Section 80EEA of the Income Tax Act, 1961: Deduction for Interest on Home Loan

Buying a home is a significant milestone in one’s life, and the Government of India has introduced several tax benefits to make homeownership more affordable - especially for first-time buyers. Among these benefits, Section 80EEA of the Income Tax Act, 1961, stands out as a key provision that allows additional deduction on the interest paid on a housing loan.

This section was introduced in the Union Budget 2019 to further boost the affordable housing sector and encourage more people to buy their first home. Let’s explore this section in detail to understand who can claim it, how much can be claimed, and under what conditions.

What is Section 80EEA?

Section 80EEA provides an additional deduction of up to ₹1.5 lakh on the interest paid on a home loan taken for the purchase of a residential property. This deduction is over and above the ₹2 lakh limit available under Section 24(b) for interest on home loans.

In simple terms, a first-time homebuyer can claim up to ₹3.5 lakh in total deductions on home loan interest by combining Section 24(b) and Section 80EEA, subject to conditions.

Objective of Section 80EEA

The government introduced Section 80EEA to support the "Housing for All" initiative, which aims to promote the affordable housing sector and enable the middle-class population to own residential property. By providing tax incentives to first-time buyers, the government hoped to:

Improve the real estate sector’s growth.

Encourage long-term financial planning.

Make homeownership accessible to lower and middle-income groups.

Key Features of Section 80EEA

Here are the main highlights of this provision:

Deduction Limit: Maximum of ₹1,50,000 per financial year.

Type of Deduction: Only for interest on the home loan (not principal).

Eligibility Period: Loan must be sanctioned between 1st April 2019 and 31st March 2022.

Applicable for: Only individual taxpayers (not HUFs, companies, or firms).

Property Type: Only residential house property.

Eligibility Criteria for Claiming Deduction Under Section 80EEA

To claim deduction under this section, certain conditions must be met:

First-Time Home Buyer

The applicant must not own any residential property at the time of sanctioning the loan. This provision ensures that the benefit is only available to genuine first-time buyers.

Loan Sanction Period

The home loan must have been sanctioned between 1st April 2019 and 31st March 2022. Loans sanctioned outside this window do not qualify for this benefit.

Stamp Duty Value of Property

The stamp duty value of the property should not exceed ₹45 lakh. If the property is priced higher, the deduction under this section is not allowed.

Source of Loan

The home loan should be taken from a financial institution or a housing finance company registered with the National Housing Bank (NHB). Loans from friends, relatives, or unregistered sources are not eligible.

No Claim Under Section 80EE

If the taxpayer has claimed deduction under Section 80EE in any financial year, they are not eligible to claim under Section 80EEA for the same or subsequent year.

Deduction Available

A maximum deduction of ₹1,50,000 per year can be claimed on the interest portion of the EMI paid for the housing loan.

This deduction is in addition to the ₹2,00,000 deduction allowed under Section 24(b) for interest on a self-occupied house.

Therefore, a total of ₹3,50,000 per year can be claimed as a deduction on interest if both sections apply.

How to Claim Section 80EEA Deduction

To claim the deduction:

• File ITR using the appropriate ITR form (e.g., ITR-1, ITR-2, etc.).
• Mention the deduction amount under the "Deductions under Chapter VI-A" section.
• Keep a copy of your loan sanction letter and interest certificate issued by the bank.
• Ensure that all eligibility conditions are met before claiming.