Section 80EEA of Income Tax Act – Complete Guide to Home Loan Deduction

Ritesh Mehta, a 32-year-old software engineer from Pune, had long dreamt of owning a flat. In May 2023, he booked a two-bedroom apartment in Hinjewadi, priced at Rs 45 lakh. The bank approved a home loan of Rs 38 lakh at a floating interest rate of 8.2%.

While filing his income tax return, his chartered accountant told him, “You’re eligible for an additional tax deduction of Rs 1.5 lakh under Section 80EEA.”

He paused. “I thought Rs 2 lakh was the limit under Section 24(b) for interest paid on a housing loan?”

His chartered accountant smiled. “That’s true. But Section 80EEA gives you an extra Rs 1.5 lakh, provided certain conditions are met. It’s meant to promote affordable housing.”

And so began Ritesh’s journey to uncover how a small tax provision could lead to substantial savings.

Let’s explore how.

Importance of Section 80EEA

Introduced through the Finance Act 2019, Section 80EEA supports the government’s initiative, ‘Housing for All’. It allows first-time buyers of affordable homes to claim an additional deduction of up to Rs 1.5 lakh on home loan interest. 

This benefit is in addition to the Rs 2 lakh limit under Section 24(b), allowing a total interest deduction of up to Rs 3.5 lakh per year.

In Ritesh’s case:
 

This effectively reduced Ritesh’s taxable income and saved him approximately ₹39,000 in taxes for the year.

Objectives of Section 80EEA

Section 80EEA aims to:

• Make housing more affordable for first-time homebuyers.
   
• Encourage real estate growth in the mid-income and low-income sectors.
   
• Provide additional tax relief beyond traditional housing deductions.

It directly supports the government’s Pradhan Mantri Awas Yojana (PMAY) and real estate reforms, driving homeownership across urban India.

Conditions for Claiming Section 80EEA

To claim benefits under this section, the taxpayer must satisfy all the following:

1. Home Loan must be sanctioned between 01.04.2019 and 31.03.2022.
    
2. The stamp duty value of the property must not exceed ₹4,500,000.
    
3. The taxpayer must be a first-time homebuyer, i.e., should not own any residential property at the time of loan sanction.
    
4. The loan must be taken from a financial institution or a housing finance company.
    
5. The deduction is only applicable to individuals, not HUFs or companies.

Ritesh met all the conditions:
 

Hence, he could claim full benefits under 80EEA.

TDS Rate Not Applicable Here

Unlike sections such as 194R, 80EEA is a deduction for the taxpayer, not a tax deduction at source (TDS). No entity deducts tax on your behalf; you claim this deduction yourself while filing your income tax return (ITR).

Combined Benefits Under Section 24(b) + 80EEA
 

Ritesh realised that for a ₹3,800,000 home loan at 8.2% interest, the yearly interest comes close to ₹311,600. He could claim the entire amount under both sections combined.

Exemptions and Restrictions Under Section 80EEA
 

• Not available for self-employed claiming deduction under presumptive income.
   
• Not applicable under the new regime (Section 115BAC) unless you choose the old regime voluntarily.
   
• Cannot be claimed if you have already claimed Section 80EE (older provision for 2016–17 loans).

Alternate Scenarios and Tax Impact

Scenario 1: Ritesh Claims Full Deduction
 

Tax on ₹800,000 as per old regime = Approx ₹52,500
(Effective savings compared to no deductions: ₹39,000–₹42,000)

Scenario 2: Not Eligible for Section 80EEA

If Ritesh had bought a flat worth ₹5,200,000, the stamp duty value would exceed the ₹4,500,000 threshold, and he’d lose ₹150,000 worth of additional deduction. His tax liability would increase accordingly.

Compliance Requirements

To ensure full benefit under Section 80EEA, a taxpayer should:

• Obtain an interest certificate from the bank or lender.
   
• Declare the deduction in the income tax return (ITR-1 or ITR-2).
   
• Maintain the loan sanction letter, property documents, and payment proofs.

Ritesh submitted the following to his CA:
 

Eligible and Non-Eligible Cases

Let’s examine a few real-life inspired examples:

Eligible: Meera (Delhi)
 

• Home loan sanctioned: 20.06.2020
   
• Loan amount: ₹3,200,000
   
• Property value: ₹4,200,000
   
• First-time buyer: Yes, Eligible for Section 80EEA

Not Eligible: Rajesh (Mumbai)
 

• Home loan sanctioned: 10.04.2023
   
• Property value: ₹5,100,000
   
• Not a first-time buyer- Not eligible

Yearly Interest vs Deduction Scope
 

Conclusion

Ritesh’s story shows how knowing about Section 80EEA at the right time can help save a lot on taxes. If you meet the eligibility rules and claim the deductions properly, you can reduce your taxable income by an extra Rs 1.5 lakh.

Owning a home gives you financial security, and Section 80EEA helps you save tax too.

So, if you are a first-time buyer planning to buy an affordable home with a home loan, make sure your documents are ready, your loan was taken within the eligible period, and you claim all the deductions you can.

Frequently Asked Questions (FAQs)

Q1. Can I claim 80EEA deduction every year?
Yes, as long as you are paying interest on the home loan and your conditions remain the same.

Q2. What if I shift to the new tax regime?
You won’t be able to claim Section 80EEA if you opt for the new tax regime under Section 115BAC.

Q3. Is it available for under-construction properties?
Yes, but deduction can only be claimed once interest payment begins, i.e., after possession.

Q4. Can both co-owners claim 80EEA separately?
Yes, if both are co-borrowers, co-owners, and meet all eligibility conditions individually.

Q5. Does pre-EMI interest qualify for the deduction?
Only after construction is complete, and in five equal instalments under Section 24(b). Section 80EEA only applies post-possession.

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LoansJagat Team

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