80EEA : Enhance deduction on Housing Loan Interest

Abhilasha Pawar CEO, Founder Director BIZSUTRA CONSULTANT PRIVATE LIMITE

2020-10-12

             Currently tax payer is allow to avail deduction of up to Rs.2 lakhs on payment of interest on home loan u/s 24 of Income tax act 1961. In addition to that the existing provision of section 80EE allow deduction up to Rs.50,000 for interest paid by first time Home buyers from loan sanctioned in  F.Y 01.04.2016 to 31.03.2017. Now the question is what if, the Tax payer buys his/her 1st Home in Financial year 2019-2020 and interest on Home loan is more than Rs.2 lakh. So this query is resolved in Budget 2019.

             Under the objective ‘Housing for all’ and the boost the affordable housing segment, the government has announced on additional interest deduction on repayment of Home loan under section 80EEA. The enhance amount of deduction available to tax payer u/s 80EEA is Rs.1,50,000 but subject to sum condition. The enhance benefit of Housing loan interest can be claimed until taxpayer have repaid the housing loan.

           “This will translate into a benefit of around 7 Lakh to the middle class home buyers over this loan period of 15 years”- Said by our honourable finance minister in her budget speech.

1. Eligibility: - The deduction under section 80EEA will be applicable only to Individual. Any other kind of taxpayer like Hindu Undivided Family (HUF), Partnership Firm, Association of Person (AOP), Limited Liability Partnership (LLP) or any other cannot claim the benefit under this section.

1. Condition to avail enhance deduction:-

1. Loan to be sanctioned by the financial institution during the period in between 01.04.2019 to 31.03.2019.

1. The stamp duty value of house property should not exceed Rs. 45 lakh In other world, the registration price of the home should not be exceed Rs. 45 lakh. In case of registration price of home is in excess of Rs. 45 lakh taxpayer will not be eligible to claim deduction u/s 80EEA.

1. The assesse should not own any residential house property as on the date of sanction of loan. He should be a first time home buyer.

1. If assesse already availed a deduction under this section, same interest amount cannot be availed under any other section of Income tax act. Further to clarified, the assesse can claim deduction U/s 24 up to Rs.2 lakh and for in excess of Rs.2 lakh, can claim deduction u/s 80EEA. Hence enhance the deduction of Rs.1.5 lakh is in addition to Rs.2 lakh allowed u/s 24. Therefore total deduction claimed for Interest on home loan is Rs.3.5 lakh

1. The assesse will be eligible for deduction under the section if the carpet area of home is not exceeding 60 square meter (645 sq. ft.) in metropolitan cities or 90 square meter (968 sq. ft.) in cities or towns other than metropolitan cities of Bengaluru, Chennai, Delhi national capital region (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gorgon, Faridabad) Hyderabad, Kolkata and Mumbai (Whole of Mumbai metropolitan region ) further this definition will be affective on or after 1st September 2019.

1. Key Points To Note:- 

1. After Sec 80EE of the Income Tax act, the section 80EEA shall be inserted with effect from 1st April 2020 and will accordingly apply in A.Y 20-21 and subsequent A.Y.

1. For the purpose of this section.

1. The expression financial institution shall have meaning assigned to it in clause (a) of subsection (5) of section 80EE.

1. The expression stamp duty means value adopted or assessed or assessable by any authority of the central government or State government for the purpose of payment of stamp duty in respect of immovable property.

1. The principal repayment qualifies for deduction u/s 80C.

1. Claim under this Section is only for residential house property and not for commercial house property.

1. Summery:-

            The new additional benefit of enhance deduction will mostly benefit home buyers in smaller towns or tier-2 or tier-3 cities the impact will be limited in tier-1 and metro cities owing to higher real estate prices.