Introduction
Section 80EEA is an attachment or a corresponding insertion in the Income Tax Act 1961. This section allows home loan borrowers to get additional tax relief for the interest they pay on the principal amount.
This inclusion reflects the specific intention of the government to promote its ‘Housing for All’ initiative. Typically, providing more tax benefits will encourage more people to take home loans and own their dream house.
However, you must remember a few things here to make your section 80EEA claim, such as:
- The claim must pertain to a home loan
- You must take a home loan between 2019 and 2022
- The deduction applies to the interest amount paid in a year and
- It does not apply to the principal sum of the housing loan.
Read on to know more about the features and requirements to claim deduction under this specific section.
Requirements to Claim Deduction in Section 80EEA
There are a few specific requirements or conditions to fulfil for a taxpayer claiming a deduction under this particular section. To fulfil 80EEA eligibility, the taxpayer must:
- Follow the orthodox tax rules while filing their ITR
- Take a loan from an approved housing finance or financial company
- Receive the loan or its approval between 1 April 2019 and 31 March 2022
- Do not buy a property whose value of stamp duty is more than Rs 45 lakh
- Not be eligible under section 80EE and
- Be a first-time buyer of a residential property.
There are also a few other specific conditions to fulfil to enjoy the 80EEA exemption. For example, the carpet area of the property approved on or after September 1, 2019 must not exceed:
- 60 m2 or 645 ft2 for metro city projects and
- 90 m2 or 968 ft2 for homes in other towns and cities.
Furthermore, here metropolitan cities include:
- The entire Mumbai metropolitan region
- Chennai
- Bengaluru
- Hyderabad and
- Kolkata.
It also includes Delhi National Capital Region or Delhi NCR, which comprises the following:
- New Delhi
- Ghaziabad
- Faridabad
- Noida
- Greater Noida and
- Gurgaon.
The Features of 80EE Deduction
The principal amount of the home loan does not matter while claiming a deduction under section 80EEA. Instead, according to the Income Tax Act, it applies only to the amount you pay as interest for the particular loan.
You can file for an 80EEA income tax deduction claim over and above section 24. This means that your claim for section 24 will not affect or disallow you from claiming this additional tax deduction. You can claim them simultaneously.
Besides, section 80EEA terms and conditions of the Income Tax Rule do not mention any specific restriction on the income of an individual to be eligible for 80EEA exemption. Additionally, it does not specify whether the benefits are restricted to a resident of India or apply to non-resident Indians as well.
Moreover, it also does not mention whether you should occupy the property yourself. In simple words, this means that:
- Both residents and NRIs Resident can claim an 80EEA deduction
- The property may be rented or self-occupied
- The house can be bought singly or jointly.
For individuals, the maximum amount they can claim as an 80EEA deduction in every financial year is 1.5 lakhs. On the flip side, if you own a property jointly, then each co-owner can claim for 1.5 lakh deduction under this specific section every year for five years. In both cases, you must meet all other requirements successfully.
The rule also says that you must make your claims every year. In simple words, you cannot carry forward any amount that you did not claim in a specific financial year to the successive year’s ITR. So, make it a point to include this deduction in your ITR for five consecutive years after the date of your loan approval, or you will lose the chance.
The Calculation for Section 80EEA Deduction
The amount of interest payable by an individual in a year for the home loan is the primary requirement for calculating tax deductions under section 80EEA. For example, consider the following case:
- Loan amount – 40 lakhs
- Rate of interest – 8% p.a.
- Tenure – 20 years
- Interest payable – 3.2 lakhs.
As you know already, the claim limit is up to 1.5 lakhs according to the set for sec 80EEA of the Income Tax Act. So, you can claim for deduction up to that amount. The remaining interest payable amount is your taxable income. This happens until you repay the entire loan or the interest amount fully, whichever is earlier.
Conditions to Claim 80EEA Deduction
To avail of the 80EEA income tax deduction claim, there are a few specific conditions that any individual must satisfy. For example:
- You must take a home loan for an affordable project
- The project must be new and not pre-owned or resale property
- You can enjoy the benefits of the 80EEA exemption for up to five successive years from the date of taking the loan
- The loan amount must not exceed Rs. 35 Lakhs and
- The value of the asset must not be more than Rs. 45 Lakhs.
As said earlier, you must take a home loan before 31st March 2022 to be eligible for claiming such deduction for five years following the date of loan sanction.
Documents Required to Claim 80EEA Deduction
There are a few specific documents required to furnish to the tax authority or employer (if you are a salaried individual) to claim a deduction under section 80EEA. Here are some of the documents for proof:
- The sanction letter – You must furnish a copy of the sanction letter of the home loan you took from the bank or any approved financial organization.
- Certificate of interest – Your application must also include the certificate of interest provided by the lender. This certificate states the amount of interest you paid on your home loan during the year and is crucial for tax deduction calculation.
- Agreement or deed – You must also provide the sale deed or agreement between you and the property holder as proof of current property ownership.
- Certificate of possession – You may claim for tax deduction for projects under construction as well. However, in that case, you must provide the possession or occupancy certificate to the tax authorities. This is typically provided by the relevant authority or the builder.
- A declaration – You may have to provide a declaration that you are a first-time buyer of a property. So, keep it ready.
In addition, it is also good to keep the registration or stamp duty certificate handy, though it is not a mandatory requirement for this claim. You may need them to claim further deductions on your home loan under section 80C.
Comparison of the Two Sections
If you compare 80EE vs 80EEA you will find some similarities and differences.
For example, these two sections are similar concerning their relation with home loans only. Moreover, both are applicable for home loans approved within a specific time limit. However, the points of difference for the two sections are distinct.
- Property value – The property value should be less than or equal to Rs. 50 lakhs to be eligible for an 80EE deduction claim. However, in comparison, the stamp duty value is reduced by Rs. 5 lakhs for individuals claiming deductions under section 80EEA.
- Time factor – While 80EE standard tax deduction is applicable for loan sanctioned within to fiscal year 2016 – 2017, on the other hand, 80EEA applies to loans approved within 2019 and 2022.
The maximum claim for deduction made under these two specific sections is also significantly different. Typically, it is Rs. 50,000 against Rs. 1,50,000 for 80EE vs 80EEA.
Moreover, the value of the land also plays a significant role since there is a meaningful difference when you compare these two sections. While the land value must be less than or equal to Rs. 35 lakhs for 80EE claim deductions, typically 80EEA terms and conditions do not include such restrictions for claiming tax deductions.
The age of the two sections is also notably different, with section 80EE being older than section 80EEA. This is because the latter is a complementary section of the former that allows taxpayers to enjoy additional tax benefits for the home loans taken out within a specific period.
Finally, section 80EE witnessed a few changes occasionally over time but there was no extension or changes made in section 80EEA.
Read More : Section 80EE Income Tax Deduction for Interest on Home Loan
Conclusion
In conclusion, sec 80EEA of the Income Tax Act is a distinct move by the government to promote its drive to provide affordable housing to first-time buyers. It is important to know the eligibility requirements and other aspects of the section to make the right claim at the right time.
Hope the information in this article will be of great help to you to maximize your annual tax benefits and plan your money management accordingly, even though the loan-obtaining timeframe has expired.
FAQ
What is 80EEA in income tax?
80EEA refers to an additional section of the Income Tax Act 1961. It is the supplement of the 80EE section that allows the taxpayers to claim for tax deduction on the amount of interest they paid for their home loans. Typically, the 80EEA section allows them to apply for tax deductions of up to INR 1.5 lakhs in addition to the de4duction permissible under section 24(b).
What is Section 80EEA for?
The 80EEA section specifically encourages first-time purchasers to take home loans. This helps promote accessible housing schemes of the government.
What is the difference between section 24 and 80ee and 80EEA?
The three sections differ in benefits offered and eligibility requirements.
For example, in section 24:
- The deduction limit is up to INR 2 lakhs and
- It must be a self-occupied home.
For section 80EE, it is:
- Up to INR 50,000 and
- For the first-time home buyers.
Additionally, the timeframe set is 2016 – 2017 to take out the home loan.
For section 80EEA, it is:
- Up to INR 1.5 lakhs and
- For the first-timers taking loans between 2019 and 2022.
How do I know if I qualify for 80EEA?
If you do not have any other residential property in your name and have taken a loan for a property valued at less than INR 45 lakhs, you fulfil the 80EEA eligibility requirements successfully. You can make additional claims for tax deductions if you fulfill other conditions such as the timeframe of 2019 – 2022.
Is section 80EEA still applicable?
Sadly, no, the benefits of section 80EEA is no longer applicable to new loan takers. It applies to the interest amount of home loans taken within the stipulated timeframe of 2019 and 2022.
What proof is required for 80EEA?
There are a few specific documents you must submit to the tax authority as an individual or to your employer to enjoy the 80EEA tax deduction benefit.
For example, your application must include a copy of the sanction letter of the loan. This will prove the timeframe. It must also include an interest certificate which will indicate the total amount you paid as interest for your home loan in the financial year. Furthermore, the tax authority also requires the property agreement or stamp duty receipt along with the application. This helps them determine the value of the property which must be less than INR 45 lakhs.
Can I claim the section 80EE benefit if the home loan is taken now?
No, once again, new home loans are not eligible for tax deductions under section 80EE. So, if you take out a home loan now, you will have to file for deductions as allowed by section 24(b) because it is long past the set timeframe of 2016 and 2017.