rs. 50,000, while under Section 80EEA, the maximum deduction limit is Rs. 1.5 lakhs.
  3. Lastly, it’s important to note that the combined deduction limit for both sections cannot exceed the total interest paid on the home loan. This means that if a taxpayer has paid interest on their home loan of Rs. 2 lakhs, they can claim a maximum deduction of Rs. 2 lakhs under both Section 80EE and Section 80EEA.

In summary, it is possible to apply for deductions under both Section 80EE and Section 80EEA. However, taxpayers must meet the different eligibility criteria and ensure that the combined deduction limit does not exceed the total interest paid on the home loan. By doing so, taxpayers can maximize their tax savings while also meeting the legal requirements of the Income Tax Act.

Click to know about tax deduction under section 80 E

Comparison of Section 80 EE and Section 24

Section 80 EEA and Section 24 of the Income Tax Act are two provisions that allow taxpayers to claim deductions on home loans. While both sections offer tax benefits, they differ in eligibility criteria, maximum deduction limits, and other conditions for claiming deductions.

The maximum deduction limit under Section 24 of the Income Tax Act is Rs. 2 lakhs for individuals for the financial year 2021-22. This deduction can be claimed for the interest paid on a home loan taken for the purpose of purchasing, constructing, or renovating a residential property. It is important to note that this deduction can only be claimed if the property is self-occupied and the loan is taken from a financial institution such as a bank or a housing finance company.

Section 24 of the Income Tax Act allows taxpayers to claim deductions on the interest paid on a home loan, subject to certain conditions. On the other hand, Section 80 EEA provides deductions on the principal amount of the home loan in addition to the deductions provided under Section 24.

It’s important to note that the maximum deduction limit under Section 24 is higher than Section 80 EEA. Moreover, while Section 24 can be claimed every year, Section 80 EEA can only be claimed once, subject to certain conditions.

Conclusion

In summary, Section 80EEA of the Income Tax Act is an important provision that provides homebuyers with a tax deduction on the interest paid on a home loan. To claim the deduction, taxpayers must meet certain eligibility criteria and provide the necessary documents when filing their income tax return.

The importance of Section 80EEA cannot be overstated, as it can help reduce the financial burden of homeownership and encourage more people to invest in real estate. However, it is worth noting that the future of Section 80EEA remains uncertain, as tax laws are subject to change and may be amended or repealed by the government in the future.

Overall, suppose you are eligible for a Section 80EEA deduction. In that case, it can be a valuable way to save money on taxes and make your dream of homeownership more affordable.

FAQs (Frequently Asked Questions)

Can I Claim Section 80C and Section 80 EEA?

The answer is yes. You can claim deductions under both sections, subject to certain limitations.

Section 80C of the Income Tax Act provides deductions for various types of investments and expenses, such as life insurance premiums, Public Provident Fund (PPF) contributions, National Savings Certificate (NSC) purchases, and so on. The maximum deduction limit under Section 80C is Rs. 1.5 lakh per year.

On the other hand, Section 80 EEA provides deductions on interest payments for home loans taken by first-time homebuyers. The maximum deduction limit under Section 80 EEA is Rs. 1.5 lakh per year.

It’s important to note that claiming deductions under Section 80C and Section 80 EEA does not mean that the total deduction limit increases to Rs. 3 lahks per year. The total deduction limit for both sections remains at Rs. 1.5 lakh per year.

In summary, it is possible to claim deductions under Section 80C and Section 80 EEA. Still, the total deduction limit remains the same at Rs. 1.5 lakh per year. Make sure to fulfill both sections’ eligibility criteria and conditions before claiming the deductions.

What is the maximum limit under Section 80EEA?

Under Section 80EEA of the Income Tax Act, the maximum deduction limit an individual can claim is up to Rs. 1.5 lakh per financial year. This deduction is available only for first-time homebuyers. It can be claimed for the interest paid on a home loan.

It is important to note that the deduction only applies to the home loan’s interest component and not to the principal amount. By taking advantage of this deduction, first-time homebuyers can significantly reduce their tax liability and make owning a home more affordable.

Can I Claim Section 80EEA Benefits If the Home Loan Is Taken Now?

As of today’s date, February 15, 2023, the home loan sanction period for claiming deduction under Section 80EEA of the Income Tax Act ended on March 31, 2022, and this means that if you have taken a home loan after this period, you will not be eligible for the deduction.

However, suppose you have taken a home loan between April 1, 2019, and March 31, 2022, and meet the other eligibility criteria. In that case, you can still claim benefits under Section 80 EEA for the interest paid on your home loan.

Related Articles:

  1. Tax Rebate Under Section 87A of the Income Tax Act in India
  2. Section 10 of the Income Tax Act
  3. Can the Rent Paid to family members be Eligible for HRA Exemption under the Income Tax Act?
  4. Maximize Your Savings: Know the Income Tax Slabs for 2023-24
Follow Us On:

Comments

0 Comments

Submit a Comment

Your email address will not be published. Required fields are marked *

17 − 5 =

Pin It on Pinterest

Shares
Request Demo