Everything You Need to Know About the 80EEA Deduction
Have you or your friend bought a house between April 1, 2019, and March 31, 2022? If yes, then keep reading; this article is going to help you a lot. Do you know that you can avail yourself of an additional deduction as a tax benefit under Article 80EEA? Everything you need to know about the 80EEA deduction is explained clearly and simply in this article.
What is 80EEA Deduction?
80EEA was added to the Income Tax Act of 1961 in 2019. This section offers relaxation in the income tax for first-time homebuyers in India. This means that the house buyer should not own any other property in their name. If you buy a house under “affordable housing,” then you can claim an additional deduction under this section. You also need to note that this 80EEA deduction is available only if you buy the house through a home loan.
What is affordable housing?
Affordable housing has a different meaning under the different provisions of different acts. Under section 80EEA of the Income Tax Act, affordable housing means that the value of the house property should not exceed Rs. 45 lakhs. The carpet area of the house should not be above 60 square meters in metropolitan areas. Whereas, the carpet area should not be over 90 square metres in other cities.
History of 80EEA Deduction
The central government launched a flagship program in 2014, Housing for All by 2022. It aimed to provide affordable housing for all. Under this program, the center launched a scheme named Pradhan Mantri Awas Yojana to incentivize the purchase of houses by giving subsidies. To give a boost to this program, in 2019, a new section, i.e., 80EEA, was added to the Income Tax Act to offer an additional tax deduction.
Amount available under Section 80EEA
The amount that is available under the 80EEA deduction is Rs. 150,000 or the interest payable on the home loan, whichever is lower. This deduction is available along with the one available to all homebuyers under Section 24(b) of the Income Tax Act. The deduction amount available under section 24(b) is up to 2 lakhs. Thus, the maximum amount you can claim for the purchase of your house is Rs. 350,000. Also, this 80EEA deduction is not a one-time deduction. It is available as long as you pay the interest on your home loan. You can avail yourself of it once a year.
Eligibility for 80EEA Deduction
Since the government did not extend the 80EEA scheme, this deduction is no longer valid after March 2022. If you buy a house after March 31, 2022, you are not eligible for this deduction. However, you can claim the regular deduction under Section 24(b).
The metropolitan cities as mentioned under article 80EEA are Mumbai, Kolkata, Hyderabad, Delhi NCR (Faridabad, Gurgaon, Ghaziabad, Greater Noida, Noida, Delhi), Chennai, and Bengaluru. Moreover, the deduction is available even if the house is bought under joint ownership. The joint owners can avail of the deduction.
You will be eligible for the 80EEA Deduction if you meet the following conditions:
- You have bought your first house and have no other residential property under your name.
- You are an individual assessee. This is because the deduction is not available for HUF, BOI, partnership firms, etc.
- You get the loan from a financial institution like a bank, etc.
- The sanction date of the loan was between April 1, 2019, and March 31, 2022.
- The stamp duty of the house is under Rs. 45 lakhs.
- You are not eligible for a deduction under Section 80EE.
How section 80EEA and section 24 are different?
Though both sections offer tax benefits for buying a house, there are many differences that you need to know. The differences between both sections are as follows.
- Under section 80EEA, the deduction is available only if the loan is obtained from financial institutions like banks, housing companies, etc. On the other hand, under Section 24, even if a loan is taken from friends or family, you can still claim the deduction.
- The next difference is in terms of the maximum amount of deduction under both sections. Under the 80EEA Deduction, the maximum is Rs. 150,000, while under Section 24, it is Rs. 2 lakhs.
Another difference between sections 80EEA and 24 is about the possession of the property. You can take advantage of the 80EEA deduction as soon as you start paying the interest. This means that you do not have to claim possession first. For the deduction under Section 24, possession of the property is required.
What is Section 80EE of the Income Tax Act?
Section 80EE is also for first-time home buyers, but the deduction and some conditions are different. It is available for a maximum of Rs. 50,000 in deductions. The value of the house should not increase by more than Rs. 35 lakhs.Also, the loan sanction date should be between April 1, 2016, and March 31, 2017.
When it comes to buying a house, you should do extensive research about home loans offered by banks and the deductions available, etc. Buying a house is the lifetime dream of many. You must not miss any opportunities to get the best deal. We hope this article helps you understand all the information about Section 80EEA.
Piramal Finance is an online platform that allows you to learn everything you need to know about relevant acts and developments in the world of finance. For more such articles or information about personal loans, credit cards, and financial management, check out more blogs on their website!
Also Read: What is an Assessment Year: All You Need to Know About It
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