Section 80EEA of Income Tax Act: Eligibility, Deduction Limit & Tax Benefits
Purchasing a property is often one of the biggest milestones in many lives. But as property prices have increased, buying a house feels like a dream for individuals today. This is where tax advantages can help you out. When the government takes a portion of your income away in tax liabilities, it makes things like home buying much more affordable compared to what they otherwise would be.
Many provisions were created in the Income Tax Act to assist with first-time home ownership, and one of those provisions is Section 80EEA of Income Tax Act, if utilized properly can help save money when buying your first home.
In this blog we will go on to explain what is 80EEA, its eligibility, deduction limits, tax advantages and how it impacts both homebuyers and real estate investors.
Table of Contents
What is Section 80EEA?
So, what is 80EEA exactly? Section 80EEA is a special provision introduced by our government to incentivize affordable housing. It allows you to claim additional tax deductions (against all your income) on interest paid on home loans borrowed by first-time buyers.
The idea behind Sec 80EEA is simple; make housing affordable, encourage housing ownership, and help support the government on its “Housing for All” mission.
So, if you are going to buy your first home, and if you are aware about Section 80EEA, it could save you a lot in tax every year.
Eligibility Criteria for Section 80EEA
Before availing any of the benefits, you will need to ensure that you meet the 80EEA eligibility. Below are the principal 80EEA conditions:
- Only for first-time homebuyers: As of the date of sanctioning the loan, you must not own any residential property.
- Value of property: The stamp duty value of the house you have purchased must be below ₹45 lakh.
- Loan details: The loan must be taken from a recognized financial institution or housing finance company.
- Timeframe: Loans sanctioned need to be between April 1, 2019 and March 31, 2022.
- No doubling up on claims: You cannot claim benefits on both loans under Section 80EE and 80EEA simultaneously.
This makes Section 80EEA of the Income Tax Act particularly favorable to first-time homebuyers with limited budgets.
Deduction Limit under Section 80EEA
The crucial question: What is the 80EEA limit?
This means you can claim an additional deduction under Section 80EEA for up to ₹1.5 lakh per financial year for interest paid on your housing loan.
In addition to the ₹2 lakh deduction available under Section 24(b). In other words, your aggregate tax benefit could be up to ₹3.5 lakh per year from both sections.
For example:
- You paid ₹3 lakh as interest on your housing loan in one year.
- You can claim ₹2 lakh under Section 24(b).
- You can claim the remaining ₹1 lakh under 80EEA deduction.
So, this means even if your interest outgo is excess, you don’t lose the benefits entirely. For many families, these 80EEA tax benefits allow for a home to be more affordable.
Tax Benefits of Section 80EEA for Homebuyers
Here are the reasons why deduction under Section 80EEA is a milestone for first-time buyers:
- Reduced taxable income: You pay less tax, thereby leaving you with more disposable income.
- Encourages investment: Affordable housing becomes a desirable investment.
- Double benefit: You can enjoy two-fold benefit of interest on housing loan 80EEA along with Section 24(b) for further savings.
- PMAY synergy: The section works with schemes run by the government like the Pradhan Mantri Awas Yojana (PMAY).
When measured over the loan tenure, you will save lakhs in tax savings.
Difference Between Section 24(b) and Section 80EEA
Many people confuse these two sections. Let’s clear it up with a quick comparison:
| Feature | Section 24(b) | Section 80EEA |
|---|---|---|
| Deduction Limit | ₹2 lakh | ₹1.5 lakh |
| Applicability | All homebuyers | Only first-time homebuyers |
| Property Value Condition | No limit | Property ≤ ₹45 lakh |
| Loan Period | No restriction | Loan sanctioned between Apr 2019 – Mar 2022 |
So, the 80EE and 80EEA difference is that 80EEA is an additional benefit, not a replacement.
Impact on Real Estate Buyers & Investors
The inception of Sec 80EEA has increased the need for affordable housing schemes. Here’s its impact;
- For Homebuyers: It reduces the level of entry and makes first time ownership realistic.
- For Investors: Affordable housing with tax benefits provides acceptable rental yields and resale prospects.
- For Developers: It allows incredible demand in the mid-income market segment.
- Tip: The provision is no longer possible for new loans sanctioned after March 31, 2022. However, if you had already availed a loan in this window, you can continue to claim the deduction until the end of the loan tenure.
Key Things to Remember Before Claiming 80EEA
Before rushing to make a claim, please check:
- Your loan should have been sanctioned date between April 2019 to March 2022.
- Ensure the stamp duty value of the property is less than ₹45 lakh.
- Get the proof of interest on housing loan 80EEA from your lender.
- Remember, not to claim under 80EEA if you already claimed under Section 80EE.
By being aware of these conditions, you will not encounter any issues when you are filing your tax.
Conclusion
Although Section 80EEA of the Income Tax Act has been phased out of new home loans, the property ownership dream is not dead. Whether you want residential apartments, or farmhouses or to simply buy open land, location is fundamental.
For example, if you wish to explore the growth corridors in Chennai, you can look at plots in Manali or strategically located land in Kundrathur. These area have been developing rapidly, and investing here could also be an advantage for investors in the future.
